Pretty Bhalla, Lovely Professional University Unit 1: Introduction to Performance Management

Unit 1: Introduction to Performance Management Notes

CONTENTS
Introduction
1.1 Concept of Performance
1.2 Concept of Performance Management
1.3 Characteristics of Performance Management
1.4 Objectives of Performance Management
1.5 Principles of Performance Management
1.6 Performance Appraisal to Performance Management
1.7 Challenges to Performance Management

Objectives
After studying this unit, you will be able to:
⚫ Explain the meaning and characteristics of performance management
⚫ State the objectives and principles of performance management
⚫ Discuss performance appraisal to performance management
⚫ State the challenges to performance management

Introduction
The power of organization is increasingly linked to its intellectual capital rather than its physical
assets. People are now the drivers of corporate performance and competitiveness. Therefore,
performance management deals with improving organizational performance by improving
employee performance. Essentially, the cost of competitiveness involves efficiency and
productivity. Dr Mritunjay Arthreya (2004) observed that workforce productivity constitutes
around 60 percent of the total cost. Therefore, the growing significance of performance
management needs no further emphasis.

1.1 Concept of Performance

Organizations have to compete for survival. It is survival of the fittest in the true sense of the
term. Performance is the only way to do that. An ordinary performance will not do. Even better
performance may not be adequate. It has to be necessarily the best in order to compete and
thrive.

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Notes Performance Defined

The Oxford English Dictionary defines ‘performance’ as behaviour—the way in which

organizations, teams and individuals get work done. Campbell (1990) believes that “Performance
is behavior and should be distinguished from the outcomes because they can be contaminated
by systems factors”.
A more comprehensive view of performance is achieved if it is defined as embracing both behavior
and outcomes. This is well put by Brumbrach (1988): “Performance means both behaviors and
results. Behaviors emanate from the performer and transform performance from abstraction to
action. Not just the instruments for results, behaviors are also outcomes in their own right—the
product or mental and physical effort applied to tasks—and can be judged apart from results.”
Performance could, therefore, be regarded as behaviour—the way in which organizations, teams and
individuals get work done. Campbell believes that ‘Performance is behavior and should be
distinguished from the outcomes because they can be contaminated by systems factors.’
Performance = (Skill to do + Will to do)
Creating skill to do: It means resources and infrastructure required for performance. They are
mainly:
1. Machine,
2. Money,
3. Material, and
4. Men.
They determine the capacity of an organization.
Better performance cannot be thought of without state-of-the-art machinery—superior to or equal
to the competitors.
Paucity or inferiority of money or material will definitely hamper the performance. Hence, their
strategic availability is must.
Men, the most critical and scares of all the resources are not only most important as also most
strategic. Sourcing, attracting, developing, retaining and motivating talent are most crucial jobs
of a performing organization.

The Pillars of Human Performance

Work performance of an individual may be observed and appraised along three dimensions as
follows:
1. An understanding of the context of work, or work situation, in terms of its purpose, nature,
conditions, requirements, metrics of appraisals, and so on;
2. The ability to carry out the work effectively in terms of the requisite knowledge, skills and
capabilities required for performance excellence; and
3. Motivation to carry out the work in terms of one’s commitment and best efforts towards
excelling in performance.
These three dimensions may be viewed as three pillars of human performance, viz., understanding
the context, the ability to be effective, and motivational to excel. These three axes of human
performance may be logically applied and instantiated to explicate the nature, norms, and
attributes of the human capital as follows:
The first pillar, i.e., understanding the context, implies employees’ reflective and critical
understanding of the dynamic business environment of their enterprise. It also implies

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employees’ comprehension of their company’s vision and strategy, business system design Notes
and profit model, competitive logic and core value proposition. More importantly, it implies
employees’ clarity of understanding regarding their company’s processes and mechanisms for
the creation, capture, and delivery of value; and the nature and rationale of their own individual
and collective efforts toward realizing their company’s vision and strategy. The employees’
awareness and understanding of their company’s business context also orients them towards
a better appreciation of the present and potential challenges facing their company; and the
requirements of knowledge, skills, and capabilities for coping with them.
The second pillar, i.e., the ability to be effective, in the context of human capital, implies employees’
abiding dedication to work excellence in their broadly defined and non-rigid work roles. More
importantly, it implies employees’ sustained orientation towards learning, upgradation of skills,
cultivation of new and needed capabilities, expertise, creative thinking and use of knowledge;
for both problem-solving and innovation; streamlining of process, procedures, and routines
for eliminating non-value-adding activities; and experimentation and initiatives in search of
opportunities. This is so, for the concept of performance excellence, or effectiveness, is neither
static nor fixed.
The second pillar is meaningfully shaped by the first (i.e., ‘understanding the business context’)
in terms of the adaptability of human capital to changes in a firm’s business environment. The
requirements of learning, knowledge, skills and capabilities of, and by employees, and the life
cycles of its organization and industry. The requirements of employees’ effectively performance
would be radically different across disparate organizations like high-technology growth firms,
firms in mature or declining industries, or firms caught in industrial shake-outs and consolidation.
Even for the same firm, requirements would differ from time-to-time depending upon changes in
its competitive situation. The focus of human capital along the second axis of performance is on
proactive learning, development, and used of knowledge for customer-valued work excellence.
The third pillar i.e., ‘motivation to excel’ implies an organization-wide shared ethos of a high
degree of commitment to enterprise goals, and a high level of cooperation among employees
toward working together to achieve those goals, These, in turn imply a high level of trust and
goodwill among employees in pursuit of shared objectives. Both commitment and cooperation
are vital for individuals with complementary and specialized knowledge and skills to collaborate
creatively for solving difficult problems, developing new products and/or services, achieving
performance breakthroughs, creating new competencies, and generating value through relentless
improvement an innovation.
Employees in an enterprise, both individually and collectively, must score high on each of the
three axes, and consistently across all the three axes and in an expanding manner over time; in
order to constitute the firm’s human capital. The ability to meet the foregoing requirements of
performance in a continuing manner, raises a basic question. What type of person would be
capable of scaling the heights of performance, and sustaining the same in a steady-state fashion
over time?
Performance excellence and effectiveness in organizations, apart from an individual’s ability and
motivation, depend primarily on the individual’s ability to effectively collaborate with others.
Collaboration is a purposive relationship based on trust, mutual regard, and sharing of ideas,
information, knowledge, resources and responsibilities. It involves working together to learn,
solve problems, innovate, meet tight time schedules, cope with obstacles, deal with unforeseen
difficulties, and strive to achieve and exceed organizational goals every day. The nature and
range of collaborative activities may vary, the collaborating persons, or team members, may be
different from time to time, and job rotation assignments may engender new forms and modes
of interpersonal and group interactions across organization levels, space and time. But the
imperatives of doing one’s best in cooperation with others, helping others when needed, and
pursuing stretch goals of the enterprise, remain unchanged.

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Notes The Performance Management Cycle

Performance management is a process, not an event. It operates as a continuous cycle, as shown

in Figure 1.1.
Figure 1.1: The Performance Management Cycle

act

1.2 Concept of Performance Management

The concept of performance management may be categorized into two separate types of
management. The first one deals with the performance of an organization as a whole and evaluates
the effectiveness of its managers. The second one deals with the system of evaluating employees
in order to enable them to achieve reasonable goals and thus ensure that the organization
performs better.

Figure 1.2: Linkage of Performance Management with other Sub-systems

Human resource Recruitment and Industrial relations

planning selection
Data on job-person Basis for determining
fitment criteria selection criteria

organizational

Performance
management

Training and Reward Management Mentoring and counseling

development
Basis for training
needs identification Effective career and

Internalization of ethics
management

It is pertinent here to understand what performance is. Brumbrach (1988) defines ‘performance’
both as behavior and results. Behavior emanates from the performer and transforms performance
from abstraction to action. Not just the instruments for results, behaviors are also outcomes
in their own right—the products of mental and physical effort applied to task and can be

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judged apart from the results. In the organizational content, performance means successful Notes
formulation and implementation of a value creating strategy which either generates or sustains
its competitiveness.

Note Key Ingredients of Successful Performance Management

Committed leadership Transparent performance information

Build competency based development plans Effective multi-source feedback mechanisms
to discuss and address performance issue
Strong links between performance measures and Useful performance measures
program results

Adapted from: J. M. Kamensky (2006)

Hence, performance management helps organizations in management consistent performance

in a manner which holds employees and managers accountable for supporting its objectives and
strategy, successfully fulfilling assigned job responsibilities, and accomplishing individual
performance goals, this would require the following pre-requisites:
1. Business processes are as simple as possible
2. Lines of leadership and management are clear
3. Employees are empowered, which is an important driver of innovation
4. A distinct organizational culture
5. Workplace interactions are based on honesty, integrity, and trust
6. Openness to change

1.3 Characteristics of Performance Management

The following are the key characteristics of performance management:
1. Performance management is an important organizational tool to clarify performance
objectives, standards, critical dimensions, and competencies to enhance individual
performance.
2. Performance management works best when an employee’s work is planned and goals for
achievement are communicated.
3. It emphasizes the development of capability and capacity of employees to perform
consistently, coupled with the agility to respond to a changing dynamic business and work
environment.
4. Performance management is a ‘systematic’ and ‘holistic’ approach to identify critical
dimensions of performance.
5. It helps in integrating performance management process with other critical organizational
systems including leadership development, succession planning, and talent management
efforts.
6. Performance management is a multidimensional concept and includes imputes, processes,
outputs and outcomes.
7. Performance management transforms organizational objectives and strategy into a
measurable action plan by getting the right information to and from the right people at the
right time and in the right format.

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Notes 1.4 Objectives of Performance Management

The major objectives of performance management are discussed below:
1. To enable the employees towards achievement of superior standards of work
performance.
2. To help the employees in identifying the knowledge and skills required for performing the
job efficiently as this would drive their focus towards performing the right task in the right
way.
3. Boosting the performance of the employees by encouraging employee empowerment,
motivation and implementation of an effective reward mechanism.
4. Promoting a two way system of communication between the supervisors and the
employees for clarifying expectations about the roles and accountabilities, communicating
the functional and organizational goals, providing a regular and a transparent feedback for
improving employee performance and continuous coaching.
5. Identifying the barriers to effective performance and resolving those barriers through
constant monitoring, coaching and development interventions.
6. Creating a basis for several administrative decisions strategic planning, succession
planning, promotions and performance based payment.
7. Promoting personal growth and advancement in the career of the employees by helping
them in acquiring the desired knowledge and skills.

1.5 Principles of Performance Management

Some of the major principles of performance management are as follows:
1. Performance management is considered a process, not an event. It follows good
management practice in which continual coaching, feedback and communication are
integral to success.
2. The Performance Management is primarily a communication tool to ensure mutual
understanding of work responsibilities, priorities and performance expectations.
3. Elements for discussion and evaluation should be job specific – not generalized personality
traits. The major duties and responsibilities of the specific job should be defined and
communicated as the first step in the process.
4. Performance standards for each major duty/responsibility should be defined and
communicated.
5. Employee involvement is encouraged in identifying major duties and defining performance
standards.
6. Professional development should be an important component of the plan.
7. The formal evaluation period should be long enough to allow for full performance and to
establish a history such that evaluations are fair and meaningful. One year is a common
evaluation period.
8. Documentation of performance will occur as often as needed to record the continuum of
dialogue between supervisor and employee.
9. If formal ratings are included, they should reflect the incumbent’s actual performance in
relation to the performance standard for that major duty.

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10. The supervisor should be evaluated on the successful administration of the plan and Notes
ongoing performance management responsibilities.
11. Training for supervisors and employees is encouraged and will be provided by University
Human Resource Services.

Note Ten Top Performance Management Tips

Be honest in a working relationship for everyone’s benefit

Remember that performance management is not an instrument to manage
indiscipline
Notice great performance and celebrate successes

Source: Mitu Maheshwari, May 2007, Business Manager.

1.6 Performance Appraisal to Performance Management

The contemporary organizations are undergoing a transformation for coping against the changing
needs of the environment and excelling in the business by building up their adaptive capabilities
for managing change proactively. The traditional performance appraisal system did not suffice
the needs of the changing scenario as it was mainly used as a tool for employee evaluation in
which the managers were impelled to make subjective judgments about the performance and
behavior of the employees against the predetermined job standards.

Note Performance Appraisal vs. Performance Management

Performance Appraisal Performance Management
Focus is on top down assessment Stresses on mutual objective setting through a process of joint
dialogue
Performed annually Continuous reviews are performed
Usage of ratings is very common Usage of ratings is less common
Focus is on traits Focus is on quantifiable objectives, values and behaviors
Monolithic system Flexible system
Are very much linked with pay Is not directly linked with pay

Performance appraisal is a systematic evaluation of present potential capabilities of personnel

and employees by their superiors, superior’s or a professional form outside. It is a process of
estimating or judging the value, excellent qualities or status of a person or thing. It is a process
of collecting, analyzing, and evaluating data relative to job behavior and results of individuals.

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Notes Traditionally, the performance appraisals were organized in a bureaucratic manner and suffered
from unnecessary delays in decisions and corruption. Performance appraisals were mostly
narrowly focused and functioned in isolation without bearing any linkage with the overall
organizational vision or goals. The side effects of the performance appraisal system was it
generated skepticism amongst the managers and the employees on any new initiative of the HR.
In the present scenario, the organizations have shifted their focus from performance appraisals to
performance management as a result of internationalization of human resources and globalization
of business. The functions of HRM have become far more complicated as today the major focus
of strategic HRM practices is on the management of talent by implementing such development
programmes which enhance the competencies of the employees. The performance management
approach focuses more on observed behaviors and concrete results based on the previously
established smart objectives. By adopting techniques like Management by Objectives (MBO), smart
objectives are established in terms of either facts and figures and in the entire process the superior
plays the role of a coach or a facilitator. The objectives are mutually decided at the beginning of
the performance season and serve as a standard of performance for evaluation. In this method,
the employees can offer a feedback on their contributions by filling up a self appraisal form.
Performance management is a much broader term in comparison with performance appraisal
as it deals with a gamut of activities which performance appraisals never deal with. This system
is a strategic and an integrated approach which aims at building successful organizations by
developing high performance teams and individuals and improving the performance of people.
This process starts when a job is defined. Performance management emphasizes on front end
planning instead of looking backward unlike performance appraisals and the focus is on ongoing
dialogue instead of appraisal documents and ratings. Thus, performance management may be
regarded as a continuous process.

!
Caution The use of performance management in the best-practice companies is not because it
is a better technique than performance appraisal, but because it can form one of a number of
integrated approaches to the management of performance.

1.7 Challenges to Performance Management

Some of the key challenges to performance management are as follows:
1. Concerned with the output (the results achieved), outcomes, processes required for
reaching the results and also the inputs (knowledge, skills and attitudes).
2. Concerned with measurement of results and review of progress in the achievement of set
targets.
3. Defining business plans in advance for shaping a successful future.
4. Striving for continuous improvement and continuous development by creating a learning
culture and an open system.
5. Establishing a culture of trust and mutual understanding that fosters free flow of
communication at all levels in matters such as clarification of expectations and sharing of
information on the core values of an organization which binds the team together.
6. Procedural fairness and transparency in the process of decision making.

Notes
Pretty Bhalla, Lovely Professional University Unit 2: Performance Management System

Unit 2: Performance Management System Notes

CONTENTS
Introduction
2.1 Objectives of Performance System
2.2 Functions of Performance Management System
2.3 Characteristics of Effective PMS

Introduction
Performance management system is another way of envisioning the totality of a manager’s
function. It views the managerial function holistically – not a random collection of activities that
most managers recognize and undertake as their core function. It provides a systemic dimension
to the managerial activities – highlighting their mutual interrelatedness and interdependence. It
emphasizes the dynamic, sequential and cyclical nature of these activities, essential to actualize
their potential synergistic impact, which is the source of high performance and excellence. By
implication, it also explains why focusing on only one or a few of these activities doesn’t deliver
the results wished-for.
Any system needs certain prerequisites to function smoothly. So does PMS. PMS becomes easier
to do and more productive to the extent that:
1. It is used holistically, as a system
2. The relevant subsystems are in place and accepted
3. The organization’s philosophy and human environment is conducive to high morale
4. The manager is oriented to, and equipped with, high performing attitudes and leadership
skills.

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Notes 2.1 Objectives of Performance System

Performance management arrived in the late 1980s partly as a reaction to the negative aspects of
merit-rating and management by objectives referred to earlier. Of course, it at first incorporated
many of the elements of earlier approaches; for example, rating, objective-setting and review,
performance pay and a tendency towards trait assessment. Some of these features have changed.
Conceptually, however, performance management is significantly different from previous
approaches, although in practice the term has often simply replaced performance appraisal, just
as human resource management has frequently been substituted for personnel management has
frequently been substituted for personnel management without any discernible change inapproach
lots of distinctions, not many differences.
Performance management may often be no more than new wine in old bottles or to mix
metaphors, a ‘flavors of the month’. But it exists, and our research demonstrates that interest is
growing why?
The following are the key objectives of PMS:
1. To leverage the performance of organisation, given that goals are complex
2. To ensure role clarity performance objectives at all the levels of organisation
3. To encourage high performance work culture
4. To encourage team building in the organisation
5. Employee development by systematically identifying training and development needs
6. To improve relationship between manager and employees through a two way
communication process
7. To focus on process rather than on format
8. To encourage performance based rewards and recognitions in the organisation

!
Caution The use of performance management in the best-practice companies is not
because it is a better technique than performance appraisal, but because it can form one
of a number of integrated approaches to the management of performance. The appeal of
performance management in its fully realized form is that it is holistic: it pervades every
aspect of running the business and helps to give purpose and meaning to those involved in
achieving organizational success.

2.2 Functions of Performance Management System

Performance management system can fulfill different functions for different organisations. The
given below are the key functions of PMS:
1. Helps in clarifying the mission, vision, strategy, and values of the organization to the
employees in order to enable them achieve the same
2. Helps in improving various business processes as the deficiencies are highlighted.
3. Helps in attracting and retaining talents in the organization and helps in establishing a
robust talent review system.
4. Facilitates competency mapping, training and development needs identification, and
implementation as part of the performance development tool (employees have the
competencies to met both the present and emerging requirements of the organization).

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5. Assists management in validating their recruitment and selection process and techniques. Notes
6. Helps employees attain their full potential and attain a balance between work and personal
life.
7. Improves organization’s ability to change faster by highlighting the gap between potential
capabilities and present ability.
8. Helps in making a shift from industrial relations to individual relations with a focus for
employee growth an development
9. Enables sustainable organizational competitiveness, innovation, and low employee
turnover by helping in reviewing organization structure and plan succession.
10. Builds the intellectual capital not only at managerial level but at front-line level also.
In a nutshell, performance management seeks to balance business alignment with learning and
development and performance reward.

Figure 2.1: Conditions required for Successful Institutionalization

Professional relations
between managers
team spirit

Successful Institutio- employees receiving

nalization of PMS

professionals with positive

Source: Adapted and Modified from Mohd. Fazal (2005).

2.3 Characteristics of Effective PMS

Characteristics of Effective Performance Management System are as follows:
1. Focus is on performance management.
2. Emphasis is on performance improvements of individuals, teams and the organization.
3. Continuous process with quarterly performance review discussions.
4. Emphasis is on performance planning, analysis, review, development and improvements.
5. Performance rewarding may or may not be an integral part.
6. Designed by HR department but could be monitored by the respective departments
themselves.
7. Ownership is with line managers, HR facilitates its implementation. KPAs or KRAs are
used as planning mechanisms.
8. Developmental needs are identified on the basis of the competency requirements for the
coming year.

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Notes 9. There are review mechanisms essentially to bring performance improvements

10. It is a system with deadlines, meetings, input, output and a format.
11. Process driven with emphasis on the format as an aid.
12. Linked to performance improvements and through them to other HR decisions as and
when necessary.
13. PMS is change in managerial style of doing work.
14. It creates and nurtures performing culture.
15. Framework of Performance Management.
In the organization with performance management systems, 85 percent had performance pay
and 76 percent rated performance. The emphasis was on objective –setting and review, which
as the authors of the report noted, ‘leaves something of a void when it comes to identifying
development needs on a longer-term basis. There is a danger with results orientated schemes
in focusing excessively on what is to be achieved and ignoring the how.’ It was noted that some
organizations were moving in the direction of competency analysis, but not very systematically.

Note Elements of an Effective Performance Management System

Process

Effective Performance
management

organizational professionals

Source: Kathy Armstrong (2005)

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Notes Unit 3: Performance Planning

CONTENTS
Introduction
3.1 Characteristics of Performance Planning
3.2 Objectives of Performance Planning
3.3 Importance of Performance Planning
3.4 Process of Performance Planning
3.5 Barriers to Performance Planning

Introduction
The performance-planning part of the performance-management sequence is primarily a joint
exploration of what individuals need to do and know to improve their performance and develop
their skills and competences, and how their managers can provide the support and guidance
they need. This requires Competence Mapping & Machine & potential development.
The performances aspect of the plan obtained agreement on what has to be done to achieve
objectives, raise standards and improve performance. It also establishes priorities—the key
aspects of the job to which attention has to be given. Agreement is also reached at this stage
on the basis upon which performance will be measured and the evidence that will be used to
establish levels of competence. It is important that these measures and evidence requirements
should be identified and fully agreed now, because they will be used jointly by managers and
individuals and collectively by teams to monitors progress and demonstrate achievements.

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Notes

Note

Prepare for the performance planning session by reviewing department mission

statements, goals, objectives, and strategies, and by drafting a preliminary set of
development research performance objectives or job responsibilities.
Give the researcher ample notice of the performance planning session, review the overall
purpose and design of the performance management system, share relevant department
materials, and ask the development researcher to draft preliminary performance
objectives or job responsibilities.

3.1 Characteristics of Performance Planning

The given below are the key characteristics of performance planning:
1. Performance planning is the key essential for an effective performance management
system.
2. Performance planning is a continuous process which starts with understanding of
organisational objectives and ends with setting of performance criteria.
3. Performance planning helps in attaining the goals and objectives of the organisation.
4. Performance planning motivate the employees to contribute their best in achieving the key
goal of the organisation.
5. Performance planning is an integral part of performance management system.
6. Performance planning identifies the criteria for assessing the employee’s performance.
7. Performance planning helps in setting the basis for making distinguish between the
different levels of performance.
8. Performance planning helps in deciding the criteria for rewarding the employee as per
their achievements.

3.2 Objectives of Performance Planning

The development of an employee performance management plan is paramount to the successof
any performance management system. A performance 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. The performance plan 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 organisation and to establish
realistic goals and objectives consistent with that mission in a defined time frame within
the organization’s capacity for implementation.
2. Communicate those goals and objectives to the organization’s constituents.
3. Ensure the most effective use is made of the organization’s resources by focusing the
resources on the key priorities.
4. Provide a base from which progress can be measured and establish a mechanism for
informed change when needed.

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Notes 5. Listen to everyone’s opinions in order to build consensus about where the organization is
going.
6. Provides clearer focus for the organization, thereby producing more efficiency and
effectiveness.
7. To clearly identify the performance metrics used to measure employee’s success in meeting
predetermined targets.
8. Produces great satisfaction and meaning among planners, especially around a common
vision.
9. Increases productivity from increased efficiency and effectiveness.
10. Solves major problems in the organization
11. To provide an ongoing on-the-job feedback

!
Caution Best practice identifies that objectives are easily understood and acted upon when
they are specific, measurable, achievable, and realistic and time specific. The acronym
SMART is an aid to remember those components.
To set SMART objectives it is important to:
1. Identify the outcome expected, the ‘what’;
2. Provide indicators to measure the degree of achievement;
3. Create an objective that constitutes a challenge within the staff member’s capabilities;
4. Take into account available resources; and
5. Include a target date or response time.

3.3 Importance of Performance Planning

Coaches 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. The following
points discuss the importance of performance planning:
1. Performance planning helps in aligning the individual goals with the organisational
goals.
2. Performance planning makes the process of performance management more accountable
and objective.
3. Performance planning focus on key results area and key performance area.
4. Performance planning helps in maximum utilisation of resources.
5. Performance planning is important to make clarity in role and responsibilities of
employees.

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Notes
3.4 Process of Performance Planning
There are many advantages to both supervisors and employees in having an effective performance
planning and review process. 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?
When building a performance plan, you would 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 performance planning:
1. Preparation of Performance Plans: Performance plans are usually prepared at the beginning
of annual review period, or when an employee first starts their new job. Preparing for the
initial planning meeting should be undertaken by both the supervisor and the employee.
Both supervisor and employee should be reviewing the goals, objectives and needs of
the work unit and looking at the current job description. The supervisor should list the
things in the job that they intend to measure, and the standards you will measure to. The
employee could write down the ways they think each of their tasks could be measured and
how well each should be performed.
2. Identification of Key Success Factors: Performance objectives and results to be achieved
should be focused on results and set in order of priority. Measures should be specific to
each task, with clear standards which include dates and times when appropriate.

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Notes 3. Setting Departmental and Individual Objectives: After setting the organisational goals and
objectives the departmental goals and objectives are defined. The departmental objectives are
further categorised into individual goals. The individual goals include the key duties and
responsibilities to achieve the final goals of the organisation.
4. Providing Regular Feedback: The next step in the process is providing regular feedback.
The supervisor should be maintaining a log of performance facts, which will ensure that
important issues are given the attention that is required and will help the formal review
proceed in a more focused and potentially more positive way. The employee should also
maintain a record of accomplishments and special achievements, or issues that need to be
resolved. Discussion of these things during scheduled or spontaneous feedback sessions
will allow resolution of problems in a timely manner.
5. Performance Review: Reviewing performance gives the supervisor and the employee the
opportunity to look at results that have been achieved in relation to the original plan and
standards of performance that were established. At this meeting, you should review all
performance records and assess each task, discussing whether they met the standards
of performance or not, and whether they exceed those standards. Review any outside
factors that may have had an effect on performance. At this time, the supervisor should be
identifying any areas where improvement may be necessary or performance could be
enhanced. The employee should also have the opportunity to discuss areas where they
could have used more help.
6. Action Planning: Another important aspect to completing this cycle is action planning.
This is where the supervisor and employee would plan for any training that needs to occur,
and could also be where you discuss career planning.

3.5 Barriers to Performance Planning

The barriers to performance planning can be categorised as follows:
1. Organisational Barriers: Most of the traditional organisations are not in the favour of
performance planning. According to these organisations spending time on performance
planning is just the wastage of time. These organisations believe that they have strong
implementation strategy.

Example: Indian companies tend to spend 30% time on planning and remaining
70% on implementation whereas MNCs usually spend 70% time on performance planning
and the remaining 30% time on strategy implementation.
2. Individual Barriers: Lack of commitment in organisation’s employees or management is
another important barrier to performance planning. Sometimes managers or employees or
both show less commitment towards the achievement of organisational goals. The reasons
could be personal, organisational, competitive or any other HR factor.

Example: Organisational politics, workplace bullying or high conflict causes

employees to show less interest towards their job responsibilities.

34 LOVELY PROFESSIONAL UNIVERSITY

Pretty Bhalla, Lovely Professional University Unit 4: Competency Mapping

Unit 4: Competency Mapping Notes

CONTENTS
Introduction
4.1 Building Competency Models
4.2 Profiling Competency Framework for a Particular Role
4.3 Potential Assessment Centre for Competency Mapping
4.4 Methods of Competency Mapping

Introduction
Competency Mapping begins with identifying key competencies for an organization and/or a
job and incorporating those competencies throughout the various processes (i.e. job evaluation,
training, recruitment) of the organization. With a competency based job description, the second
step involves mapping those competencies throughout the organization’s human resources
processes. The competencies of the respective job description also become factors for assessment on
performance evaluation. Using competencies helps in more objective evaluations based on
displayed or not displayed behaviors. Taking competency mapping one step further, the results
of performance evaluation can be used to identify in what competencies individuals need
additional development or training.

4.1 Building Competency Models

There are three ways in which competencies models may be developed:

1. Behavioral Indicators: Behavioral indicators describe the behaviors, thought patterns,

abilities and traits that contribute to superior performance.
2. Evaluative Competency Levels: Exceptional competencies of high performers are set as
standards for evaluating competency levels of employees.
3. Competencies Describing Job Requirements: This approach is useful for organizations
having multiple competency models. Competencies required in a particular job are
described. Job specific competency models help in structuring focused appraisal and
compensation decisions.

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Performance Management System

Notes 4.2 Profiling Competency Framework for a Particular Role

To identify role-specific competencies required industry specific, functional and behavioral
competencies, which need to be developed for enhanced performance. The approach for
developing a competency framework for a particular role is as proposed below:
1. Understand strategic business context of the organizations in term of its structure and
environmental variables.
2. Detail role description for positions. Defining and scaling (relative importance and mastery
level) of specific behaviors for each identified competency as a measure of performance.
3. Develop competency framework taking into consideration the core values and the culture
of the organizations in addition to specific functional and level requirements. This should
jell with the vision and mission of the company.
4. Validate the competency framework through a workshop, which should includefunctional
experts and top management personnel in order to define critical and desirable
competencies. And also to substantiate the extent to which the competencies differentiate
between high and average performers by validating the content and criteria.

competencies and the proficiency levels required froe each competency. Each competency

4.3 Potential Assessment Centre for Competency Mapping

The linkage between competencies and roles is achieved through a competency mapping exercise,
through which the most critical, success driving behaviors for specific roles are established.
Against the validated competency framework, an individual’s potential is identified through an
Assessment Centre process as outlined below:
1. Design Assessment Centre
2. Conduct Assessment Centre
3. Map individual competencies and gaps
4. Finally assess organizational capability and gaps.
A link between people and competencies is established through an effective system of measuring the
proficiency of an individual on the desired competencies for the role. The link between people and
roles is established through effective measuring tools that evaluate the performance of the person
in the role. On-the-job performance of the individual is evaluated on the basis of a performance
management system.
The Assessment Centre is a powerful tool in the hands of the management for selection and
development. As a selection tool it can be used for management promotions, fast tracks schemes,
high potential list and change of functional role. As a development tool, it is helpful in succession
planning, identifying training needs and career development.
Designing and conducting a potential Assessment Centre should follow basic principles in term
of accuracy, fairness, reliability, legality, efficiency, multiple assessors, multiple tests and optimal
stress to increase performance. It would involve two types of exercises, i.e., group exercises and
individual exercises.

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 Unit 4: Competency Mapping

Group Exercises Notes

For potential assessment, the following group exercises are conducted:

1. Assigned Role Exercises: Used to assess negotiating skills, decision making skills, and risk
taking skills;
2. Unassigned Role Exercises: Used to assess ability to handle uncertainty, change orientation,
ethical behavior and global orientation; and
3. Team Exercises: Used to assess ability to work in a team and solve problems efficiently.

Individual Exercises

For potential assessment, the following individual exercises are conducted:

1. In-Basket Exercises: Used to assess ability to plan, organize, decide, manage and
delegate;
2. Learning skill Inventory/Psychometric Inventories: Used to assess ability to learn, leverage
knowledge and indicate behavioral patterns; and
3. Interpersonal Effectiveness Module: Used to assess interpersonal effectiveness,
excommunication skills, patience and interpersonal skills.
Inputs for analysis of an individual’s potential and behavioral patterns are also collected through
multilateral feedback (self, peer, subordinate, customer and superior assessment), behavioral event
interviews, career aspiration interview, career history, etc. In order to minimize assessors’ bias and
ensure objectivity and uniformity multiple trained assessors for each competencies assessment are
used.
The competencies gaps can be found out by comparing the desired competency (proficiency)
levels and displayed competency levels as indicated in the Figure 4.1.
Based on the above exercises, feedback details for individuals on their strengths and developmental
areas are prepared.

!
Caution Positive gaps between desired and displayed competencies indicate areas of
improvement; negative gaps indicate strengths.
Each gap area needs to be analyzed and prioritized into major and minor gaps. These gaps
are to be addressed at the individual, departmental and organizational levels by agreeing on
milestones for each individual in terms of projects, job rotations, transfer, training and job
enrichment. Setting up a Development Monitoring Cell in HR would help in creating a project
plan with deadlines and escalation possibilities with a feedback system for feedback from bosses and
individuals. Average assessment results are used to identify strengths and gaps in an
organization’s capabilities.

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Performance Management System

Notes
Figure 4.1: Competency Gap

Levels
5
4.5

3.5

2.5

1.5

0.5

4.4 Methods of Competency Mapping

It is not easy to identify all the competencies required to fulfill the job requirement. However,
a number of methods and approaches have been developed and successfully tried outin
organization. These methods have helped managers to a large extent, to identify and reinforce
and/or develop these competencies both for the growth of the individual and the growth of
our organization.

1. 360-degree multi-rating: It is a type of performance appraisal for assessing the employees

more objectively. This appraisal method takes care of many thins like what kind of
behavior a person has with superiors, subordinates, peers etc.
2. Organizational surveys: In the organizational survey the questionnaire are filled by the
employee, who rates himself. Questionnaires are written list of questions that users fill out
questionnaires and return. The techniques are used at various stages of development,
depending on the questions that are asked in the questionnaires.
3. Assessment centre: Assessment center is a mechanism to identify the potential for growth.
It is a procedure (not location) that uses a variety of techniques to evaluate employees for
manpower purpose and decisions. An essential feature of the assessment centre as used
by our organization is the use of situational test to observe specific job behavior. Since it is
with reference to a job, elements related to the job are simulated through a variety of tests.
The assessors observe the behavior and make independent evaluation of what they have
observed, which results in identifying strengths and weaknesses of the attributes being
studied.
4. Expert’s rating of job analysis: Job analysis tools help companies extract knowledge of core
competency required from internal experts and allow the company to have any number of
expert raters contribute rating on standard competency scale for any job title or position.
The accumulated ratings are transformed into a composite template defining the ideal
competency set for that position. Employee or job applicants then complete a self-report
version and there are mapped against the template. Skills or competency gaps are thus
identified and informed to the training decisions.

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 Unit 4: Competency Mapping

Notes

BHEL
Making Performance Management System a Way of life

A
s a continuing process of linking HRM to market forces and stakeholder-driven
policies, several new HR initiatives were put in place during the year. Having
introduced Performance Management System (PMS) as a replacement of
conventional Annual Confidentiality Reports (ACRs), the company become the first PSE to
implement during the year, an e-enabling Performance Management System for executives
called e-MAP—Moving ahead through Performance. The new Performance Management
System was started by the initiative and high involvement of the top management with
a drive to excel and to counter competition with domestic as well as foreign suppliers
of equipment. The system, while debugging various lacunae faced in performance
management systems, is aimed at boosting the productivity of employee and introducing
greater transparency. It provides access to over 10,000 executives located all over the
country for preparing of their performance plans and completing the appraisal on a web-
enabled platform.
Five focus groups at Haridwar involving approximately 150 executives across levels,
functions, locations, units and sectors were taken to test the use of MAP.
The process of e-MAP took off in 2002. The existing performance management system
(ACR) was analyzed and improvement (design) measures were arrived at form the
analysis. The precondition for making it user friendly and time saving is e-enablement.
Simultaneously, a pilot project to develop implementation tools and processes for the new
performance management system was undertaken. A combination of e-enablingand
new tools and processes formed the basis to implement MAP, implementation of a
communication rollout to all executives. The 2002-03 cycle process review and the report
were done by Hewitt Consultants by June 2003. They also are assisting in performance
planning for 2003-04.
The duration from designing MAP till rolling it out to the middle and junior level
management was 14 weeks and Hewitt played an important role during this phase. BHEL
played its part in rolling out the communication process and MAP to middle and junior
executives. The 14-week task was divided into three phases. The first phase of two weeks
duration involved designing of MAP and the communication strategy and its materials.
The second mid-week phase was the change phase. The customization of e-enablement to
MAP requirements was followed by pilot study in IS and power sector and then the roll-
out of MAP to the pilot unit and functional templates were prepared.
The major part of this phase was spent in communicating the change and its implementation
as it was important for the rese of the sub-tasks in this phase.
BHEL leadership team workshops were held and MAP was introduced for usage to BHEL
middle and junior management during the third phase. It was of six weeks duration. The
process was monitored till the end of its completion for the middle management and a
process audit was held for the junior management.
Five hundred change agents were selected to implement the process throughout the
organization. These change agents were the high job performers and key managers and
executives. The communication strategy BHEL used in this task is as described hereafter.

Contd....

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Performance Management System

Notes The communication principle is to build awareness of PMS 2-0, to gain an understanding
of its functioning during implementation and through feedback from users and to allay the
misgivings of the system. The variables were five-fold:
1. Events: When are the key events taking place in the change process? And what are the
key phases in these events?
2. Audiences: Who are the key audiences for this change? And how is this change going
to affect them?
3. Message: What are the key messages that are required to be communicated to the
audience? And what are the other appropriate messages for communication?
4. Media: How are the message going to be communicated? What are the key delivery
vehicles? What is available? What is to be developed?
5. Messenger: Who are the key messengers? And what are the groups or users they are
covering?
It was decided to discuss the PMS at different levels/cross-sections/units/business groups.
We had the following agenda in view:
1. The PMS feedback last year;
2. Expectation from system;
3. Culture and mindset; and
4. Key concerns.
BHEL has been continuously improving upon the process/approaches for managing
performance. The Performance Management System (PMS) was developed through in-
house efforts, taking inputs from all concerned groups. However, in order to address
certain issues, which mainly related to:
1. Alignment;
2. Consistency;
3. Transparency; and
4. Ownership;
A workshop held, with 150 participating executives across levels/functions/locations
units/business sectors.
The following inputs were collated:
1. “I was able to objectively discuss my performance with my boss.”
2. “The process made us thinking about our role and contribution.”
3. “We are not clear about how goals are to be set.”
4. “Inadequate understanding of competencies”
5. “The process was completed only because it had to be done”.
6. “We do not know what our final scores are”
7. “The system is not transparent”
8. “It is very difficult to set goals for service areas”
9. “Our superiors accumulate our targets as their targets”
10. “People have set objectives which they have already achieved or which are routine
activities”.
Contd....

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 Unit 4: Competency Mapping

11. “We set our targets in isolation”. Notes

12. “Senior people have not devoted time to the PMS”.

13. “Promotion seems to be the objective of the system”.
14. “The lack of role clarity has impacted the quality of the process”.
15. “Tendency to avoid stretch”.
Thus, by listening to the users of the systems, the current state of the system was:
1. Wide acceptance of need for PMS;
2. PMS design, by and large, appropriate;
3. Entire organization has attempted to implement it, with varying degrees of success;
and
4. Strong commitment to resolve issues and move on.
And the issues which needed to be addressed we identified as:
1. Alignment and Focus: Executive’s performance aligned to the goals of BHEL;
2. Ownership: Executives taking responsibility and onus for their own performance;
3. Transparency: Clear, transparent and objective process; and
4. Consistency: Consistent application of performance principles; ‘uniform loading’.
Thus, a project was taken up to make performance a “way of life” at BHEL. This was
planned through:
1. Redesigning;
2. E-enabling; and
3. Effective organization-wide implementation of the performance management
system.
(M/s Hewitt Associates assistance was sought in the above area).
A comprehensive structure was put in place to prepare a road map/design the system/
design enable process and methodology to implement the same in a time-bound frame.
The system has the following features:
1. Consistency of measures through functional templates;
2. Alignment of individual goals to organizational goals;
3. Agreement between appraiser, appraisee and the reviewer;
4. Clarify and enrich the existing competencies;
5. Transpose employee to unique roles;
6. Assign competencies and proficiencies to unique roles;
7. Redesign of normalization process;
8. Effective organization-wide communication and training of new system; and
9. PMS workflow automation.
Also, the futuristic linkage of systems were discussed/debated and included as below:
1. Direct linkage of PMS to rewards;

Contd....

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Performance Management System

Notes 2. Improved measurement and target settings

3. Multi-rater feedback for a segment of the organization. E.g., senior management;
4. Better alignment of performance cycle with the performance management system;
5. E-learning-development platform;
6. Performance –potential matrix for career/succession planning;
7. Create a new competency model in line with business realities; and
8. Initiate assessment for senior managers/high performers.
The basic parameters have been bifurcated in two, as shown in Figure 1
1. Performance parameters; and
2. Capability development parameters.

Figure 1: Basic Parameters

Performance
1. KRAs

(a) The implementation to take care of issues around the development of KRAs for
service functions as well as interdependencies;
(b) The KRAs to recognize the efforts that create value for the organization;
(c) To include outcome measures as well as measures that focus on process, capability
development, customer and projects; and
(d) Identify measures to capture relative ease of achieving performance.
2. Routine Responsibilities
(a) Appraisee to propose weightage to each appraiser to approve;
(b) Could be either outputs or activities depending upon roles; and
(c) Some roles might have very high weightage of routine responsibilities, e.g.,
parliamentary affairs, VIP reference, establishment, security, etc.
Capability Development
1. Competencies:
(a) Consolidated from 53 to 19 competencies;

Contd....

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 Unit 4: Competency Mapping

(b) Each competency to have 3-5 distinct proficiency level, supported behaviour clearly Notes
articulated;
(c) Each unique role will have predefined competencies and proficiency levels; and
(d) 2-3 competencies would be selected by the appraiser as the development
competencies for the year.
2. Development Plans: Based on last year’s performance, competency gap and future
growth development plan for each individual will be prepared and incorporated in
the plan by the appraiser.
Relative weights to KRAs and routine responsibilities would be pre-allocated through
the System.
Performance Planning Features
1. Modification to the performance plan: The change can be incorporated under
extraneous circumstances.
2. Role Charge: In the event of a transfer a time-weighted average performance rating
of the roles performed by the appraisee will be taken as this performance score of the
year (exception: Less than one month in the job).
Target-setting Principles Stretch/Loading
1. Stretch principles: Clearly articulated six target setting principles for BHEL.
2. Appraiser and appraisee establish KRAs and targets based on these target setting
principles.
3. Reviewer reviews the performance plan for all appraisees keeping in mind the target
setting principles.
Performance Feedback and Review
1. Performance vs Effort: Overall rating will be based on achievement of the performance
parameters only. The PMS would ensure balanced KRAs, capturing capability and
process building effort.
2. Frequency of feedback: Continuous performance feedback made possible through
appraisee e-PMS dairy
Competencies for Map
1. 53 competencies of the present system have been consolidated into 19.
2. Each competency has been defined and proficiency levels have been calibrated.
Some to the competencies used are:
1. Planning and organizing
2. Initiative and drive
3. Commitment to quality
4. Creativity and innovation
5. Interpersonal relationships
6. Risk-taking
7. Decision-making
8. Subordinate development job knowledge
9. Knowledge of business environment.

Contd....

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Performance Management System

Notes Competency and Proficiency Levels: An Example

Competency Name: ‘Planning and Organizing’
Definition: It establishes systematic action plans for self and others to assure accomplishment
of specific objectives.
Each competency is specified at three levels at BHEL and a corresponding behaviour
description is also defined.
Level 1
1. Develops schedules to accomplish work
2. Develops a personal system for organizing work (files, to-do lists, paperwork, pending
orders) that facilities delivery of work.
3. Prioritizes activities and issues on daily, weekly, and monthly basis and reworks plans
as required.
Level 2
1. Clearly outlines the work, deliverables, and timelines to team members and helps
them prepare action plans.
2. Establishes a course of action to accomplish a specific goal; plans proper allocation of
time and resources.
3. Analyses cost-benefit trade-off and focuses on activities that have the greatest impact.
4. Is aware of interrelationships among different activities and plans work assignments
and allocates resources accordingly.
Level 3
1. Works with multiple teams/projects and effectively integrates/ensures integration of
their deliverables, if required.
2. Foresees potential issues that might arise and develops contingency plans to take care
of the same.
3. Takes cognizance of a varied number of inputs across several functions and develop
long-term direction for unit/function.
These competencies are rated on a five-point scale as follows:
1. Learner: Has not yet demonstrated the behaviour or skill.
2. Development area: Sometimes demonstrates the behaviour/skill where appropriate.
3. Capable: Often demonstrates the behaviour/skill.
4. Strength: Almost always demonstrates behaviour/ skill where appropriate.
5. Role model: Encourages and influences others to display the skill in a job.
Unique Roles (UR) have to be created for every job under this system. Unique roles are jobs
that may be held by different incumbents but essentially perform the same function. Thus,
there may be certain differences in the incumbents, e.g., experience in number of years,
number of people supervised by the incumbents or overall authority; but the jobs may still
form one unique role if the following questions are answered:
1. Do the jobs have the same primary reason of existence? Is the purpose of the jobs
same?
Required Answer: YES
Contd....

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 Unit 4: Competency Mapping

2. Are the roles significantly similar in duties, responsibilities and accountabilities? Notes

Required Answer: YES

3. If you switch the incumbents of the roles in question, can they perform each other’s
roles with the same efficiency?
Required Answer: YES
3. Would the incumbents require a significantly different set of skills or abilities to
perform each other’s roles? No
Required Answer: No.
The improvements in the new PMS (MAP) consist of:
1. Design improvement;
2. Tools developed to support MAP, such as
(a) Unique roles and responsibilities templates;
(b) Measurement of stretch in targets;
(c) Normalization;
(d) E-enabling MAP,
(e) Users’ handbook; and
3. Customizing MAP.
The Performance Cycle

It starts with:
1. Unit/Business Sectors Draft Budgets (end-February)
2. Office Performance Planning (March to mid-April).
3. Online Performance Planning (mid-April to end-April).
4. Mid-Year Review (September/October)
5. Final Review and Feedback (April)
6. Normalization of Scores (May)
These systems provide for ongoing feedback between appraisee and appraiser.
E-enabling
The system has been e-enabled with the objective of:
1. Ease of use and implementation;
2. Covers 10,000 + Executives of BHEL, via Internet;
3. Consolidation of data centrally;
4. Real-time analysis of data, to provide insights for business directors;
5. Generalization of reports, as and when desired by users.

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Pretty Bhalla, Lovely Professional University Unit 5: Performance Appraisal

Unit 5: Performance Appraisal Notes

CONTENTS
Introduction
5.1 Meaning of Performance Appraisal
5.2 Process of Performance Appraisal
5.3 Approaches of Performance Appraisal

Introduction
Many people believe that appraisal systems have created more problems than they have solved;
and question their very need in organizations. Experience has shown that appraisal is not a play-
safe gimmick. If these are not handled properly, appraisals can do a lot of damage to an
organization in the areas of employee morale, climate of trust and consequences for employee
relations.

5.1 Meaning of Performance Appraisal

Performance appraisal is a systematic evaluation of present potential capabilities of personnel
and employees by their superiors, superior’s or a professional form outside. It is a process of
estimating or judging the value, excellent qualities or status of a person or thing. It is a process
of collecting, analyzing, and evaluating data relative to job behavior and results of individuals.
The appraisal system is organized on the principle of goals and management by objectives.
Management decisions on performance utilize several integrated inputs: goals and plans, job
evaluation, performance evaluation, and individual history. It connotes a two-dimensional
concept-at one end of the continuum lies the goals set by the authority, and at the other end, the
performance achieved by the individual or any given group.
Performance appraisal can be either formal or informal. Formal appraisals are usage of former
systems schedule regular sessions in which to discuss an employee’s performance. Informal
appraisals are unplanned, often just chance statements made in passing about an employee’s
performance. Most organizations use a formal appraisal system. Some organizations use more
then one appraisal system for different types of employees or for different appraisal purposes.
Organizations need to measure employee performance to determine whether acceptable

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Performance Management System

Notes standards of performance are being maintained. The six primary criteria on which the value of
performance may be assessed are: quality, timeliness, cost effectiveness, need for supervision,
and interpersonal impact. If appraisals indicate that employees are not performing at acceptable
levels, steps can be taken to simply jobs, train, and motivate workers, or dismiss them, depending
upon the reasons for poor performance.

?
Did u know? What is the importance on performance appraisal results?
The results of appraisal are normally used to: (1) estimate the overall effectiveness of
employees in performing their jobs, (2) identify strengths and weaknesses in job knowledge
and skills, (3) determine whether a subordinate’s responsibilities can be expanded, (4)
identify future training and development needs, (5) review progress towards goals and
objectives, (6) determine readiness for promotion, and (7) motivate and guide growth and
development.

5.2 Process of Performance Appraisal

A meaningful performance appraisal is a two-way process that benefits both the employee and
the manager. For employees, appraisal is the time to find out how the manager thinks they are
performing in the job. For a manager, a formal appraisal interview is a good time to find out how
employees think they are performing on the job. The planning appraisal strategy has to be done:

Before the Appraisal

1. Establish key task areas and performance goals.

2. Set performance goals for each key task area.
3. Get the facts.
4. Schedule each appraisal interview well in advance.

During the Appraisal

1. Encourage two-way communication.

2. Discuss and agree on performance goals for the future.
3. Think about how you can help the employee to achieve more at work.
4. Record notes of the interview.
5. End the interview on an upbeat note.

After the Appraisal

1. Prepare a formal record of the interview.

2. Monitor performance.
3. Feedback session – tell and sale, tell and listen, problem solving.
4. Developing need based training program.
5. Working out reward based incentives.

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 Unit 5: Performance Appraisal

5.3 Approaches of Performance Appraisal Notes

George Odiorne has identified four basic approaches to performance appraisal.

1. Personality-based systems: In such systems the appraisal form consists of a list of personality
traits that presumably are significant in the jobs of the individuals being appraised. Such traits
as initiative, drive, intelligence, ingenuity, creativity, loyalty and trustworthiness appear on
most such lists.
2. Generalized descriptive systems: Similar to personality-based systems, they differ in the
type of descriptive term used. Often they include qualities or actions of presumably good
managers: “organizes, plans, controls, motivates others, delegates, communicates, makes
things happen,” and so on. Such a system, like the personality-based system, might be
useful if meticulous care were taken to define the meaning of each term in respect to actual
results.

3. Behavioral descriptive systems: Such systems feature detailed job analysis and job
descriptions, including specific statements of the actual behavior required from successfully
employees.
4. Result-centered systems: These appraisal systems (sometime called work-centered or job-
centered systems) are directly job related.
They require that manager and subordinate sit down at the start of each work evaluation period
and determine the work to be done in all areas of responsibility and functions, and the specific
standards of performance to be used in each area.
When introducing performance appraisal a job description in the form of a questionnaire has
to be preferred. A typical questionnaire addressed to an individual would cover the following points:
1. What is your job title?
2. To whom are you responsible?
3. Who is responsible to you?
4. What is the main purpose what are your main areas of responsibility?
5. What is the size of your job in such terms of output or sales targets, number of items
processed, number of people managed, number of customers? What targets or standards of
performance have been assigned for your job? Are there any other ways in which it would
be possible to measure the effectiveness with which you carry out your job?
6. Is there any other information you can provide about your job?

TCS Asks 1,300 Employees to Leave

round 1,300 employees of Tata Consultancy Services will resign from the company

to cent the
1,30,000, said a spokesperson for the company.

Contd...

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Performance Management System

Notes

TCS’ current utilisation rate (the proportion of staff working on projects) is 75 per cent, said

Source: www.thehindubusinessline.com

58 LOVELY PROFESSIONAL UNIVERSITY

Pretty Bhalla, Lovely Professional University Unit 6: Methods of Performance Appraisal

Unit 6: Methods of Performance Appraisal Notes

CONTENTS
Introduction

6.1 360-degree Feedback or 360-degree Appraisal

6.2 Balance Scorecard
6.3 Assessment Centre

6.1 360-degree Feedback or 360-degree Appraisal

Traditionally, in most performance evaluations a supervisor evaluates
the performance of subordinate. Recently, a new approach has been
enunciated by the western management gurus,

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which is known as 360-degree appraisal – a performance management in which people receive Notes
performance feedback from those on all sides of them in the organization.

?
Did u know? 360-degree feedback is also known as ‘multi-rater feedback’, as it is the most
comprehensive appraisal where the feedback about the employees’ performance comes
from all the sources that come in contact with the employee on his job.
360-degree respondents for an employee can be his/her peers, managers (i.e. superior),
subordinates, team members, customers, suppliers/vendors – anyone who comes into contact
with the employee and can provide valuable insights and information or feedback regarding the
“on-the-job” performance of the employee.
360-degree appraisal has four integral components:
1. Self appraisal
2. Superior’s appraisal
3. Subordinate’s appraisal
4. Peer appraisal.
Self appraisal gives a chance to the employee to look at his/her strengths and weaknesses, his
achievements, and judge his own performance. Superior’s appraisal forms the traditional part of
the 360-degree performance appraisal where the employees’ responsibilities and actual
performance is rated by the superior.
Subordinates appraisal gives a chance to judge the employee on the parameters like communication
and motivating abilities, superior’s ability to delegate the work, leadership qualities etc. Also
known as internal customers, the correct feedback given by peers can help to find employees’
abilities to work in a team, co-operation and sensitivity towards others.
Self assessment is an indispensable part of 360-degree appraisals and therefore 360-degree
Performance appraisal have high employee involvement and also have the strongest impact on
behavior and performance. It provides a “360-degree review” of the employees’ performance
and is considered to be one of the most credible performance appraisal methods.
360-degree performance appraisal is also a powerful developmental tool because when conducted
at regular intervals (say yearly) it helps to keep a track of the changes others’ perceptions about
the employees. A 360-degree appraisal is generally found more suitable for the managers as it
helps to assess their leadership and managing styles. This technique is being effectively used
across the globe for performance appraisals. Some of the Indian organizations following it are
Wipro, Infosys, and Reliance Industries etc.
Many American companies are now using this 360-degree feedback. Companies that practice
360-degree appraisals include Motorola, Semco Brazil, British Petroleum, British Airways,
Central Televisions, and so on. Barring a few multinational companies, in India this system of
appraisal is uncommon.
This form of performance evaluation can be very beneficial to managers because it typically gives
them a much wider range of performance-related feedback than a traditional evaluation. That is,
rather than focusing narrowly on objective performance, such as sales increase or productivity gains,
360-degree often focuses on such things as interpersonal relations and style. Of course,to
benefit from 360-degree feedback, a manager must have thick skin. The manager is likely tohear
some personal comments on sensitive topics, which may be threatening. Thus, a 360-degree
feedback system must be carefully managed so that its focus remains on constructive rather than
destructive criticism.

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Notes Advantages of 360-degree Appraisal

For Employees

1. Can uncover hidden lights and blind spots.

2. Feedback coming from a number of different people is more likely to be accepted.
3. Helps individuals gain a realistic view of how others perceive them.
4. Inspires people to take ownership of their own learning and development.
5. Provides feedback in a quantifiable form on a structured range of behaviors.

For the Team

1. It helps people understand how their behavior influences both their own personal
effectiveness and how they impact the smooth running of the organization.
2. Supports teamwork by involving team members in the development process.
3. Increases communication between team members.
4. Higher levels of trust and better communication as individuals identify the causes of
breakdowns.
5. Increased team effectiveness.

For the Organization

1. Better career development planning and implementation for employees.

2. Improves customer service by having customers contribute to the evaluation process.
3. Reinforced corporate culture by linking survey items to organizational leadership
competencies and company values.
4. Helps with training needs analysis.

?
Did u know? How 360-degree Feedback System adds Value?
360-degree feedback enables an organization to focus on developmental efforts, at the
individual and group level, in the present business environment where the success of the
company depends on continuous revolution, which is possible through organizational
development. 360-degree feedback facilitates the alignment of individual capabilities and
behaviors with organizational strategies. It adds value to the organization indifferent
ways:
1. 360-degree feedback provides a better understanding of individuals performance at
work.
2. 360-degree feedback provides a multifaceted view about the employees from different
sources.
3. 360-degree feedback provides a better understanding of employed developmental
needs.
4. 360-degree feedback provides increased the understanding about one’s role
expectations.

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5. 360-degree feedback provides increased the understanding of competence and Notes

competency in various roles.
6. 360-degree feedback extends better morale to those who perform and contribute well
to the organization.
7. 360-degree feedback reduces training costs by identifying common development
needs.
8. 360-degree feedback increases the team’s ability to contribute to the organizations goals.
9. 360-degree feedback helps everyone to work for a common standard and institutionalize
performance management.
10. 360-degree feedback ensure better interpersonal relationship and group cohesiveness.
11. It promotes self-directed learning and provides a road map for employee’s development
planning.
12. It promotes better communication within departments.
13. 360-degree feedback Increases the team’s ability to contribute to the organizations goals
develop better bottom line through boosting the capability of the organization to meet its
objectives.

Pitfalls of 360-degree Feedback

1. A detailed plan of action, which ensure the transparent and clear implementation of
appraisal with employee accountability.
2. Effective follow-up is the prime requirement of 360-degree feedback. Failure in follow-up
may cause more harm than good.
3. The 360-degree feedback is time consuming and cost consuming assessment process.
Without having adequate resource to implement the process, it will end up nowhere and
develop financial burden to organisation.
4. The trust and confidence on the employees who undergo this feedback assessment process is
a determinant factor in its outcome. Many consider this appraisal as tool for downsizing.
5. The process involves a lot of paper work.
6. There are high chances of subjectivity from the management and employee part in the feed
back assessment.
7. Many times the confidentiality of the appraisal cannot ensure from the HR department.
8. Since the assessment is based on qualitative data many times it cannot ensure unambiguous,
clear, specific and, observable and quantifiable formats.

6.2 Balance Scorecard

The Balance Scorecard (BSC) creates a template of measurement of organizational performance
as well as individual performance. It is a measurement based management system, which enables
organizations to clarify vision and strategy before initiating action. It is also a monitoring system
that integrates strategy into performance measures and targets, thus making it operational and
highly effective. It helps cascade corporate level measures to lower level so that the employees
can see what they must do well to improve organizational effectiveness and helps focus the entire

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Notes organization on what must be done to create breakthrough performance. BSC was introduced in
1992 by Dr. Robert Kaplan and David Nortan and has been successfully adopted by numerous
companies worldwide.
The Balanced Scorecard method is a strategic approach and performance management system
that enables the organisations to translate its vision and strategy into implementation. The
Balanced Scorecard is a conceptual framework for translating an organization’s vision into
a set of performance indicators distributed among four perspectives: Financial, Customer,
Internal Business Processes, and Learning and Growth. Indicators are maintained to measure an
organization’s progress toward achieving its vision. Other indicators are maintained to measure
the long-term drivers of success. Through this scorecard, an organization monitors both its
current performance (finances, customer satisfaction, and business process results) and its efforts
to improve processes, motivate and educate employees, and enhance information systems – its
ability to learn and improve. A Balanced Scorecard enables us to measure not just how we have
been doing, but also how well we are doing (“current indicators” and can expect to do in the
future (leading indicators). This in turn, gives us a clear picture of reality.
The Balanced Scorecard is a way of:
1. Measuring organizational, business unit’s or department’s success
2. Balancing long-term and short-term actions
3. Balancing different measures of success
(a) Financial
(b) Customer
(c) Internal Operations
(d) Human Resource System & Development (learning and growth)

Four Kinds of Measure

The scorecard seeks to measure a business from the following perspectives:

1. Financial perspective: Measures reflecting financial performance, for example, number of
debtors, cash flow or return on investment. The financial performance of an organization
is fundamental to its success. Even non-profit organisations must make the books balance.
Financial figures suffer from two major drawbacks.
2. Customer perspective: This perspective captures the ability of the organization to provide
quality goods and services, effective delivery, and overall customer satisfaction for both
Internal and External customers.

Example: Time taken to process a phone call, results of customer surveys,

number of complaints or competitive rankings.

3. Business Process perspective: This perspective provides data regarding the internal
business results against measures that lead to financial success and satisfied customers.
To meet the organizational objectives and customers expectations, organizations must
identify the key business processes at which they must excel. Key processes are monitored
to ensure that outcomes are satisfactory. Internal business processes are the mechanisms
through which performance expectations are achieved.

Example: The time spent prospecting new customers, number of units that
required rework or process cost.

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4. Learning and growth perspective: This perspective captures the ability of employees, Notes
information systems, and organizational alignment to manage the business and adapt to
change. Processes will only succeed if adequately skilled and motivated employees,
supplied with accurate and timely information, are driving them. In order to meet
changing requirements and customer expectations, employees are being asked to take on
dramatically new responsibilities that may require skills, capabilities, technologies, and
organizational designs that were not available before. It measures the company’s learning
curve for example, number of employee suggestions or total hours spent on staff training.

Objectives, Measures, Targets and Initiatives

Within each of the balanced scorecard financial customer, internal process, and learning
perspectives, the organisation must define the following:
1. Strategic objectives – the strategy for achieving that perspective
2. Measures – how progress for that particular objective will be measured
3. Targets – the target value sought for each measure
4. Initiatives – what will be done to facilitate reaching out the target.
The balanced scorecard provides an interconnected model for measuring performance and
revolves around four distinct perspectives – financial, customer, internal processes, and
innovation and learning. Each of these perspectives is stated in terms of the organisation’s
objectives, performance measures, targets, and initiatives, and all are harnessed to implement
corporate vision and strategy.
The name also reflects the balance between the short and long-term objectives, between financial
and non-financial measures, between lagging and leading indicators and between external and
internal performance perspectives.
Under the balance scorecard system, financial measures are the outcome, but do not give a good
indication of what is or will be going on in the organization. Measures of customer satisfaction,
growth and retention is the current indicator of company performance, and internal operations
(efficiency, speed, reducing non-value added work, minimizing quality problems) and human
resource systems and development are leading indicators of company performance.
Robert S Kaplan and David P Norton, the architects of the balanced scorecard approach,
recognized early that long-term improvement in overall performance was unlikely to happen
through technology only and hence placed greater emphasis on organizational learning and
growth. These, in turn, consist of the integrated development of employees, information, and
systems capabilities.

How to enhance Performance through Balance Scorecard?

In such constantly shifting environments, managements must learn to continuously adapt to new
strategies that can emerge from capitalizing on opportunities or countering threats. A properly
constructed balanced scorecard can provide management with the ideal tool in reacting to the
turbulent environment and helping the organisation to correct the course to success.
Scorecard provides managers with feedback, thus, enabling them to monitor and adjust the
implementation of their strategy – even to the extent of changing the strategy itself. In today’s
information age, organisations operate in very turbulent environments. Planned strategy, though
initiated with the best of intentions and with the best available information at the time of planning
may no longer be appropriate or valid for contemporary conditions.
As companies have applied the balanced scorecard, they have begun to recognize that the
scorecard represents a fundamental change in the underlying assumptions about performance
measurement.

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Notes The scorecard puts strategy and vision, not control, at the centre. It establishes goals but assumes
that people will adopt whatever behaviours and take whatever actions are necessary to arrive at
those goals. The measures are designed to pull people toward the overall vision. Senior managers
may know what the end result should be, but they cannot tell employees exactly how to achieve
that result, because the conditions in which employees operate are constantly changing.
This new approach to performance measurement is consistent with the initiatives under way in
many organisation: cross-functional integration, customer supplier partnerships, global scale,
continuous improvement, and team rather than individual accountability. By combining the
financial, customer, internal process and innovation, and organizational learning perspectives,
the balanced scorecard helps managers understand, at least implicitly, many interrelationships.
This understanding can help managers transcend traditional notions about functional barriers
and ultimately lead to improved decision-making, problem-solving and enhanced performance.
The balanced scorecard keeps organisations moving forward.

6.3 Assessment Centre

An assessment centre is a comprehensive, standardized procedure in which multiple assessment
techniques such as situational exercises and job simulation (Business games, discussions,
reports and presentations) are used to evaluate individual employees for a variety of decisions.
Most frequently the approach has been applied to individuals being considered for selection,
promotion, placement or special training and development in management.

Promotion

A decision to promote is essentially a decision to select from within the organization those most
likely to succeed at higher level jobs. Any method used by the organization to take promotion
decisions such as performance appraisal data, interviews, etc. should be supplemented by data
from the assessment centre. Since, the assessment centre method is used to study the likely
performance and behavior of a person in a role not previously performed by him/her; it can
be used to supplement promotion decisions. Using additional inputs not only results in a more
appropriate decision, it also helps eliminate individual biases and imparts more transparency
and fairness to the promotion system. High validity has been reported in use of assessment
centre data for promotions to first level supervisory and middle management levels; while no
validity studies have been reported for higher levels of management.

Tools used in Assessment Centres

As mentioned above, the main characteristics of assessment centres are multiple methods of
assessment using multiple assessors. The main assessment tools that are used are:

Psychometric Tests

In general three types of tests or questionnaires can be used in assessment centres: aptitude tests,
ability tests and personality tests. Aptitude tests are those which attempt to evaluate verbal and
numerical reasoning ability. Ability tests attempt to measure awareness. Knowledge and other
such aspects. They also measure simple skills like problem solving ability, etc. For e.g., a chapter
pencil test could be administered to find out the familiarity or level of skill of the individual in relation
to computer literacy, financial management skills, etc. Personality tests are those tests which are
aimed at studying various dimensions of personality rather than the ability. MBTI and 16 PF are
tests used in many organizations. While ability and aptitude tests have right or wrong answers,
personality tests do not have the same.

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The tests are selected for assessment taking the following points into consideration: Notes
1. Objective—what needs to be measured;
2. Reliability and validity;
3. Length of time required to administer the test;
4. Availability of qualified experts to administer, scope and interpret the tests;
5. Cost involved.

Research professionals

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Amit Kumar Sharma, Lovely Professional University Unit 7: Performance Monitoring

Unit 7: Performance Monitoring Notes

CONTENTS
Introduction
7.1 Performance Monitoring: Concept and Characteristics
7.2 Objectives of Performance Monitoring
7.3 Importance of Performance Monitoring
7.4 Process of Performance Monitoring

Introduction
Perhaps one of the most important concepts of performance management, and it bears frequent
repetition, is that it is a continuous process of managing and developing performance standards
which reflects normal good practices of direction setting, monitoring and measuring performance,
providing feedback and taking action accordingly. Performance management should not be
imposed on managers as something ‘special’ that they have to do. Neither should it be imposed on
individuals and teams as something ‘special ‘that that is done to them. Performance management
does no more than provide a framework within which managers, individuals and teams work
together to gain a better understanding of what is to be done, how it is to be done, what has been
achieved, and what has to be done to do even better in the future.

!
Caution Monitoring managee performance is an essential part of supervisory leadership,
and naturally follows planning managee performance. This is a phase in which the cycle of
PfM: Planning → Monitoring → Stocking occurs several times.

7.1 Performance Monitoring: Concept and Characteristics

Performance monitoring may be defined as the process of appraising an environment of
continuous learning and development, maintaining the employee’s performance, enhancing
individual competencies to make them more productive for the organisation. Successful business
management requires the ongoing monitoring of performance in order to generate data by which

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Notes to judge the success or otherwise of specific strategies. Improvement in performance can only be
realistically achieved when management is properly informed about current performance. To this
end it is important to identify key performance indicators (KPIs) that will enable management to
monitor progress.
As stated by the American Compensation Association (1996), it is important to develop
performance management on the basis of ‘open, honest, positive, two-way communication
between supervisors and employees throughout the period’. From the viewpoint of performance,
this means instant feedback to individuals and teams on the things they have done well or not so
well. If people can be provided with the information they need to monitor their own performance, so
much the better. It is not available readily, they can be encouraged to seek it. The aim is to
provide intrinsic motivation by giving people autonomy and the means to control their work.
Interim informal reviews can be held as required – monthly, quarterly etc. They can be used to
provide more structure feedback and, importantly, to revise objectives and plans in response toss
changing circumstances.
Progress in implementing the personal development plan can also be monitored during the year.
The given below are the key characteristics of performance monitoring:
1. A performance monitoring plan is a critical tool for planning, managing, and documenting
data collection.
2. Performance monitoring is an important part of performance management system.
3. Performance monitoring helps in maintaining the employees’ performance as per the goals
and objectives of the organisation.
4. Performance monitoring helps in building the strong relationships between the management
and employees.
5. It facilitates career development of employees.
6. Performance monitoring provides the training and development opportunity to
employees.

Note

7.2 Objectives of Performance Monitoring

PfM explicitly promotes the value that a manager and her manage accept joint responsibility for
monitoring progress on the tasks and goals agreed upon during the initial performance planning

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or expectation setting meeting and subsequent review meetings. Managers use instruments like Notes
written reports, review discussions and on-the-spot inspections to track:
1. Timely and quality fulfillment of managee tasks and goals.
2. Help and support legitimately needed by the managee’s tasks, including those agreed
upon during planning and review meetings.
3. To improve employees job performance as well as methods and techniques of measuring.
4. Introducing continuous learning and development process.

?
Did u know? How do Periodic Reviews Work Better and Help?
Periodic reviews help the performance manager:
1. Correct planning assumptions and errors mid-course before it is too late.
2. Monitor and encourage progress, and keep the work on track.
3. Strengthen dyadic relationship between the manager and her employee.

7.3 Importance of Performance Monitoring

Performance monitoring is important because:
1. Performance monitoring provides scope for modification, change and/or alteration of the
existing performance management system.
2. It helps in reviewing and correcting performance objectives as linked to mission and
objectives of the organization.
3. It identifies areas for competency improvement.
4. It continually enhances performance of employees.
5. It helps in realizing the full potential of employees and organization for excellence in
performance.

7.4 Process of Performance Monitoring

The manager observes managee performance through:
1. Periodic written reports
2. Scheduled meetings
3. On-the-spot inspections, or field or site visits in case of managees whose location is different
from that of the manager.
4. Relevant and reliable information from other available sources.
In the course of monitoring, the manager provides feedback to the managee(s) and asks for
feedback from the managee(s) during
1. Group or team meetings to discuss common issues, problems, etc.
2. One-on-one meetings to discuss specific issues and problems encountered by individual
managee(s).

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Notes The manager and the managee, thereafter, discuss corrective measures needed, actions to be
taken by either or both of them and other help or support needed to accomplish the requisite
tasks and goals.

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Amit Kumar Sharma, Lovely Professional University Unit 8: Mentoring and Coaching

Unit 8: Mentoring and Coaching Notes

CONTENTS
Introduction
8.1 Coaching and Mentoring in the Organization
8.2 Coaching
8.2.1 Skills and Activities of Coaching
8.2.2 Coaching to Improve Unsatisfactory Performance
8.2.3 Learning to Coach
8.3 Ongoing Mentoring and Protégé Development
8.4 Mentoring
8.4.1 Skills and Activities of Mentoring
8.4.2 Learning to Mentor
8.4.3 Setting up Mentoring Schemes
8.4.4 Informal Mentoring

Objectives
After studying this unit, you will be able to:
⚫ Explain the concept of coaching and mentoring
⚫ Discuss the implication of coaching and mentoring in organisation
⚫ Identify the skills and activities of coaching and mentoring
⚫ Describe ongoing mentoring and protégé development

Introduction
The traditional homogeneity of organizations is increasingly being replaced by encouragement
of individuality, variety, innovation and difference. This, however, runs the risk of losing some
of the key attractions of the traditional organization- stability and security.
Coaching and mentoring seek to bridge the gap between traditional expectations of the
organization and more contemporary approaches. Several key features of coaching and mentoring,
for individuals and organizations, make them attractive. They can encourage a culture of learning
and mutual help, and combine both individual and organizational development.

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Notes Both coaching and mentoring are natural human activities, often intuitively practiced by
managers, although many managers practice them without thinking, many others have not
developed these natural skills or have allowed them to stagnate or disappear.
Mentoring and coaching are distinguished from each other generally by the work-distance and
time-frame of what is being discussed. Typically, managers coach those who report them, about
fairly immediate work developments. A mentor is often organizationally more distant from the
person they are mentoring (by seniority or by being outside the organization or department); and
can work with the mentee on longer term issues of personal development and career planning.

8.1 Coaching and Mentoring in the Organization

The significance of coaching and mentoring for the modern organization lies in four key aspects:
1. The attention to the individual provided by these activities. This in itself is a shift from
previous attitudes to the management of subordinates. This attention can provide a point
of stability that makes people more able to respond effectively to change.
2. The individual becomes a skilful and reflective learner. This is the underlying aim of
both activities. Individuals increasingly use their own experience as the key material for
learning, assisted by the knowledge and wisdom of the coach or mentor.
3. The importance of the relationship. Both activities are examples of what has been described
as ‘developmental working relationships’. A large part of the success of the mentor or
coach depends on the way they manage the relationship at a human and personal level.
This ability transfers into other working areas, as not only a survival skill in the new style
of organization, but as a means of sharing knowledge and expertise.
4. The effect of organizational climate, and the effect on it. Though the one to-one relationship
is clearly central in coaching and mentoring, to be fully effective it needs to be part of an
organization-wide appreciation of the value of learning as a driver for relevant change.
Effective coaching and value of learning is a driver for relevant change. Effective coaching
and mentoring relationships can help to develop this wider process as well as deriving
benefits from it.
Coaching and mentoring frequently run alongside, or are an intrinsic part of, a self-development
process set in place by the organization. This process can vary; with personal projects and personal
development plans at one end of the continuum, and an organization-wide self-managed learning
programme at the other. They are linked by an emphasis on development becoming something
for which individuals have to take responsibility themselves.
One of the most important conditions for coaching and mentoring to be successful is the
assumption that learning is a respectable activity, and that everyone can and should be engaged
in it. The mentor and the coach challenge and support individuals in their learning, and help to
provide the organizational framework in which it happens.
Success is also more likely where there is a clear, though evolving, picture of the nature of a person’s
job or role, and where it fits into the organization and the corporate goals. This requires a degree
of clarity about job or role expectations:
Well-developed and thought-through criteria so success, clear regular feedback, some sense of
the resources necessary to achieve the targets set, and an understanding of the work context, both
internal to the organization and in the marketplace. This clarity is never easy to achieve, but a
move towards it sets the scene for effective coaching and mentoring.

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8.2 Coaching Notes

Effective coaching depends not only on the skills of the coach and the receptiveness of the person
being coached, but also on the conditions outlined above being present (clarity about success criteria,
usable feedback, etc.) in the work setting, at the same time, when managers start tocoach, if they
are working effectively there is a better chance of the surrounding conditions being improved.
Coaching conversations may lead to increased clarity about job expectations, for instance, and may
provide regular feedback and the opportunity to think through standards and criteria for success.
There is a close two-way relationship between effective coaching initiatives and a favorable learning
climate, each enhancing the other.
The concept of coaching remains most easily associated with sports coaching where the purpose
of the coach is to help the person they are coaching to reach their personal best. Interestingly, the
nature of sports coaching is undergoing basic changes-ones which are, to some degree, mirrored
in organizations. There was a time when the coach was the person who drove the athlete on,
forced the pace and continually instructed. Increasingly coaches are now moving to an approach
which involves accurately targeted questioning to help the athlete become increasingly aware
of ‘what works’- for instance, the environment in which he or she performs best, how this feels,
and what the obstacles are to achieving this repeatedly. Despite this changing emphasis, some
traditional aspects of coaching remain-for example, the coach also celebrates victories and
supports the athletes through bad times.
In the same way, the manager who is coaching subordinates finds a way of getting them to reflect on
their performance, become aware of what they are doing and how they are doing it, so that each
individual in the end learns to monitor his or her own performance. At the same time, the manager
provides essential information and knowledge where there are gaps that need to be filled.
While doing this, they are working to develop a climate where learning and innovation–as well
as achievement–are expected and rewarded. The coaching approach challenges the manager to think
about the nature of the roles of the people they may be coaching, and this is a developmental
experience for the managers. Many HR functions are devolving some other their management
development responsibilities to the line, and the concept of ‘manager as coach’ isseen as part of
this trend.

8.2.1 Skills and Activities of Coaching

There are many possible approaches to coaching. They may involve watching what a person
does and giving feedback on what you notice; working on problems with someone and learning
together; asking stimulating open-ended questions; taking through your own thinking processes
aloud, and encouraging the other person to do the same encouraging analysis of what really
works for individuals; finding your own way of seeing the work and the learning from the other
person’s point of view; and using questioning as a way of helping a person understand their own
thought processes.
Coaching can be thought of as two kinds of conversation: mapping-related and performance-
related.
Mapping-related conversations may focus on:
1. The organizational setting or culture – ‘what works around here?’, where does this project
fit into the overall strategic plan?
2. Identifying problems and possible causes – ‘what exactly is going wrong?’, ‘has this
happened before?’
3. Establishing overall desired outcomes – ‘what are you trying to achieve?’, ‘what is the
general purpose here?’

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Notes Performance-related conversations may focus on:

1. What the person is doing-‘what exactly did you do?’, ‘how are you going about this?’
2. Comparisons-‘is this different from what you did last time?’, are other people doing the
same thing?’, ‘can you learn from them?’
3. Questions about thinking-‘how are you thinking this through?’, ‘what evidence are you
looking for?’, ‘what assumptions are you making?’, ‘do they need checking?’
4. Questions about resources-‘what it help to organize your resources differently?’
Managers as coaches face a number of common pitfalls in their conversations, for any of the
following reasons:
1. Having moved into coaching before establishing a certain amount of rapport and trust;
2. Being unclear in their own minds about what they are trying to achieve by engaging in the
conversation;
3. Not listening properly because they are too busy deciding whether what they are saying is
right or not;
4. Only using questions which demonstrate their knowledge;
5. Avoiding questions to which they don’t know the answer;
6. Answering their own questions;
7. Not picking up signals as the conversation goes along about how useful it is for the other
person.
These pitfalls can be avoided by keeping in mind the purpose and desired outcome of the
coaching activity.

8.2.2 Coaching to Improve Unsatisfactory Performance

A further and more skillful area of coaching is in the area of challenging or confronting for
performance improvement. When a person is not delivering the performance required, he/she
may have a variety of emotional reactions such as despair, resistance, self-justification, or even
complete unawareness.
The coaching approach in this situation is to deal with these by focusing on clear expectations.
Often these expectations have not been properly mapped out or clearly understood.
Gathering information and agreeing where the problem lies are essential next steps, at the same time
as staying aware of the other person’s reactions.
In dealing with underperformance, the following pattern, for a coach, can be useful:
1. Get clear in your own mind what the situation is: what is the current performance, and
what it is expected to be;
2. Lay aside feelings of blame and irritation and gather information about how individuals are
reacting, their awareness of the performance shortfall, and what they see as the problems.
3. Get the person being coached to share in identifying the problems, adding their own
perspective and ask them for possibilities to resolve them. This is a stage where it is
particularly important to maintain a positive and clear relationship, focusing forward on
next steps and change.
4. Establish a process whereby the employee will set up a plan for informing the coach/
manager of progress against clearly stated goals.

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8.2.3 Learning to Coach Notes

The value of coaching is that it establishes an effective and dynamic working relationship in
difficult and changing situations.
In many cases, managers are encouraged to coach by ‘manager as coach and developer’ initiatives.
Theses may take the form of workshops or of elements of management development programmes.
As training and development responsibilities are being developed more and more to line
managers, the pressure on them to work in this way increases. Lack of time or otherpriorities often
get in the way, with the widespread feeling that in current working conditions it’s quicker just
to tell someone how to do things or, alternatively, to let them get on with their job, rather than
taking time to coach. Because of this, there is often a certain amount of resistance to adopting a
coaching style of management in the first instance; this resistance may also be in reaction to the hype
that is in some cases connected with approaches to coaching.
Resistance may be overcome by starting the coaching from the top. The managers who are
expected to move to a coaching style may themselves need to be coached. This experience helps
them to understand the value of coaching at first hand, and to get an intuitive sense of how to
do it themselves.

8.3 Ongoing Mentoring and Protégé Development

The concept of mentors and protégés traces its origin to Greek mythology. Odysseus left for the
Trojan War and put the care of his household and his son Telemachus in the hands of his friend
Mentor. He believed Mentor could and would live up to his expectations. These expectations
were justified as Odysseus discovered on his return. Again, the combination of expectations and
action based on these expectation resulted in a self-fulfilling prophecy. While mentoring has
existed in business for many years on an informal basis, only recently has it become formally
entrenched in the corporate realm.
Mentoring is a dynamic and reciprocal relationship in a work environment between a manager
(mentor) and an employee (protege) aimed at promoting the career development of both. Reesa
Staten of Robert Half International (2007) says that mentoring is a key practice for transferring
wisdom, fostering talent, and promoting best practices within a firm or department. It is also one
of the most effective ways to develop new leaders.
Strategic succession planning: The practice entails the assignment of a junior member of staff or
a recently recruited graduate known as the protégé to a senior seasoned manager or executive
known as the mentor. A mentor who knows about a subordinate’s skills and talents can help that
person reach his or her career goals.

The relationship of a mentor to a protégé is that of a staff capacity as opposed to a line capacity.
The mentor provides advice and shares his or her experience with the protégé. The mentor must
constantly act as a positive Pygmalion to make the process effective.

8.4 Mentoring
Mentoring has something in common with coaching but, at its best, has a different emphasis. The
mentor has less of a vested interest in the mentee’s performance results – the mentee’s results
don’t directly have an effect on the mentor’s business performance. This makes it easier for the

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Notes mentor to take a long-term view and a broader approach to the mentee in his/her working life.
The mentor is free to be objective, challenging or supporting as necessary, and is able to help
mentees think through their overall career development, while their immediate manager or
coach may quite properly bring in the more immediate or short-term focus.
Mentors are often used to help individuals manage the process of transition: graduates entering
a large organization; someone moving to increased responsibility; a person moving to a level in
which they may be seen as unusual (such as women promoted to a level where there are very
few women).
Many organizations now have a well-established system of mentor selection and training,
induction for mentees and monitoring of the process.

Example: GKN has a mentoring system for employees of high potential on a self-managed
learning programmes; at supermarket chain ASDA, a senior store manager from a different area
will be a mentor for people who are being prepared to be store mangers; at a division of the
Prudential Corporation mentoring is used for women returning to work after maternity leave;
and the UK Stock Exchange has a system of external mentors to support senior management
through a major change scheme.
Although widespread mentoring is a fairly recent development in Europe, it is more notably
acknowledged as an essential developmental experience in Japan. Research carried out by
Warwick and Stirling Universities, compared the ‘factors in growing as a manager’ reported in
paired British and Japanese companies. The emphasis on the effect of role models and mentors
was cited most frequently by the Japanese, while the British emphasized education and wider
experience of life.
The process of mentoring, when mentors come from within an organization, can have an
organizational impact. Senior managers come into contact with, for instance, recent recruits, and this
can give the mentor a fresh view on the organization and on the new generation of thinking.At
the same time, the mentor who is working at a strategic level can be in a position to convey the
corporate direction to the mentee in a way that is direct and immediate. In this way, the
mentoring relationship can strengthen organizational cohesion.

8.4.1 Skills and Activities of Mentoring

What is required of a mentor? The most favoured attributes appear to be acting as a sounding
board for ideas; being a source of organizational knowledge; and helping people to see themselves
more clearly. Interesting, few potential mentors choose a role model; someone who exemplifies
good practice although this is frequently the reason a mentor is chosen by a mentee.
Each variant of the mentor role requires different skills, but a core might include some familiar
and well developed techniques, to be used during a mentoring meeting:
1. Listening openly without making judgments;
2. Asking open-ended questions;
3. Summarizing;
4. Clarifying;
5. Reflecting back;
6. Being aware of differences between verbal and non-verbal behavior;
7. Helping the mentee explore potential options and their outcomes.

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Behaviors which maybe tempting but that are particularly unhelpful to a mentor include: Notes
1. Passing judgment;
2. Filling in a silence too quickly;
3. Asking questions when the mentee is trying to figure something out;
4. Being or feeling patronizing or condescending;
5. Telling the mentee what to do before he or she has started to think it through for themselves.
The main purpose of the mentoring relationship is to help mentees develop their own thinking and
planning about their career and development, with someone supportive who has organizational
experience and knowledge. Unhelpful behaviors such as those listed above sabotage this
process.
It is noticeable, when working with potential mentors, how easy it is for them to fall into the trap
of asking leading questions or of disguising statements or opinions as questions. These are habits
acquired from an earlier style of management and it is easy not to be aware of them, or their
inappropriateness, in the mentoring situation.
For senior managers, mentoring involves a change of behavior but an even more dramatic
change of thinking. Senior managers have mainly got to where they are by being effective and
decisive and by (quite appropriately) knowing what people should do and getting them to do
it. Working with someone who is junior to them but whom they do not manage can initially be
quite challenging. This stretch of style is one of the benefits that mentors identify as a personal
gain from being involved in the mentoring process.

8.4.2 Learning to Mentor

Many organizations provide orientation or training for mentors, to provide a base-line or a

common approach. Attending a mentoring workshop can be a welcome opportunity to engage
in some personal development, to revisit the skills of listening, establishing rapport, reflecting on
one’s own behavior; skills that may have become rusty in the journey to a senior position. The
use fullness of mentors lies partly in their knowledge and experience; but as this becomes less
relevant with changing times, mentors’ key value is in their ability to help their mentees to gain
knowledge and experience of their own in their current role, and to develop their ability to make
effective judgments in ambiguous or uncertain or uncertain situations.

8.4.3 Setting up Mentoring Schemes

Key factors in a successful mentoring scheme are similar to those in any organizational initiative.
That is, commitment and modeling from those with most power and influence, clear anduser-
friendly systems and procedures, clarity about the reasons and desired outcomes of the
schemes, and widespread and appropriate communication to all stakeholders. In the case of a
mentoring scheme, the stakeholders include not only mentors and mentees, but also the mentees’
managers.
In some organizations, only selected people are offered a mentor in a formal scheme. Mentoring
may be provided for potential high-flyers, for women, for new recruits. These choices may have
an impact on those who are not offered the same provision. Communication and explanation are
therefore important. Mentoring may also be seen, usually wrongly, as a ‘gateway’, a way through
to the fast track with a powerful protector; these notions needs to be contradicted if they are not
the case, and the real reasons for the selection widely disseminated.
An essential element of the communication is clear briefing for all involved (mentor, mentee,
mentee’s manager), which may also include an element of training for mentors. Bringing mentors

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Notes together at intervals supports this communication process as well as providing support for the
mentors themselves.

8.4.4 Informal Mentoring

Many people have experience of an informal mentor; someone who took them under their wing
at a crucial stage in their career. In a wide variety of organizations there are traces of this process,
being, as it is, a very normal and well-respected human activity. This mentor may have been
chosen in some sense by the mentee, or may have themselves chosen the mentee. One approach
to promoting mentoring in the organization is to encourage this process by, for instance:
1. Describing it as a valuable process;
2. Encouraging new recruits to select a mentor;
3. Including developmental activities such as mentoring and appraisal criteria for senior
managers.

8.5 International or Cross-cultural Implications

Cross-cultural research indicates that managers in different national cultures work from different
sets of assumptions and priorities. The individualist assumptions in cultures such as those of
the UK or the United States, for example, contrast with the collective assumptions in Japanese
or Latin American culture. Assumptions will affect the pattern of mentoring and coaching in
these countries, with varying emphasis not eh individual’s career and personal development
or the good of the organization or group. The assumptions about how status is attained (based
on one’s own achievements, or on the group a person was born into their personal connections)
vary between countries and cultures, and this will affect the choice of mentors, and how they
are valued by mentees. Expected behaviors by mentors in different countries or cultures with a
history of mentoring may also vary.
There are also implications for mentoring in multinational organizations, particularly where
there are managers of different nationalities working in the same company. In the light of known
cultural differences, attitudes and under standing of what mentoring is to be in the organization
need careful clarification, with shared meaning being developed.

Mentoring System: The NTPC Experience

“Mentoring is a brain to pick, an ear to listen, and a push in the right direction.”
Mentoring: Genesis and Concept

In the Indian context, imparting shiksha to the Shishya (discipline) by the guru (teacher) is a
well-established practice rooted in centuries-old tradition. The transfer of knowledge, skills
and experience to the Shishya (discipline) is also very well-documented in the great epic
Mahabharat where the story of Arjun, the powerful warrior, mastering the art of archery
from his Guru Dronacharya gives enough testimony to learning through the guru-shishya
parampara.

Contd....

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Mentoring, from the Greek work mentor, is best described as a sustained relationship Notes
between a youth and an adult for guidance and assistance to the former. Through continued
involvement, the adult, who is usually an older and experienced person, offers help and
support to the younger person during the growing-up phase. In this manner, the mentor
shows the right way in the turbulence of life to the mentee. Viewed from this perspective,
mentoring can be referred to as an initiative meant for the overall growth and development of
the mentee.
In modern times, the concept of mentoring has found application in all walks of life. In
academics, a mentor is often used synonymously with a faculty adviser. In families where
parents are either unavailable or unable to provide responsible guidance for their children
mentors can play a critical role. In business houses, mentoring is being used as a tool for
social integration, assimilation and development of newly joined employees. Further,
this is also being used as a powerful instrument for enhancing the performance level of
employees in the corporate world.
Mentoring Initiative: Need in NTPC
Right from inception, NTPC has laid a lot of emphasis on managing and developing
talent through an integrated human resource development and management system. This
philosophy of integrated human resource development is reflected in the HR strategy of
NTPC which focuses on building competence, commitment, culture and systems. Further,
the same spirit is also expressed in the HR vision of NTPC which is to enable our people to
be a family of world-class professionals making NTPC a learning organization.
The process of attracting and developing talent is a way of life at NTPC Executives in NTPC
is mostly inducted through the Executive Trainee Scheme and the same talents are
nurtured, developed and grown to future leadership roles through comprehensive and
innovative induction, orientation and other HRD practices.
The engineering and other professional talents hired through the NTPC Executive Trainee
scheme are put on a one-year training period with the right mix of classroom and on-the-job
training to inculcate in them the right attitude, value systems and functional competencies.
This process has helped NTPC in infusing the right attitude and skills amongst newly hired
young engineers and other professionals who join NTPc fresh from colleges and other
institutions. Although the overall comprehensive training module is designed to instill the
required technical, behavioural, managerial skills and internalize in them the right culture
and other value systems of the company, we are sensitive to the possibility of the trainees
not finding their bearings in a large multi-unit organization. Being fresh from colleges and
other such institutions, they sometimes need tuning and orientation tothe NTPC ethos, its
values and cultures. Therefore, it was decided to introduce a system toguide and counsel
the young talents through a personal touch for better socialization and thus facilitate
effective integration and assimilation in the organization.
As such, mentoring as a formal system/HR initiative was introduced in NTPC in the year
1998 as an extension of the orientation practice in the workplace and township to meet the
trainee’s needs during and after training.
Objectives of the Mentoring System at NTPC
The mentoring system was launched in NTPC to achieve the following objectives:
1. To guide and direct the new entrant during the vital and formative years in the
organization;
2. To clear doubts and apprehensions faced by the new entrant;
3. To enable the entrant to assimilate and adapt to the organizational culture;

Contd....

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Notes 4. To provide a companion who could be a Friend, Philosopher and Guide; and
5. To act as a counselor for the new entrant.
Mentoring Model at NTPC
The mentoring system introduced in NTPC is based on the model.
Broad Features of the System
The mentoring system promotes and facilitates a relationship between the mentor and the
mentee. A mentor is a fairly senior person (preferably one who had joined as an Executive
Trainee himself), well versed with the working environment of the organization, having
positive outlook and empathy, capacity to guide and known for his performance. A mentee
as a new entrant to the organization, performance. A mentee is a new entrant tothe
organization, usually a fresh Executive Trainee. When the trainees join for on-the-job training,
Human Resources Function catalyses the process of identification of mentor asper laid down
guidelines and undertakes the role of an anchor by facilitating interaction, review meetings
and social get-togethers. Further, the relationship is sustained, continued and developed
through a well-defined structure in accordance with the mentoring system. Besides offering a
number of opportunities for interaction and for building the relationship through socialization
and guidance, the relationship is also publicly recognized through innovative practice like
“Mentor’s Day” which is celebrated every year on 5th September (Teacher’s Day) with much
fanfare and gaiety, bringing together all mentors and mentess on one platform for
experience sharing and recognition. The camaraderie and team spiritis also promoted by a
relaxed and playful environment created through organizing Quiz Competition, Antakshari,
and indoor games and activities in which both mentors and mentees take part. The team spirit
and bonding are further deepened by encouraging out-bond meets and programmes for them.
To exchange progress, concerns, views, difficulties, learning from others and for networking,
there is a system for formation ofa Mentors Club. Although the formal mentor-mentee
relationship is meant for the one- year training period, the informal relationship and
dialogue usually continue beyond the training period.

Senior Executive

Figure 1: Mentoring Model

Contd....

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Unique Initiatives for Institutionalization Notes

To hone and harness the right and positive outlook in the mentors for actualizing the
initiative, organizational workshops are conducted with the help of expert facilitators. This
also generates interest and enthusiasm in the system. In the initial years, this was done every
year in all locations to bring about involvement, appreciation of the initiative’s purpose
and clarification of the concept and its value. Refresher courses are held from time to time
to renew and revisit the concept and its implementation. For creating exclusive identifying and
to generating good feeling, Mentors Badges are provided. Besides recognizing the service
of mentors by felicitating them through “Mentor’s Samman (honour):, a lot of other rewards
and recognitions such as appreciation letters, token gifts, dinner with HODs, informal get-
togethers, etc. are presented and organized to encourage and sustain the initiative.
A Reality Check
With a very focused approach, NTPC succeeded in creating and developing a pool of over
305 mentors in the organization for driving the change initiative. It was further observed
that the system greatly helps the socialization process, assimilating trainees easily into the
NTPC culture and systems. It has also helped in tackling work-related stress and given a
lot of personal benefits to the mentors, besides providing opportunities to the mentors to
get fresh and creative ideas and perspective on technical and other issues which the young
trainees pass on to them in the course of their interaction.
A perception survey amongst the mentors and the mentees, conducted through structured
questionnaires, brought out the results given above. Besides getting good feedback on the
effectiveness of the system and the implementation status, a few action areas have also
emerged from the survey, which were incorporated for improving the system.
Conclusion
NTPC’s commitment for building talent through a multi-pronged strategy is paying rich
dividends. Mentoring—one of the initiatives launched for guiding, directing and
counselling the young recruits—has contributed in enhancing their commitment level and in
this process achieved its intended purpose. Overall, this HR initiative has been successful in
integrating and assimilating the new executives in the culture and value system of the
organization. It has also provided the new entrant a friend, philosopher and guide to share
his pains and pleasures and show him the right way in professional as well as personal
life.
Question
Make an analysis on mentoring system used by NTPC.

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Notes Unit 9: Performance Counselling

CONTENTS
Introduction
9.1 Concept of Performance Counselling
9.2 Principles of Performance Counselling
9.3 Performance Counselling Skills
9.4 Performance Counselling for Higher Job Performance

Introduction
Performance Counselling is quite often misunderstood. It is wrongly interpreted as a process
of correcting or controlling the employee behaviour by giving him negative feedback in an
assertive manner by his boss. When employees make mistakes or become unmanageable or
non-cooperative, executives often state that they need counselling. Some managers also are
known to make statements like “I called him for counselling and gave him a bit of my mind” or
“I called him for counselling and told him clearly that I am not going to tolerate his behaviour
any more” or “I called him for counselling and finished him off”, etc. Unfortunately, due to such
misuse of the term “counselling” it has acquired some negative connotations in the minds of some
managers. They confuse “verbal threats”, “criticism” and “negative feedback” to be counselling.
Actually such behaviours prevent counselling.

?
Did u know? What is negative feedback?
Negative feedback includes information that performance has fallen short of accepted
standards the goal of providing negative feedback is to help employees improve their
performance in the future; it is not to punish, embarrass, or chastise them.
A second reason why counselling has acquired a negative image in the minds of some executives
is because of equating it with clinical counselling and psychotherapy which are more often
associated with problem cases. In fact, a major difference between clinical counselling and
performance counselling is precisely this.

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9.1 Concept of Performance Counselling Notes

Performance counselling is normally done in regular course of performance when there are no
problems. When there are problems, executives should resort to appropriate methods of solving
them rather than to counselling because exclusive focus on a particular problem or issue may
prevent performance counselling. Performance counselling focuses on the entire performance
(tasks and behaviours) during a particular period rather than on a specific problem. However,
specific problems may be discussed during counselling as a part of analysing and understanding
performance patterns.
Any organization interested in using a good performance appraisal and review system that aims
at developing employees has to practice and pay enough attention to performance counselling.
Performance appraisal does not serve the purpose of developing employees unless an effective
system of performance counselling is introduced and practiced in the organization. Performance
counselling can be defined as the help provided by a manager to his subordinates in analysing their
performance and other job behaviours in order to increase their job effectiveness. Performance
counselling essentially focuses on the analysis of performance on the job and identification of
training needs for further improvement.
Counselling is a dyadic process. It is based on the relation between two persons, a manager who
is providing help or how is counselling and an employee to whom such help is given or who is a
counselee. It differs from training mainly in its intensity of dyadic relationship and its focus on
establishing mutuality and confidentiality. Managers provide such help or counsellingat various
stages. For example, an employee may be provided such personal help soon after hisselection
or when he is facing difficulties or problems. The focus of performance counselling is the
employee’s performance on the task assigned to him.

?
Did u know? Performance counselling sometimes is also called “coaching” mainly because
the purpose, the word” counselling” is a much wider and appropriate term for such a
process.

9.2 Principles of Performance Counselling

Counselling is a means and not an end in itself. Development does not occur just because there is
counselling. Counselling could be an effective instrument in helping people integrate with their
organization and have a sense of involvement and satisfaction. The following conditions are
necessary for counselling to be effective.
1. General Climate of Openness and Mutuality: If the organization or department in which the
employee is working is full of tension, and people do not trust each other, counselling
cannot be effective. A climate of minimum trust and openness is essential for effective
counselling.
2. General Helpful and Empathic Attitude of Management: Counselling involves effective
helping which is not possible unless the counselor has general helping attitude and has
empathy for the counselee.
3. Sense of Uninhibited Participation by the Subordinates in the Performance Review Process:
Unless the subordinates in a department or organization feel free enough to participate
without inhibition in the process of review and feedback, counselling cannot be effective.
Counselling is not a one-way process of communicating to the employee what he should or
should not do. It is a process of developing dialogue which eventually contributes to better
understanding on the part of counselee.

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Notes 4. Dialogic Relationship in Goal Setting and Performance Review: Performance counselling
focuses not eh counselee’s achievement of the performance goals he had set in consultation
with his manger. Joint participation by the employee and his reporting officer are necessary
both in goal setting as well as in the performance review. Without such collaboration effort,
counselling does not achieve its purpose.
5. Focus on Work-oriented Behaviour: The main purpose of performance counselling is to
help the employee in improving his performance. Counselling can be effective if the focus
is kept on the work-related goals rather than diffusing attention into various other areas.
While doing so, discussion may involve other related and personal issues, but these are
used to refocus on improvement of organizational roles rather than on personal or general
personality problems.
6. Focus on Work-related Problems and Difficulties: Performance counselling is not related
only to the achievement of goals, but also to the contextual problems in achieving or not
achieving the goals. Analysis of performance therefore becomes the basis of counselling.
7. Avoidance of Discussion of Salary and Other Rewards: Performance counselling may not
serve its purpose if it includes discussion about salary raise, rewards, etc. The main purpose
of performance counselling is to use performance appraisal in planning and improvement
of the employee, rather than understanding relationship between performance and reward
like salary, etc. Bringing such discussion in the performance counselling may vitiate the
main purpose of counselling.

Performance Counselling in Hanford Pharmaceuticals

H
anford Pharmaceuticals intends to give employees reasonable opportunityto
improve their performance as soon as they have been notified that their
performance is falling below a satisfactory level. When performance is below a
satisfactory level, communication will be through the performance counselling process.
Performance counselling is designed to identify performance problems and to recommend
action plans for development and correction. Performance counselling offers the employee
a fair, objective, and consistent program for development while offering the supervisor an
unbiased and expeditious method for communicating expectations and performance
standards.
Performance counselling is used for performance-related situations that affect productivity,
quality, interpersonal relations, and efficiency. The focus of performance counselling is
to promote employee success by identifying deficiencies and agreeing on method(s) for
improving employee performance to a satisfactory level. Since the performance counselling
is intended to be action oriented, every session will include scheduled review dates to
monitor the employee’s progress toward success.
Examples of performance-related issues that may require counselling are:

• Consistent errors in work • Inconsistent performance

• Inability to perform assigned work • Poor communications
• Adversely affecting others’ ability to do work

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9.3 Performance Counselling Skills Notes

The given below are the key performance counselling skills:

Listening

One of the key essential of performance counselling is active listening. Listening involves paying
attention to the various messages being sent by the other person. The obvious message is the
ideas being communicated (cognitive message). But more hidden may be the feelings and the
concerns the other person may not be able to put clearly in words. Listening to feelings and
concerns is very important for effective counselling. This involves skills which can be practiced.
Some exercises can be used to improve listening of such hidden messages.

Asking Questions and Responding

Questions can facilitate or hinder the process of communication. Questions can serve several
purposes: they can help in getting more information, establishing mutuality, clarifying matters,
stimulating thinking. In a counselling situation questions play a very important role. Some
questions can shut off the counselee, or make him dependent on the counselor. Another set of
questions can build autonomy of the counselee. Obviously the latter will be helpful, and not the
former.

Being Emphatic

Questions about the feelings of a person, his concern, his problem, not so much for finding
solutions as to indicate and express concern, may be classified as emphatic questions. When
a manager asks an employee: “How is your son feelings now?”, he is not merely seeking
information, but in fact indicating his personal concern about the health of the employee’s son
and thereby expressing empathy with the employee. Such questions help to generate more trust,
and the necessary rapport with the employee. Empathic questions create a climate of mutual
trust and human understanding.

Positive Reinforcement

It has been established by Skinner that change in behaviour cannot be brought about in human
beings through punishment or negative reinforcement, but only through positive reinforcement.
Influencing would involve providing encouragement and reinforcing success so that the person
takes more initiative and is able to experiment with new ideas. Change cannot take place without
experiment and risk-taking. And these are encouraged through positive reinforcement.

9.4 Performance Counselling for Higher Job Performance

Counselling is given by one who is senior to the other person-in competence, or in knowledge,
or in psychological expertise, or in the hierarchical position in the organization. There are three
main processes involved in counselling-communication, influencing, and helping. The counselor
essentially communicates with the counselee. Communication involves both receiving messages
(listening), giving messages (responding), and giving feedback. The person who provides
counselling does all the three things. Counselling also involves influencing the counselee in
several ways. The manager cannot escape the fact that he is influencing his employee in such a
way that the latter is able to move in some direction. However, this influence is of a special type,
enabling the other person to exercise more autonomy, providing positive reinforcement so that
desirable behaviour is further strengthened, and creating conditions in which the person is able
to learn from the behaviour of the counselor through the process of identification.

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Notes The third element in the process, i.e., helping also functions in a similar way. It involves three
different elements. Helping behaviour is based on concern and empathy the counselor has for
his counselee. It is also based on mutuality of relationship; counselee responds as much to the
counselor’s needs as the former does to the latter’s. And finally, helping primarily involves
identification of developmental needs of the counselee so that he may be able to develop and
increase his effectiveness.

Communication

Interpersonal communication is the basis of performance review in which both the employee and his
reporting officer are involved. The general climate of such conversation in performance review
should be congenial which may help the employee to be in a receptive mood. It is important to
keep in mind that communication is greatly influenced by how problems and issues are perceived by
the two persons involved in the conversation. Communication may get distorted if people arenot
empathic to each other and do not try to understand each others’ point of view. Non-verbal
communication is as important as verbal communication. People speak much more through their
gestures and postures than through words. The tone and manner of speaking is also important.

Feedback

Interpersonal feedback is an important input for increasing self-awareness. It helps in reducing

the blind area of a person, helping him to become more aware about his strengths and weaknesses.
If properly used, it results in higher mutuality between two persons. The process of interpersonal
feedback and conditions which make it effective have been discussed in detail elsewhere.

Note Essentials of Effective Feedback

Feedback will be effective if the person who gives the feedback (counselor) makes sure
that it is:

Intended to help;

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Influencing Notes

Influencing would mean making an impact on the person in relationship. Such impact need not
necessarily be of restrictive type. Influencing in effective counselling would involve the following
three aspects.
1. Increasing Autonomy of the Person: Usually, influencing is understood in the only sense of
restrictingtheautonomyofthepersonanddirectinghimintochannelswhicharepredetermined by
the person who is exerting influence. Positive influencing is the opposite of it; the
autonomy of the other person is increased and he has larger scope of making his own choice.
Even this is influencing. But this is a different kind of influencing.
2. Helping: Counselling is essentially helping. Helping involves several processes but the
following three are mainly important.
3. Concern and Empathy: Without manager’s concern for his employee, effective helping
cannot be provided in the counselling session. Such concern is shown when the counselor is
able to feel for his subordinate and is able to empathize with him. These would be reflected
in the kinds of questions asked and the tone in which conversation takes place. Managers
may constantly ask themselves how much concern and genuine empathy they have for the
employees whom they are counselling. Without such genuine concern, counselling may
only degenerate into a ritual and cannot achieve its goals.

Key Points of Discussion in Counselling

The following table explains the points of discussion during the counselling process:

Personal Problems Professional Problems Resources Constraints

• Career • Absenteeism • Increased production cost
• Family • Tardiness • Increased employee turnover
• Financial • Drug Abuse • Interpersonal conflict
• Legal • Interpersonal conflict • Low morale
• Health • Poor job performance

Who should do the Counselling?

In most cases it is your responsibility as a manager to provide counselling to your staff in relation
to work performance and conduct. However, in circumstances where performance is affected by
factors outside the workplace, for example if a person has a problem with drugs or alcohol or
has difficulties in their private life, it may be appropriate, after an initial discussion, to refer the
person to a staff counsellor or counsellor from an Employee Assistance Program (EAP). This does
not mean that you should back away from the problem, but you should focus on ways to improve the
person’s performance at work and not attempt to solve problems that may be occurring in the
individual’s private life. In most cases, managers are not qualified to take on such a role.
Apart from providing a counselling service for staff, EAPs can also help you as a manager. For
instance, if you are faced with having to give a person critical feedback about their performance
and you feel uncertain about your approach, you may wish to contact the EAP to obtain advice
on how to best frame the discussion. You may also wish to consult a more senior manager or
contact your human resources area for advice.
In some cases it may be appropriate to involve a professionally qualified counsellor outside your
agency, such as a medical practitioner. If you are considering an external referral you should not
put pressure on the person to seek outside counselling. A referral should be arranged only with
the person’s consent.

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Notes

Performance Improvement: The IOC Experience

Introduction
In the deregulated business environment there has emerged a growing need to accelerate
performance improvement to face the challenges of the free market and competition. With
globalization, the oil industry in India has had to gear itself to complete effectively with the
entry of private players including MNCs.
This calls for a rethinking of performance management and measurement practices and
policies that are aimed at encouraging a performance-oriented culture. Among the key
factors that drive performance improvement are differentiation of high performance, and
recognizing and rewarding it, as also setting up a transparent communication channel.
What is Performance Management?
It is said that whatever gets measured gets done and whatever gets done is measurable.
Performance measurement is a significant movement from Human Resource Development
to Human Resource Management.
It is a process that measures output in terms of delivered performance in relation to
expectations expressed as objectives. A forward-looking developmental approach,
performance management is more a transformational rather than an appraisal process. A
smart approach in goal-setting presupposes that goals are specific, measurable, achievable,
relevant and time targeted.
Performance quotient is a function of emotional quotient plus intelligence quotient, which
indicates that possessing intelligence or knowledge is not enough for high performance. It
must be supplemented by emotional maturity.
The Oil Industry Context
The oil industry, in general and Indian Oil in particular, has been experiencing a variety of
concerns in the recent past due to the opening up to the market. These concerns relateto
the following:
1. Extreme pressure on the bottoms line
2. Commercial competitiveness
3. Dismantling of the administered pricing mechanism (APM)
4. Entry of big players
5. Squeezed resources
6. Enhanced stakeholder expectations
7. Social aspect of business
In view of the above, some of the critical issues confronting the management are:
1. Moving from potential to performance
2. Providing an environment to excel
3. Enhancing competitiveness
4. Creating differentiators for performers
Contd....

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5. Motivating people to perform Notes

6. Managing organizational and environmental turbulence

Being a leading public sector enterprise, Indian Oil has successfully faced the various
challenges of the turbulent market environment and also has become a strategically of the
Government of India by ensuring timely supply of petroleum products to the armed forces
in wartime. Its operating performance and vast infrastructure are a clear indication of its
inherent ability to face the challenge of competition and fulfill its social responsibilities.
(See in Exhibit 1)

Exhibit 1

About Indian Oil (2000-2001)

Sales Over ` 1.13 lac Crore
Employee strength 33,000
Sales record 47.8 T (53%)
Sales point Over 21,000
LPG (liquefied petroleum gas) bottling plants 71
Aviation fuel stations 92
State offices 22
Divisional offices 47

Indian Oil owns nine of the seventeen refineries in India. It is the only Indian company
in the Global Fortune 500 list. It ranks 112th in the Forbes International 500 list of largest
companies outside the US and 34th among the largest 1000 Top Asian Companies of Asia
Week.
The general assumption is that money drives performance, but that is not all. There are
other factors too that drive performance. Some of these are enumerated below:
Mission (aspirations) Very clear
High level and inspirational
Consistent over time
Target/Goals Highly aggressive
Both short and long-term & measurable
Adjusted over time
Organization Few layers
Many P&L (profit and loss)
Units (“atomized”)
Performance feedback Transparent
Internal and external benchmarking
Rankings made public
Consequence management Visible and quick
Varying severity

Contd....

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Notes In the fiercely competitive market environment, Indian Oil has been working towards
evolving innovative schemes to recognize and reward high performance which also can
serve as a strong incentive to other employees of the organization. Towards this end, the
marketing division has developed a unique scheme that recognizes the performance by
various section of the marketing division. It has also evolved a highly comprehensive
methodology for differentiating the high performers who deserve rewards.
Performance Management Schemes
Some of the incentive schemes implemented at Indian Oil are:
1. Productivity-linked incentives bonus, region/unit-wise
2. Ex-gratia (applicable for all)
3. Performance-related incentives (for super perfumers)

Methodology
The steps involved in carrying out the schemes are threefold.
Step 1: Target Setting
The scheme is goal-oriented. Targets are broken down and allocated top-down across all
the levels. The allocation is done by the Head Office based on annual growth projections
aligned with business realities. These targets are agreed upon and owned by the business
heads at various levels as benchmarks of their performance.
In accordance with the methodology, target setting is done: region-wise by the Head Office:
state-wise by the regions; and location-wise by the State Offices.
Step 2: Measurement
The measurement parameters provide for the consequences of performance by assigning
weightage and value to achievements, including negative marking.
Step 3: Evaluation
The final evaluation is carried out by evaluation committees at the state, regional and head
office levels. The HRD department coordinates the entire process.
Towards High Performance with an Integrated Approach
To motivate teams to not only delivers performance for achieving targets but also to strive
for excellence in the entire range of service, quality, safety and other related areas of
performance. The Indian Oil marketing division identified the key business units and also
the frontline personnel responsible for achieving critical business results. The performance
parameters of the following personnel throw light on the various areas of performance
taken into consideration.
1. Best Head of State: Performance Parameters
(a) Market share
(b) LPG enrolment
(c) Indane showroom computerization
(d) Inspections
(e) Growth in profitability
(f) Computerization, Executive information system

Contd....

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(g) Non-Directorate of Government Supply & Distribution (DGS& D) outstanding Notes

(h) Revenue/capital utilization

(i) Stock loss control
2. Best Head of State, Market share: Performance parameters
(a) Increase in market share MS (Motor Sprite-retail and HSD (high speed diesel),
FO (Fortune oil), LSHS (Low sulphur heavy stock), bitumen/naptha/LDO (light
diesel oil)/LPG (liquefied Petroleum gas)/special products.
(b) Increase in lube-fuel ratio
(c) Percentage of volume growth lubes
(d) SKO (superior kerosene oil) sales
3. Best Divisional Manager: Performance Parameters
(a) Increase in market share
(b) Lube/grease volume growth
(c) Lube-fuel ratio
(d) SKO allocation vs sales
(e) Retail outlet (RO) commissioning
(f) Vision 2000 upgradation (RO modernization scheme)
(g) Conversion from “B” site (i.e. dealer-owned, dealer-operated) to “A” site (i.e.,
company-owned, dealer-operated)RO
(h) Upgradation of state transport undertaking/railway depots
(i) Inspections
(j) Non-DGS&D and beyond, credit outstanding
(k) Stock loss
(l) Quality control index of supply points

4. Best Depot/Terminal Manager: Performance Parameters

(a) Stock loss
(b) Tank-truck performance
(c) Quality control index
(d) Safety maintenance and inspection (M&I) index
(e) Innovations
(f) Cost control
(g) Claims and Demurrages
(h) Disposal of scrap
(i) Revenue and capital budget
(j) Compliance with statutory provisions

Contd....

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Notes (k) Compliance of inspection report

(l) Training activities
5. Best sales Officer (Retail): Performance Parameters
(a) Increase in market share
(b) Lube-fuel ration
(c) RO Commissioning
(d) Vision 2000 up gradation (RO modernization scheme)
(e) Conversion from “B” site (i.e., dealer-owned, dealer-operated) to “A” site (i.e.,
company-owned, dealer operated) RO
(f) Inspections
(g) Mandatory facilities at retail outlets
(h) Dishonour of instruments
(i) Irregularity at dealership
(j) Customers’ complaints
(k) Pump attendants’ uniform
6. Best Sales Officer Consumer: Performance Parameters
(a) Sales, volume, growth MS and HSD, FO, LDO
(b) Sales, volume, growth HSD (Direct)
(c) Sales, volume, growth FO, LDO
(d) New business potential tapping
(e) Lubes volume, growth
(f) Consumer pump upgradation
(g) Non-DGS&D collections
(h) Customers’ complaints
(i) Railway Consumer Depot (RCD) inspections/meetings
7. Best Sales Officer (Retail and Consumer): Performance Parameters
(a) Potential customer tapping
(b) Lube-fuel Ration
(c) Lubes volume growth
(d) RO Commissioning
(e) Vision 2000 upgradation (RO modernization scheme)
(f) Sales, volume, growth MS, and HSD, FO, LDO
(g) Increase in market share MS, (retail) and HSD (retail)
(h) Sales, volume, growth HSD (Direct)
(i) Sales, volume, growth FO

Contd....

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(j) Servo shop Notes

(k) Non-DDGS &D collections

(l) Inspections Retail, SKO
(m) Customers’ complaints
(n) Mandatory facilities at retail outlet
(o) Night outs
For each of these awards, parameters with a significant impact on performance were involved
and reward announced. (See Exhibit 2)

Exhibit 2: Parameters and Reward

Unit Parameter Reward All India Others

State Office Overall Singapore (3 nights) Nepal (2 nights)
-do- Goa
State Office Market Share Nepal -do-
Dividioanl Office Overall -do- -do-
Terminal Overall -do- Goa
Depot Overall Nepal
Field Officer Retail Consumer

The spouse could accompany the rewardee and travel, boarding and lodging are on
company account.
Officers going abroad are expected to study the practices of multinational in similar retail
business.
Conclusion
Indian Oil’s scheme is a unique policy intervention aimed at recognition and reward
of high performance by team heads and individual performers. It has gone a long way
in creating a motivational climate in its marketing division, and thus, has had a highly
positive impact in product sales/market share. In the post APM scenario, this scheme has
been indirectly instrumental in helping IOC maintain its high sales volume and market
leadership position.
The following data illustrates this point.

Year IOC Product Sales (in mt) Market Share (as %)

1998-99 46.05 53.1

1999-00 48.79 53.3
2000-01 47.80 52.5

Question
Evaluate the PMS schemes used by IOC.

Is there any relation between the counseling and job performance?

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Unit 10: Performance Management Implementation Notes

Notes
CONTENTS
Introduction

10.1 Strategies for Effective Implementation of Performance Management

Introduction
Performance management is a fundamental component of any
business management system. A Performance Management Plan
provides a formal, regular, rigorous process for data collection,
analysis and usage. Thus changes in effectiveness and efficiency
can be measured, enabling comparison of performance over time
and against that of other similar entities.

1.1 Strategies for Effective Implementation of Performance

Management
Performance Management is a highly collaborative effort that involves multiple internal and
external stakeholders working through how goals and objectives translate into lower level KPIs,
which in turn link to front line metrics. It is only after an organization creates these linkages that
alignment can occur. A common thread for any strategy - regardless of industry - is that with
time it will somehow change as organizations react to internal and external events, so one can
also look at it as an evolutionary process that involves everyone working towards a common set
of goals and objectives which at some point over in the future will be changed or modified. Some
of the strategies for effective implementation of performance management are discussed as
below:
1. Supportive leadership and management: HR professional and top management plays an
important role in successful implementation of performance management. A supportive
leadership and management make the implementation strategy easy and effective.

Notes Performance-oriented work culture encompasses the following:

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Notes 2. Performance Oriented Work Culture: Work culture drives organizational performance
because an organization becomes successful by developing a real and meaningful culture
where performance is one of the core values. Performance oriented work culture means
launching a variety of improvement efforts, including designing high-performance work
systems.
3. Providing Training and Feedback: Training is an important tool to enhance the performance
of employees. Employees should get proper training and timely feedback.
4. Building Participative Environment: The organisations should introduce a participative
work culture where both the managers and employees can discuss their views. Furthermore,
the involvement of employees is also crucial. Inviting managers and employees to assist
in the development of the system facilitates their buy-in, and enhances their trust,
understanding, and ownership of the performance management system.
5. Effective Communication Strategy: Communication is one of the most important factors
in effective implementation of performance management. Communication provides
feedback of work performance, clarifies all the important aspects related with performance
management. This facilitates the buy-in from the people in the organization without which
performance management is less likely to be successful. There should be effective
communication of performance objectives to all the employees in the organisation.

?
Did u know? What are the SMARTER performance objectives?
SMARTER performance objectives means:
S-performance objectives must be specific
M-performance objectives must be measurable
A-performance objectives must be attainable
R-performance objectives must be realistic
T -performance objectives must be time-based
E-performance objectives should be exciting R-
performance objectives should be recorded
6. Benchmarking Best Practices: If organisations want to be more competitive they need
to continuously improve their performance, and benchmark against best practices in
performance management. By undertaking benchmarking, organizations can equip
themselves with insightful and measurable information on improving organizational
performance. Organizations should freely share with their employees such benchmarked
information, so as to create a role model to emulate, which is appropriate for the
organization.
The following are the other key strategies for effective implementation of performance
management system:
1. Relying on Objective Assessments
2. Adopting Performance Management Policies
3. Honesty and Transparency
4. Encouraging Participation without Punishing Poor Results
5. Incremental Improvements
6. Dedicating Staff and Resources
7. Clearly Defining Organization Direction

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Notes Unit 12: Performance Management Linked Reward System

CONTENTS
Introduction
12.1 Performance Management and Reward
12.2 Components of Reward System
12.3 How to Link Performance with Compensation?
12.4 Implications of Performance Linked Reward System
12.4.1 Whom to Reward?
12.4.2 What to Reward?
12.4.3 How should Assessment be done?
12.4.4 How do Organizations Reward?

Introduction
Performance management is concerned with creating a culture in which organisational and
individual learning and development are continuous process. It provides means for integration
of learning and work so that everyone learns from successes and challenges inherent in day-to-
day activities. The desire to enhance performance is making ever-greater demand on the
knowledge and skills of the workforce and on the people, who carry a much greater responsibility
for their own performance. Performance and results are important but concern for people, their
well-being and fairness of treatment is equally important.
If organisations want to attract high performers and retain and motivate the high performer, they
have to be willing to reward excellent performer highly. This requires abandoning traditional
pay structures and practices in which the best performers are only paid a little more than average
and below average performer. In today’s new economy, companies have to invest money in
human capital in order to make them.

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12.1 Performance Management and Reward Notes

According to Lockett (1992) “the essence of performance management is the development

of the individuals with competence and commitment working towards the achievement of
shared and meaningful objectives within the organisation, which supports and encourages the
achievement.” Performance Management is a process which is designed to improve organisation
team and individual performance – it is shared/participative process, an integrating process –
based on agreements on accountability, measurement and Review, feedbacks, development and
improvements on continuous basis.

Criteria for measuring performance of work and contribution to company needs to be

developed, communicated, understood and accepted

The challenges before compensational reward system are to attract the right kind of human capital
and to motivate it to develop and perform in the way that increases shareholders value. Unless
their reward and compensation system accomplishes these two objectives, most organisations
cannot be affected in a highly competitive business environment. Simply spending large amount
of money is not enough; the money must be spent in ways that attract, retain and motivate the
right people.
Creating reward systems that focus on excellence and treat employees as human capital investors
requires a major change in the way most systems operate. Reward system generally treats
employees as jobholders and how well they perform their jobs. Viewing them as human capital
investors suggests a different approach to rewards in two respects. (1) It suggests basic reward
on the value of human capital that people bring to organisation. What their job is at a particular
moment is much less important than the value of their knowledge and skills. (2) It suggests
rewarding people according to how effectively they use their human capital – their knowledge,
skills and competencies – to help the organisation improve its business performance.
Creating reward system that recognises the value of human capital and reward performance
excellence is not easy. It requires a total departure from traditional compensation system and
a careful articulation of existing reward system, business strategy, organisational design,
information systems, etc.
Designing performance linked reward system is conditioned by a variety of factors; such as,
nature of business, type of technology, the attitude of unions, and human resource strategy of
organisation. Therefore, no standard model can be recommended. It has to be customized.

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Notes
!
Caution Performance linked reward systems reduce labour cost, result in increase in real
wages and motivate performance. They provide a method of observing cost escalation
on account of pay increase and thus, help in sustaining the competitiveness of the
organisation.
It has been increasingly realised that performance related pay if used in isolation, may have little
impact on motivation for performance. Appropriate conditions have to be createdin the
organisation for performance linked reward system to be motivationally effective. These
conditions will involve, for instance, proper information, proper consultation, proper
communication, proper training and development of the employees, developing a proactive
attitude and performance-oriented culture, providing non-monetary incentives and evolving an
efficient management performance.
Employee’s performance depends on mainly three factors – skill, knowledge & motivation:
Employees performance= f (SKM) + External Environment
Where,
S = Skill & ability to perform task
K = Knowledge of facts, rules, principles & procedures
M = Motivation to perform

12.2 Components of Reward System

The key elements of an organisation’s reward system can be categorised as follows:
1. Financial Reward: Financial rewards include the direct monetary rewards in terms of cash
for their work and achievements.

Example: Salary, wages, incentives etc

2. Non-financial Rewards: The non-financial reward contains many of the reward components
that behavioral scientists have been describing for the past 50 years as critical for improving
workplace performance. Non-financial rewards can be in form of:

(a) Enhanced Dignity and Satisfaction from Work Performed: Possibly the least costly and
one of the most powerful rewards an organization can offer to an employee is to
recognize the person as a useful and valuable contributor. This kind of recognition
leads to employee feelings of self-worth and pride in making a contribution. Few
people want simply to be given something. They would much prefer to knowthat
through their own efforts, they have earned and deserved rewards. Every
compensation and non-compensation reward component should carry with it the
message. “we need you and appreciate your efforts.”
(b) Enhance Physiological Health, Intellectual Growth and Emotional Maturity: Considering
the number of hours a person spends on the job, on travel to and form the work
site, and off the job in attempting to resolve job-related problems frequently receive
minimal attention until a serious problem occurs. Once this happens, however,
it overrides all other employee concerns and activities. Modern health practices
recognize the direct relationship between the physiological health and intellectualand
emotional well-being of each individual.
(c) Promote Constructive Social Relationships with Coworkers: An old adage states that “One
man is no man.” Although there are constant reminders of what one dedicated

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person can achieve, there are even more reminders that one human alone is weak. Notes
However, with concerted action, people can accomplish almost anything. In this
world of extreme specialization, people need and rely on other people more than ever.
One of the most valued rewards gained from working is the opportunity to interact
in a socially constructive manner with other people – to enjoy the comradeship of
work-place associates.
(d) Design Jobs that Require Adequate Attention and Effort: Over the past 40 years,
organizational scientists have discussed at length the problems arising boredom
related to work assignments that were developed in the last quarter of the nineteenth
century. Jobs were designed so that workers could be taught quickly how to perform
a few highly repetitive tasks. Workers then were required to perform these few
tasks for as long as they remained on the job. What first appeared to be an efficient
way of melding human resources with machine technology proved to have serious
drawbacks.
(e) Allocate Sufficient Resources to Perform Work Assignments: Requiring employees
to perform assignments for which they have neither the knowledge nor the skills
opens the door for problems. Not only is the organization likely to suffer because of
outcome failures, but employee job-related interest and satisfaction are apt to break
down because of the likelihood or inevitability of failure. Most employees seek a
sense of accomplishment from their work. They want some degree of challenge, but
they also want to feel reasonably, sure that they can succeed.
(f) Grant Sufficient Control over the Jobs to Meet Personal Demands: From the 1950s to
the present time, behavioral scientists have discussed the need to grant employees
greater opportunity to participate in organizational decision-making processes. One
problem with this participation concept is that organizations are composed of all
kinds of people with all kinds of decision-making desires. Some people simply want
to be told what to do, to be shown what is an acceptable level of performance, and
then to be left alone to do their jobs. A few people in every organizational want to tell
top management how to run the organization. Between these two extremes is a wide
variety of demands for a greater voice in determining how to perform assignments.
(g) Offer Supportive Leadership and Management: This dimension is difficult to separate from
all other non-compensation rewards, but it is so important that it must be recognized as
a unique dimension of the non-compensation rewards and not just a component of the
other factors.

12.3 How to Link Performance with Compensation?

A performance appraisal system is often the link between rewards employees hope to receive &
their productivity. The linkage can be thought of as follows:

!
Caution Productivity — Performance appraisal — Rewards
Performance-based compensation affirms the idea that pay raises should be given for performance
accomplishments rather than for seniority.

?
Did u know? What is variable pay?
Pay for performance is also known as variable performance linked pay or contingent pay.

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Notes Where a performance-oriented philosophy is followed, organizations do not guarantee additional

or increased compensation simply for completing another year of organizational service. Instead,
pay and incentives reflect performance differences among employees. Employees who perform
well receive larger compensation increase; those who do not perform satisfactorily see little or
no increase in compensation. Thus, employees who perform well receive larger compensation
increases; those who do not perform satisfactorily see little or no increase in compensation. Thus,
employees who perform satisfactorily, advance in relation to market compensation levels, whereas
poor or marginal performers may fall behind. Also, bonuses are determined on the basis of
individual, group, and/or organizational performance.
Few organizations follow totally performance-oriented compensation practices. However, in the
midst of organizational restructuring occurring throughout many industries, organizations look for
compensation systems that break the entitlement mode. Even in the public sector, some
organizations have recognized the need to shift toward more performance-oriented re-organized
compensation practices. How fast the shift occurs, given the traditions and the strength of public-
sector unions, remains to be seen.
A performance orientation requires a variable pay approach in which pay goes up or down based
on a measure of performance. Not everyone in the same job will be paid exactly the same, and not
everyone will like the approach.

Notes Traditional Compensation Approach vs. Total Rewards Approach

Traditional Compensation Approach Total Rewards Approach

Compensation is primarily base pay Variable pay is added to base
Bonuses/perks are for executives only Annual/long-term incentives are provided to
executives, managers, and employees
Fixed benefits are tied to long tenure Flexible and portable benefits are offered
Pay grade progression based on organizational Knowledge/skill-based broad bands determine
promotions. pay grades.
Organization – wide standard pay plan exists Multiple plans consider job family, location
and business units

12.4 Implications of Performance Linked Reward System

Four main questions in relation to reward system are:
1. Who should be rewarded?
2. What rewards should be given?
3. How should assessment be done for deciding the rewards?
4. How rewards should be given?
We shall discuss each issue with examples of practices in the Indian organizations.

12.4.1 Whom to Reward?

Rewards are symbols of appreciation and recognition. Rewards reinforce what the organization
values and wants to be strengthened. So, almost every one related to the organization can be
covered by the reward system.

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1. Individual Employees: Individuals showing exceptional behaviour and high performance Notes
should be rewarded. Individuals are being rewarded by all organizations that follow a
reward system. Variable pay is one type of reward. We shall discuss below individual
rewards under other aspects of reward system. Probably about 20% managers are likely to
get rewards.

Example: Performance at Polaris is categorized into four levels: Premium,

Outstanding, Competent and Learning. These are indexed to the 90 th, 75th, 50th and 25th
percentile. “The Premium Performers are at the top end of the industry, and that is
consistent with our policy of institutionalizing meritocracy at all levels of the company.”
Among the rewards schemes at Polaris are Konark, aimed at identifying potential leaders
and encouraging the “cream to float to the top”.

Example: At Cognizant “statistically speaking, the top performers have

progressed about 70 percent quicker, and have received cash award up to three times
higher than the others in the organization. That pretty much sums up our performance
ethic.”
2. Teams: As already stated, individuals work in teams, and the organizations need strong,
cohesive, competent and self managed teams. Therefore, in future more and more rewards
should be given to teams. Teams need to be empowered by giving high performing teams
more autonomy and resources.

Example: In Tata Cummins, which runs operations through self managed teams
of workers, each team is given money every month to use for raising the level of
performance. Teams also include departments. High performing department should also
be recognized and rewarded.
3. The Organization: Exceptional performance by the organization needs to be celebrated.
Every one belonging to the organization then has a sense of pride.
4. Outsiders: Customers, suppliers vendors etc. can also be covered in the reward system.

Example: In Associated Capsules and Universal Capsules, outstanding

employees chosen are asked to name any outsider, who in their opinion, has contributed
to the business of the company in the last quarter. They may invite that person to the
company’s dinner and the Chairman writes the invitation letter to such persons. This is a
very innovative way to recognizing external persons through internal people.

Example: At ICICI recognition extends to the employees’ family as well: employees’

children who excel in academics or extracurricular activities are recognizedthrough
scholarships and sponsorships.

12.4.2 What to Reward?

As already stated rewards are meant to reinforce desirable behaviour, high performance, values
etc., whatever the organisation wants to be strengthened and promoted further. Some of the
following aspects can be rewarded.

1. Performance: Performance needs to be rewarded, both of individuals and teams. Criteria

of performance excellence and their weightage may be determined. The following criteria
and weightage are suggested as an illustration.

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Notes 2. Organizational level: Profit, market share, customer satisfaction, employee satisfaction,
achievement index of one thrust area to be declared every year exceptional events like new
product launch, export award, crossing a significant milestone etc. should be celebrated.
3. Unit/Department level: Internal customer satisfaction, innovations leading to efficiency,
achievement-index-of one thrust area to be declared in advance, quality, culture building,
team work, creativity, internal customer service, cost reduction, strategic initiatives, etc.
Any of these could also become annual thrust areas or some other thrust areas could be
declared by the organization or the unit/department like export, energy saving, wastage
reduction, zero defect, safety, breakthrough in chronic problems. A few Chairmen’s shields
may be constituted, given each year to the units/departments/being judged as the best
units for the year’s thrust area, and other aspects to be promoted by the organization.
4. Speed and efficiency: Ericsson Falcon Award is given for Speed and efficiency to promote
fast, urgent work pace with speed and efficiency. The Qualifiers are: Increase in efficiency;
cost savings for the company; Earnings/rewards for the company. Demonstrated
Behaviours for the award are:
(a) Exceeds timelines consistently
(b) Completes projects in record time
(c) Always withstands pressures
(d) Does not wait for assignments, decides what is needed to be done
(e) Respond promptly to sudden/unexpected problems in own unit/department
5. Loyalty: When employees complete their first year with Hughes Software they are presented
a watch; when they complete five year, they (and their families) are given acompany paid
holiday. Ernst & young also reward people who stay in the company in considerable time.
6. Innovation: Gujarat Gas gives “innovation helps” reward for an idea given by an employee
who has resulted in cost reduction/improved efficiency. Philips Software Centre rewards
innovation `5,000 for sending an idea to head office and $750 when it is filled for patent. So
far more than 1,400 ideas have been filed and in the last two years 12 patents were granted.
At Texas Instruments (India) Development Centre, employees feel that they really don’t do
peripheral work. This fact comes out quite clearly in the patent data. Over the last 16 years.
TI’s India centre has filed 225 patents out of India. That is more than two and a half times
the next company on the list, IBM, which has 85 patents filed from India in 10 years.
7. At Ericsson: India Ericsson Innovator Awards are given for Innovation, Creativity and
Functional Excellence. The purpose is to promote: Innovation, creativity and performance
excellence; Initiative taking and doing an extra yard; a climate of experimentation and
learning that focus continuously on new ways to create added value for customers and
shareholders. Nominations for this award should consider visible and concrete value
addition in the form of increase in revenue; increase in efficiency; cost reduction; functional
value addition. The following are the demonstrated behaviors for this reward:
(a) Uses opportunities to develop new and better ways of doing things.
(b) Challenges the status quo.
(c) Puts generated ideas into implementation.
(d) Explores innovative and new ideas in problem solving.
(e) Reflects on past experiences to learn.
(f) Approaches problems in generally curious and open minded manner.

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(g) Is able to modify and use learned concepts or methods appropriately. Notes
(h) Makes a different, original use of the existing information.
(i) Uses intuitive approach to develop new systems and procedures to increase efficiency;
Stimulates creative ideas in others.
(j) Anticipates and prepares for problems that are not obvious to others.
(k) Does not stop at the firs solution.
(l) Thinks positively even when faced with obstacles.
(m) Encourages innovation around him/her.
(n) Uses tools like brainstorming to stimulate creativity around him/her.
8. Upholding values: Hughes Software gives formal award for adherence to company values.
Ambassador award is given for values and Business Excellence. The award is given to
promote: Human and business competencies which are mandatory for Ericsson employees,
viz. Ericsson knowledge, customer orientation, communication, teamwork, negotiation,
cultural awareness and approach to change; Ericsson values: professionalism, respect and
perseverance; Ericsson wanted behaviors passion to win, dedication to customer success;
fast, urgent, creativity, value adding teamwork. For the award Ericsson values and
behaviors should be demonstrated in the following areas: Visible market or product beak-
in; Achieving strategic contract; Successful customer partnership; Great enhancements in
customer satisfaction. Demonstrated behaviors are:
(a) Puts forth views influentially because of the deep insight in the matters.
(b) Handles all customer situations with confidence
(c) Shares knowledge, skills and experience in a clear, concise and open manner
(d) Leads teams through difficulties by soliciting ideas and eliciting their co-operation.
(e) Adapts to new challenges and is able to identify, accept and introduce changes in
order to meet the future customer and market requirements.
(f) Persists in face of difficulties.
(g) Understands business situation and decision making process in client organization,
by establishing contacts with key persons and reading the organization.
(h) Exerts to get ahead, is enterprising and gets the job done.
(i) Delivers promises with speed and a sense of urgency.
(j) Understands on a strategic level, the relationship between finance/technology/
business areas of the company and uses it effectively in negotiating business deals.
(k) Understands business situation and decision making process within customers’
organization, by establishing contacts with key persons and building relationships.
(l) Is able to take a decision even under high stress when the risks cannot be planned.
(m) Understands how the customer gains profit from doing business with Ericsson.
(n) Has knowledge of Ericsson’s main competitors and their competitive strategies.
9. Technical Solution: Hughes Software holds employee poll for rewarding the “person with
best technical solution”.
10. Learning: Infozech Software rewards the personal achievement of the employees. For
example employees who have cleared examination like; MCSD, MCSE, MCIP, MCDBA,

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Notes CISCO certification, Sun certification, they are given a cash reward in the monthly meeting.
11. Good behaviour: Hughes Software holds employee poll to reward “the most warm and
friendly person”.
12. Sense of humor: Hughes Software also gives reward for the best sense of humour.
13. Teaching: In Hughes Software employee poll is also held for rewarding “the best teacher”.

14. Publications: Gujarat Gas gives “the triumph” reward to an individual employee or the
team who have come out with an in-house publication.
15. Event Management: Gujarat Gas also gives reward to persons involved in an event
management without help of external agency.
16. Social Concern: RPG gives awards to people who have done something on social issues
like riot relief or flood relief. RPG gives awards to people who have done something on
social issues like riots relief or flood relief.

12.4.3 How should Assessment be Done?

A tricky question is how to decide who should be rewarded. In some cases the criteria may be
quite objective (e.g. production, selling etc.). However, in most cases some judgment is required.
Different ways are used to reduce subjectivity in decision making. One way is to have a team
decision rather than individual choices. Various methods have been used as illustrated below.
Discrimination of the head of unit/department should also be given importance in rewarding
employees.
For Unit/Department level rewards, survey, instruments may be prepared for assessing
achievement in the selected area. Other alternative arrangements may be to have Audit Teams for
each aspect, whose recommendations may be sent to the apex team for finalization of rewards.
If audit is to be used for Business/Corporate function rewards, the top management may
constitute two Audit Teams. One Audit Team may cover internal customer satisfaction, strategic
initiatives, and the other Audit Team may cover culture/climate, team work, and subordinate
development. The Audit Teams can utilize survey data, in addition to their on-the-spot visits.
Audit Teams may develop their own guidelines. The teams may core the Units/ Depts. in A, B, C
categories. The top management may nominate one of the six members as Chairman of the joint
teams to finalise their recommendations.
For rewarding individuals some devices have been used to make it more objective. In Hughes
Software employee polls are used to pick up individuals for rewards. When the management
makes decisions in rewarding employees, people may doubt that management would pick up
their favourites. Employee polling is free from this kind of bias. In NIIT the HR department
organizes a poll for choosing best employee. Thirty names are chosen from the poll results and
these employees become members of Presidents Forum. At Net Across one has to be nominated
for the best employee by one of the department members. The information about the nominee,
the criteria on the basis of which the person has been nominated, the projects he has undertaken
and his accomplishments, competency etc. are displayed on intranet. And the best employee is
selected after the polling. No cash rewards are connected with this.

Balance between Objectivity vs Subjectivity Performance Evaluation

Many workplaces use evaluations to decide which employees should advance. Many companies
do quarterly or annual evaluations. Evaluations also help employees improve their performances

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by pointing out areas that are strong along with areas that need improvement. Depending on the Notes
workplace, it may be better to evaluate based on subjective or objective criteria or a mix of both.
1. Objective Performance Evaluation: An objective performance evaluation might focus on
an easily measurable number, such as total sales. The “Performance Appraisal Handbook,”
published by the U.S. Department of the Interior, describes some ways to objectively
evaluate employees. For example, employers could measure quantity of work. In this case,
the “Performance Appraisal Handbook” describes quantity of work as “how much work
the employee or work unit is expected to produce. Measures are expressed as a number of
products or services expected.”
2. Subjective Performance Evaluation: For some service jobs, a subjective performance
evaluation, which looks at an employee’s qualities not the quantity of work, might include
how well a certain employee interacts with customers. While quantity of work can be
easily measured, how well a certain employee interacts with customers cannot. Instead,
such criteria rely on observations and opinions.

12.4.4 How do Organizations Reward?

Rewards are given to recognize outstanding work of individuals, teams (units and departments
including) or other connected with the organization. It is important to communicate appreciation
in public. Celebrating achievement in public boosts the value of the reward. Exceptional
performance by the organization, crossing a milestone or launching of a new product etc. may
be celebrated organization-wide with small gifts (the same to all employees, from the top to the
lowest level). A team of 5 to 7 employees (or preferably their wives), from different levels and
locations, may decide the gift to be given.
Based on the “performance” of the units/departments (all units/departments to be rated by a
corporate committee as A,B,C), the units/departments may be given discretionary funds from
the Reward Corpus, to be utilized to reward their employees. The recommendations made by
the unit/department heads, along with justification, should be sent to the Corporate Rewards
Committee. The rewards should be declared by the unit/department heads.
Individuals or team rewards may include monetary rewards, computers, family holiday plans,
stock/share options, declaration in the newsletter, medals and certificates (to be given in a
function by Unit/Department Head/CEO, also a person who collects four medals or so may be
given some intrinsic/extrinsic reward), visit to other plants, visits abroad etc.
Survey of customer satisfaction, internal customer satisfaction and employee satisfaction, may
preferably be conducted by internal or external team (say by short placement IIM/IIT/other
institute graduates). Survey forms may be developed by a Task Force, reviewed and finalised.
1. Empowerment: One way to reward people is to empower them, giving them autonomy with
support to act in relation to their work.
One good example is the public sector undertaking, BPCL, which reorganised itself and
gave more freedom to people in the field.

Example: Territory managers in retail can award jobs up to `2 crore or take action
against errant dealers. In Philips Software Centre 70-80% vacancies get filled by employee
referrals. Wipro Spectramind has a programme CONTACT (Cutting Out New Talent
Activity) for employee referral.
2. Recognition: Recognition is the greatest reward.

Example: 1. Texas Instruments, rated no.1 Great Places to Work in India,

recognizes people by electing them as TI Fellows, one of the highest steps on the technical
ladder.

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Notes 2. “ATI Fellow is like being a Don at Oxford. Only 0.6% of the TI population is fellows. These
are the chaps who are the ‘brains’ – people who help TI meet its most difficult technical
challenges. Becoming a fellow is difficult. Your peers and seniors evaluate your work to see
if you have been innovative in your thinking right through… Staying there is even harder.
You are re-assessed every year. If you fall behind you can lose your fellowship as the total
number cannot be more than 1% at any given time.”
3. Career Growth: An excellent way to reward people is to provide career growth to deserving
people.

Example: 1. In Federal Express an employee started as a receptionist, oved on to

operations, and then to customer service. There each employee can tailor his/her career path.
2. Texas Instruments has a “technical ladder”, communicating to people that it does
not matter even if they want to remain technical gurus all their lives. They would still
be rewarded on par with people who move into management. The tool is the “technical
ladder’. It is a parallel career path to the management ladder.
3. Eli Lilly (India) career growth is promoted through cross-functional competencies. ELI
recently introduced one of parent Eli Lilly’s interventions – a technical competency model
(TCM) – to help those employees who want to develop deep technical expertise and also
want to progress in their specialized function. TCM was introduced after it was debated
heavily in the cross functional teams set up to assess the pros and cons of the model.
4. Development: Developing people, raising their competence and qualifications is a great
reward for them. Value is added to them, and their ability to carry higher responsibility
increases. Several companies are increasingly investigating in employee development.
Employees get more mobility and opportunities for career growth.

Example: 1. Texas Instruments have set up Development Centre, so have Aditya

Birla Group, Gyanodaya, a learning Centre.
2. Johnson & Johnson have tied up with various business schools for MBA courses for
deserving employees.
3. In Jindal Iron and Steel Company shop floor workers are routinely moved and trained.
The company trains them before they are given a new function. They can get `10,000
allowance once in two year to pay for tuition fees. The result: productivity per worker has
increased from 300 tonnes in 2000 to 575 tonnes in 2003.
5. Celebrating and Fun: As already discussed, rewards should be celebrated. This may be in
many forms. Having a party is one of celebration. In fact, more and more emphasis is being
given on developing fund and joy at work place.

Example: Wipro Spectramind has a budget of `150-200 per employee per month to
have a party either on the premises or outside or a weekend party. The company also believes
in immediate rewards. `25,000 to 30,000 a month are spent on on-the-spot rewards as
watches, pens, caps, T-shirts, travel bags, etc. This is called Pragati initiative.

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Notes

Performance-based Compensation Structure in

Crompton Greaves Ltd.
Introduction
This case study deals with the introduction of a Performance-Based Compensation (PBC)
package in Crompton Greaves (CG) in 1994. After a thumbnail profile of the company, the
rationale for introducing PBC, its objectives, the structure, the process, and learnings are
discussed.
CG is the largest multi-technology, and multi-locational electrical products manufacturing
private sector company in the country. It has a sales turnover of `17,000 millions and a
workforce of 8,000 people. The company is headed by a Managing Director with four
business groups and three functional areas at the corporate level.
The organization has broadly five layers of management:
1. Strategic Business Unit (SBU) and corporate functional chief-president
2. Multi-profit centre chief (in-charge of more than one profit centre)—Senior Vice
President/Vice President/Sr. General Manager
3. Profit centre head – Sr. General Manager/General Manager
4. Departmental head – Dy. General Manager/Sr. Manager
5. Sub-departmental head/frontline supervisor – Manager/Asst. Manager
Over the years, several managerial designations have come into existence within the five
layers of this hierarchical structure due to operational factors such as seniority, needs of the
organization and needs of individuals.
Pre-requisites for PBC Schemes
For successful implementation, monitoring and evaluation of a PBC Scheme, there are
certain conditions which should be met in the organization. The organization should
possess the following:
1. A corporate culture of confidence and mutual trust.
2. An image of management, being one among employees of fairness and equity
3. Clear communication throughout the organization about the mission, values, vision,
objectives and goals of the organization.
4. HRM processes that are adequately positioned, including non-monetary employee
development systems.
5. A professional style of management.
6. A working environment that is conducive to give employees professional and personal
space for functioning.
7. Above all, scheme that is “SMART”, that is:
S : Specific
M : Measurable
A : Achievable
R : Realistic
T : Time-bound
Contd....

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Notes The raison detre for CGs PBC for Executives

Some of the major reasons for introducing a PBC Scheme for executives in CG are as
follows:
1. The Government of India’s decision to open up the Indian economy and markets
for global competition made it imperative for the organization to make strategic
interventions for gaining a competitive edge over other global players. The performance-
based compensation scheme was introduced in the organizational efficiency.
2. CG’s compensation package was not competitive compared to other leading
organizations in similar business in the country.
3. The organization realised that to retain its competitive edge in the market and to achieve
profitable and sustainable growth, it had to make certain HRD interventions to
motivate the employees.
4. CG’s business of telecom, information technology (IT) products, etc., one of its
strategic business, had been incurring losses for quite some time. With IT emerging
as a ‘sunrise industry’, the organization was finding it difficult to attract and retain
talented professionals.
5. There was a distinct trend for rapid increase in executive remuneration in the
country.
In the light of the above, CG made some critical HRD intervention. These included:
1. Restructuring and re-engineering of the organization.
2. Creation of Strategic Business Groups.
3. Redesigning the appraisal system to be compatible with the PBC Scheme.
4. Hastening the process for implementing Total Quality Management (TQM) and to
bring the total population within its umbrella by 1998.
5. Introduction of a PBC package for senior executives.
6. Establishing an HRD centre to further hasten competency and capacity building of
employees.
The management felt that due to TQM campaign launched in the company as back as 1990, the
environment in the organization was conducive for introducing a performance-based
compensation scheme.
Intensive discussions were held within the hierarchy of the management. On the basis
of the consultations within different levels of management, the final performance-based
compensation scheme was finalized and introduced.
Of the various HRD interventions mentioned above, we will discuss only the PBC for senior
executives.
Objectives of the PBC Scheme of CG
The major objectives of the scheme are:
1. To make CG’s compensation package for executives comparable with that of the first
three companies in similar business in the country.
2. To attract talented young professionals into the IT group without distributing the
basic CG compensation structure.
3. To strengthen performance-compensation linkage in SBUs.
Contd....

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4. To use compensation as one of the critical motivators within the overall HRM Notes
strategy.
5. To attract and retain the best available talent in the industry.
6. To recognize, encourage and reward employees for good/exceptional performance.
7. To strengthen manufacturing and other processes and make them more predictable.
8. To prepare CG for future global competition.
Salient Features of CG’s PBC Schemes
The salient features of the PBC Schemes are:
1. Measurement of performance is on the basis of four specific elements: (1) cash, (ii)
profit before tax, (iii) sales and (iv) process cost.
2. Minimum and maximum compensation varies across levels.
3. The scheme takes into account the performance of the company, SBU, division and
individual. Weightage is assigned to performance at difference at different levels and
to different elements.
4. Less than 100% performance is also rewarded.
5. The scheme is made simple to the extent that an individual, at the end of the year, can
calculate his performance and the amount permissible to him.
6. The scheme encourages teamwork as it gives details of individual performance with
the division, SBU and company performance.
The ‘Pride Money’ Scheme
The PBC Scheme was termed as ‘Pride Money’ Scheme replacing the existing scheme of
bonus and commission.
The ‘Pride Money’ scheme was conceptually different from the loosely defined concept
of bonuses and commissions. Being scientific in nature and basically quantifiable, the
quantum of reward to executives was on the basis of performance of the company, SBU,
division and individual.
Such schemes are generally dynamic in nature and need to be periodically reviewed and
redesigned, based on the changes in the external and operating environment and to keep
in consonance with the organizational thrust areas.
Process of Setting Goals
Personal Goals
At the beginning of the year, the executive and the appraiser decide performance areas
and set mutually agreed goals to be achieved during the year. The process has an in-built
system of informal feedback to the executive by his superior. At the end of the year, the
appraiser evaluates the performance on the basis of achievement of goals.
Divisional Goals
The second step in the process is setting of Divisional goals through discussions between
the Divisional and Departmental heads. The divisional goals are set by the divisional head
in consultation with the departmental head. As a first step in the process, the departmental
head discusses departmental goals with Sectional heads.

Contd....

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Notes SBU Goals

SBU goals are set by the process of discussions between the SBU Chief and the Divisional
heads of the concerned SBU.
The final goals are set on the basis of discussions between the SBU Chief and the Chief
Executive of the company.
Company Goals
The CEO of the company consults the SBU Chief and Corporate Heads for evolving
company goals.
Performance and Evaluation Parameters
The final package under PBC scheme of each individual, depending on his position in
management, is on the basis of performance of the following:

Designation Performance of : (goals related to)

1. President Personal, SBU and Company
2. Sr. Vice Presidnet/Vice Personal, Divison and SBU
President/Sr. General Manager
3. General Manager/Sr. GM Personal, Division and SBU
4. Dy. GM/Sr. Manager Personal and Division

Lessons from Cg’s Experience

1. There is no standardized PBC scheme which can fit all types and sizes of organizations.
Business line, product range, operating environment, corporate culture, business
strategy, management style and various other factors influence the shape and success
of a PBC scheme in an organization.
2. The management should be clear about expectations from the scheme.
3. The review of the scheme should be an ongoing process to make it responsive to the
changing needs of the organization.
4. Care should be taken to guard against “sand bagging” of goals.
5. No PBC scheme can be 100% objective. Efforts should be to reduce the subjectivity to
the minimum. Efforts should also be made to reduce heartburn amongst executives of
different profit centres.
6. It should be simple, measurable, achievable, realistic and time bound.
7. Finally, it is critical that a PBC scheme should fit into the overall HR strategy of the
organization.
Question
Make a critical analysis of evaluation parameter used by Cromption Greaves Ltd.

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