MGTH 04 -PERFORMANCE MANAGEMENT

UNIT I
From Performance Appraisal to Performance Management : Definitions and Dimensions of PA, Necessity
of Performance Appraisal and its Usage by Organizations, Characteristics of Performance Appraisal,
Performance Appraisal Process, Performance Appraisal Methods - Traditional Methods, Modern
Methods, Construction of BARS, Performance Appraisal of Bureaucrats – A New Approach, Aims of
Performance Management, Purpose of Performance Management, Employee Engagement and
Performance Management, Principles of Performance Management, Overview of Performance
Management as a System, Dimensions of Performance Management, MBO - Performance Appraisal -
Performance Management differences.

UNIT 2
Overview of Performance Management Process – Performance Management – Definition, Performance
Management Process & Performance Management Cycle at a Glance – Deming’s Model, The Torrington
Hall Model, Characteristics of Healthy Organizations, Performance Reviews and Feedback: Feedback –
Role, Types and Principles, Situations Requiring Feedback, 360 Degree Feedback and its relevance, Steps
in giving a Constructive Feedback – Role of a Transformational Leader, Levels of Performance Feedback,
Performance Goal Setting – Setting of Objectives.

UNIT 3
Measurement & Evaluation of Performance - Enhancing performance at Individual, Team and
Organizational levels, Measurement of performance at Organizational Level – Ratio Analysis, Fund
Flows, Cash Flows, EVA, EFQM, DashBoard, Balanced Scorecard, Various methods to evaluate
performance at Individual & Team Levels, Team Performance, Performance of Learning Organizations
and Virtual Teams: Team Performance Management.

UNIT 4
Issues in Performance Management – Role of Line Managers in Performance Management, Performance
Management and Reward - Linking Performance to Pay – Pay Bands & Structures, Realities of Ethics in
Performance Management, Unethical practices in performance measurement and evaluation and how to
curb this.

UNIT 5
Facilitation of Performance Management System through Automation - Improving Quality of Planning
and Design of Performance Management, Improving the Objectivity of Performance Management,
Improving Execution Aspects of Performance ManagementAutomation in Performance Management,
Automation Process

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UNIT I: From Performance Appraisal to Performance Management

Definitions and Dimensions of PA

The term performance appraisal refers to the regular review of an employee's job
performance and overall contribution to a company. Also known as an annual review,
performance review or evaluation, or employee appraisal, a performance appraisal evaluates
an employee’s skills, achievements, and growth, or lack thereof.
Companies use performance appraisals to give employees big-picture feedback on their work
and to justify pay increases and bonuses, as well as termination decisions. They can be
conducted at any given time but tend to be annual, semi-annual, or quarterly.

Types of Performance Appraisals

Most performance appraisals are top-down, meaning supervisors evaluate their staff with no
input from the subject. But there are other types:

● Self-assessment: Individuals rate their job performance and behavior.

● Peer assessment: An individual's workgroup or coworkers rate their performance.
● 360-degree feedback assessment: Includes input from an individual, supervisor, and
peers.
● Negotiated appraisal: A newer trend that utilizes a mediator and attempts to
moderate the adversarial nature of performance evaluations by allowing the subject to
present first. Also focuses on what the individual is doing right before any criticism is
given. This structure tends to be useful during conflicts between subordinates and
supervisors.

Dimension of PA

1. Result and Output:

The most acceptable and measurable dimension of
performance is result and output. It describes the
conditions of inputs which include raw material, working
conditions, process capabilities and talent of employees
in the final form of product or service. It is necessary to
plan all the performance activities in a scientific and
systematic manner so that the desired result or output
may be obtained.
2. Input:
This dimension deals with the activities to be
accomplished by the employee. Performance can be

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achieved if the nature of inputs can be managed without mistake, because performance is a
function of three sets of factors – ability, motivation and organizational support. If any of
these three factors is less, the performance is poor.
3. Time:
Time is a precious and very important dimension of performance. In the current scenario of
the world, the performance management is time bound, otherwise the survival of the
organization is not possible in the future. Performance of an employee in relation to a given
role during a particular period of time under the set of circumstances operating at that point
of time. Therefore, time may become the target
4. Focus:
Performance also has a focus dimension. For example in case of sales, profits and new areas.
Focus means attention, not only on your own activities but should also keep close watch on
related activities.
5. Quality:
‘Quality is not a destination but a journey’. Quality refers to doing the things right from the
first time rather than making and correcting mistakes in order to achieve total customer
satisfaction. It means quality is conformance to customer requirements, not goodness. Higher
is the quality greater is the satisfaction of customers. It is the responsibility of each and every
employee as well as management to build a quality standard which provides reasonable
customer satisfaction at economical cost. Quality is the core dimension of performance
management
6. Cost:
The ultimate principle of purchasing is the low cost with best quality. Therefore cost
effectiveness is another dimension of performance management. It implies the capacity of a
business unit to produce a given commodity at a lower cost through more effective utilization
of existing resources. It is the process of cost reduction by improving efficiency of
operations.
7. Output:
Output relationships and analysis- It is relevant and essential to understand the input-output
relationships and analysis. The purpose of input-output analysis is to find out the
interdependencies and complexities of the economy in order to determine the conditions for
maintaining balance between demand and supply. It describes the inputs required to produce
the outputs of different sectors of the economy. It also involves the study of the exchange of
goods and services among industries.

The performance appraisal is the part of performance management because the moment the
assessing process is started there is an appraisal taking place. Therefore, performance
appraisal is static in nature while performance management is a dynamic process.

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Necessity of Performance Appraisal and its Usage by Organizations,

Performance appraisals are essential for the growth of a company and the employee. It helps
the company to find out whether the employee is being productive or is a liability. It helps
the employee to find out where his / her career is heading. It is an essential part of HR
management. A performance approval need not be a stressful event for the HR / supervisor
or for the employee.
Following are some of the benefits of performance appraisal.

1. Employee satisfaction and motivation

A Performance appraisal meeting is a platform where the employee is recognized for his / her
good work and it is important to recognize the work done by an employee. Even if the
employee has not done a good job, it is important to show that the organization is interested
in his / her individual performance and their growth in the company.

2. Finding out the need for training and development

During an appraisal meeting, the employer can point out the areas where the employee needs
improvement. The employee can look at the data and agree with the employer, and then work
out a plan for training and development. The training will help the employee to perform
better and it will pave the way to future growth. Companies can look at consolidated
appraisal data and decide on areas where improvement is needed for individual employees,
as well as, for the whole team. Then they can plan for training and development

3. Analyzing appraisal data for better recruitment

Appraisal data helps in monitoring the success of a company’s recruitment practices. For
example, how well the employees who were hired in the past one or two years are
performing, how is the attrition rate and so on. Based on it, the HR department can strategize
future hiring.

4. Improving communication between management and employee

Most often, there is a communication gap between the supervisor and the employee,
especially when the employee is new to the company. Most of the time the supervisor /
manager will be too busy to pay proper attention to the new hire. Performance appraisals will
help to break that ice, which is good for both the supervisor / manager, as well as, the
employee because better communication leads to better productivity.

Characteristics of Performance Appraisal

Performance appraisal process needs to be a simple and an easy approach for all the
employees to understand and adhere to the methodology.

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The following encompasses ideal characteristics of an appraisal system.

1. Clear Objectives
Organizations differ in terms of work, size,
resources, needs and environment, but every
organization will have a set of objectives to be
achieved by the end of the year. The goals should be
well defined and communicated to every employee
at the organization. This will align employees
towards organization goals. The goals should be set
taking into account organization-employee
compatibility and scope of the employees to attain
the goals. Thus the goal/objective of the appraisal
system should be clear, specific and tailor-made for
the company.

2. Reliable and Valid

Appraisal system should be fair and ethical, to make
the organization attain the pinnacle of success. This can be made possible only when the data
is valid and reliable. The data here is nothing but the goal against employee outcome, time
taken to accomplish the goal and status of the goal. All this data must be recorded and
documented for every employee performance. Collation of this data showcases complete
employee performance on the appraisal day and will be real time, reliable data.

3. Developmental
The manager should not go judgmental on employee performances. The manager should be
able to analyze employee skills, capabilities and his/her approach towards work. The
manager must take care of every developmental need of the employee to uncover hidden
potential. Only when the manager has a clear understanding of the employee capabilities, can
he fine tune employee performances and help him/her grow professionally; wisely playing on
employee’s strengths at the same time addressing any areas of improvements needed.

4. Training
There will be employees in every organization who will need assistance and support to work
better. The manager should be able to identify those employees who need proper assistance
and training. After sorting out employees based on the level of training they require, the
manager should guide and motivate them. The manager should ultimately help every
individual perform better in the current role and get him/her prepared to move to the next
level professionally.

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5. Standardization
The appraisal process is very common in all organizations but the strategies might differ
from one to another. Whatever the method the organization picks up, it should be well
defined. If performance is assessed frequently and appraisal is carried out either monthly or
at least once a quarter, the appraisal process is said to be how it should be. Appraisal process
is similar to an employment policy that must follow standard organization procedures.
Employees who go around the procedures ethically are identified and encouraged.

Performance Appraisal Process

Step 1: Establish performance standards

Performance standards are set to ensure achievement of departmental
goals and objectives and the organization’s overall strategy and
objectives. Standards are based on the position, rather than an
individual. In order to be clearly understood and perceived as
objective, standards should adhere to the same rules that apply to
goal-setting; that is, they should be “SMART:” specific, measurable,
achievable, relevant and timebound.

Step 2: Communicate performance standards

In order to be effective, performance standards must be clearly
communicated and understood to be expectations. Performance
standards assume that an individual is competent, so initial and
corrective training should be factored into the performance
management process. If there is a specific training period after which
an employee is assumed to be competent and performing to
standards, that should be communicated as well.

Step 3: Measure performance

Performance that is expressed in numeric terms—for example, cost, quantity, quality,
timeliness—is relatively easy to measure. Performance in the area of soft skills—for
example, communication, customer service and leadership—is more difficult to evaluate..

Step 4: Compare actual performance to performance standards

In this step of the appraisal process, actual performance is compared to the performance
standards. Documentation should highlight actions and results.

Step 5: Discuss the appraisal with the employee

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This is generally the step in the process that is the most difficult for managers and employees
alike and it can be a challenge to manage emotions and expectations. Even when
performance is strong, there can be differences of opinion on the next action. A significant
difference of opinion regarding performance can create an emotionally-charged situation. If
the manager is providing feedback and coaching on a regular basis, this shouldn’t be the case
To identify and prepare for differences of opinion, management can ask employees to
complete and submit a self-evaluation prior to the appraisal meeting. A key point to keep in
mind is that the manager’s ability to remain calm and civil will have a significant impact on
the employee’s confidence, motivation and future performance.

Step 6: Implement personnel action

The final step in the appraisal process is the discussion and/or implementation of any next
steps: a reward of some sort—a raise, promotion or coveted development opportunity—or
corrective action—a performance plan or termination. Note, however, that corrective action
that might help an employee achieve expectations shouldn’t be tabled until the next formal
appraisal. As performance gaps are identified, supervisors and managers should take the time
to identify why performance is not meeting expectations and determine whether the
employee can meet expectations with additional training and/or coaching

Performance Appraisal Methods

1. TRADITIONAL METHODS:
These are the old methods of performance appraisal based on personal qualities like
knowledge, capacity, judgment, initiative, attitude, loyalty, leadership, judgment etc.
The following are the traditional methods of performance appraisal:

a) Unstructured Method of Appraisal:

This is the simple method of performance appraisal. It is highly subjective in nature. Under
this method the appraiser has to describe his impressions about the employee under appraisal
in an unstructured manner. Sometimes rater has to list his comments specifically on qualities,
abilities, attitude, aptitude and other personal traits of the employees. This makes the method
highly subjective. Personal bias reflects through the impressions of the rater in his report.
b) Straight Ranking Method:
It is quite a simple and old method of performance appraisal. Under this method the
employee and his performance are considered as an entity. All the employees are evaluated
by the appraiser considering their performance of job as a base and ranks are given.This
method is also highly subjective and lacks fairness in assessing the real worth of an
employee. It becomes a difficult task when performances of a pretty large number of

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employees are to be assessed. It lacks a systematic procedure of performance appraisal. The
next method of paired comparison is an improvement over this method.
c) Paired Comparison Method:
This method is an attempt to improve upon the
simple ranking method. Under this method
employees of a group are compared with one another
at one time. If there is a group of five employees A,
B, C, D and E then A’s performance is compared
with that of B’s and a decision is taken as to whose
performance is better. Similarly A’s performance is
compared with C, D, E and decisions regarding
comparatively better performances are taken.
d) Man to Man Comparison Method:
This method was used during World War I by the American army. Under this method certain
factors are selected for analysis. The factors include leadership qualities, initiative etc. The
appraiser develops a scale for each factor. Personnel are compared to key men as regards one
factor at a time. This method is also known as the factor comparison method. The defect of
this method is that developing a scale is quite a tough and complicated task.
e) Grading Method:
Under this technique of performance evaluation certain categories of worth are determined in
advance and they are carefully defined. These selected and well defined categories include
grade ‘A’ for outstanding, ‘B’ for very good, ‘C’ for average, ‘D’ for poor etc. These grades
are based on certain selected features of employees such as knowledge, judgment, analytical
ability, leadership qualities, self expression etc. The actual performance of employees is
compared with the above grades and employees are allotted grades that speak for their
performance.
f) Graphic Rating Scale:
This is one of the most widely used performance evaluation techniques. The evaluator is
asked to rate employees on the basis of job related characteristics and knowledge of the job.
These can broadly be grouped as employee characteristics and employee contribution.It is a
standardized, quantitative method of performance appraisal. It is simple to understand and
use. The scores are tabulated indicating the relative worth of each employee. This method
has certain demerits. It is arbitrary and highly subjective in nature. It assumes all
characteristics are of equal importance for performance of all jobs.
g) Forced Choice Method:
This method was developed during World War II for evaluating the performance of
American army personnel. The evaluators have the tendency to rate the performance as high,
moderate or low and escape the important responsibility assigned to them. This method
requires more objective and least subjective assessment of the performance.The rating

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elements are predetermined statements divided equally into negative and positive relating to
efficiency and personal traits. The logic is that the statements are grouped with equal
importance. The evaluator is compelled to select from each group (usually two).
The statements may be the following:
1. Good work organizer.
2. Shows patience with slow learners.
3. Dishonest or disloyal.
4. Careful and regular.
5. Avoid work.
6. Hard working.
7. Cooperates with fellow workers.
8. Does not take interest in work.
From the above list of statements, favorable statements are marked plus and
unfavorable statements are marked zero. Under this method subjectivity of the
evaluator is eliminated if not completely.
h) Check List:
It is the simplest form of evaluation method. Under this method a list of Statements
describing the job related behavior of the employees is given to the evaluator. If the evaluator
perceives that the employee possesses a particular trait, the statement is checked i.e. ticked
and if he feels that the employee does not possess that quality he leaves it blank. He then
submits it to the human resource department where counting of the checks is carried out and
performance is assessed.
The example of checklist is given below:
1. Is the employee punctual?
2. Is he interested in his job?
3. Does he keep cool while working?
4. Does he respect his superiors?
5. Does he treat his subordinates well?
6. Does he maintain machines in order?
7. Does he follow orders without delay?
This method has some demerits. It suffers from the evaluator's bias. A separate
checklist is required for each job which increases the cost. It is also difficult to
provide due weightage to the particular characteristic of the employee.
i) Free Essay Method:
Under this method no quantitative approach is undertaken. It is an open ended appraisal of
employees. Evaluator describes in his own words what he perceives about the employees’
performance. He includes in his descriptions the knowledge, skill, interpersonal relations,
temperament, quality and cost control aspects, needs for future development etc. of the
employees.

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 j) Critical Incidents Method:
Under this method the performance of the worker is rated on the basis of certain events that
occur during the performance of the job i.e. the evaluation is based on key incidents. An
emphasis is laid on the behavior of the worker on the job. His behavior is observed as to
whether he becomes upset over work, resists, cooperates with fellow workers, suggests an
improvement in method of work etc. Various such behaviors are recorded by the supervisor
k) Field Review Method:
Under this method a supervisor is interviewed by a human resource expert from the human
resource department. The evaluator is equipped with test questions usually memorized by
him which asks to the supervisor. Supervisor is expected to give his opinion about the
subordinates such as his weakness and strength, outstanding ability, willingness to cooperate
etc. The evaluator records the details which are approved by the supervisor and these are kept
in the personal file of the employee.

Drawbacks of Traditional Method of Appraisal:

These methods are criticized for being subjective in nature. Under these methods the
performance appraisal is based on personal judgment of the appraiser who is not free from
personal prejudice and bias. The evaluator has not received adequate training in the job and
hence he is unable to evaluate the performance of others properly.
There are several weaknesses in these methods of performance appraisal which can be
counted as follows:

1. Halo Effect:
The error is committed when the evaluator allows one strong personal trait to influence his
evaluation. This is a halo effect tendency. The evaluator assigns the same ratings to all
aspects irrespective of employee’s performance. This defect gets detected on a factor scale.
The halo effect can be minimized if the evaluator judges the performance of all the
employees on one aspect and then all the employees on the second aspect and so on.

2. Leniency and Strictness:

The appraisers differ in their tendencies towards rating. Some are quite lenient and others are
stricter. These tendencies of the evaluator shadow their evaluation of employees. The lenient
evaluator assigns high scores to the evaluates while stricter assigns comparatively low scores
to the evaluates for their performance.

3. Central Tendency:
When the evaluator has insufficient information regarding the employee and his performance
and has no time to pay sufficient attention to the process of performance appraisal he may

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play safe and evaluate the performance of all the employees as average. This tendency is a
serious distortion in the performance appraisal system.
4. Miscellaneous Biases:
Showing of bias against employees by the evaluator on the basis of sex, religion, caste, race,
position is very common. This deters objective evaluation. The evaluator gets influenced by
the seniority of the member and evaluates him high. Some of the superiors want their
subordinates to not be rated high to surpass them.

2. MODERN METHODS
Modern methods are an improvement over the traditional methods. Modern methods are an
attempt to remove defects from old methods. The modern methods of judging the
performance of employees are developed. These modern methods are discussed as below.

a) Management by
Objectives (MBO):
Management by objectives
(MBO) is the appraisal method
where managers and
employees together identify,
plan, organize, and
communicate objectives to
focus on during a specific
appraisal period. After setting
clear goals, managers and
subordinates periodically
discuss the progress made to
control and debate on the feasibility of achieving those set objectives. This performance
appraisal method is used to match the overarching organizational goals with objectives of

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employees effectively while validating objectives using the SMART method to see if the set
objective is specific, measurable, achievable, realistic, and time-sensitive

Steps to implement a successful MBO program:

➔ Every manager must have 5-10 goals expressed in specific, measurable terms
➔ Manager can propose their goals in writing, which will be finalized after
review
➔ Each goal needs to include a description and a clear plan (list of tasks) to
accomplish it
➔ Determine how progress will be measured and how frequently (minimum
quarterly)
➔ List down corrective actions that will be taken if progress is not in accordance
with plans
➔ Ensure that goals at each level are related to the organizational objectives and
levels above/below
b) 360-Degree Feedback:
360-degree feedback is a multidimensional performance appraisal method that evaluates an
employee using feedback collected from the employee’s circle of influence, namely
managers, peers, customers, and direct reports. This method will not only eliminate bias in
performance reviews but also offer a clear understanding of an individual’s competence.

This appraisal method has five integral components like:

1. Self-appraisals
Self-appraisals offer employees a chance to look back at their performance and understand
their strengths and weaknesses. However, if self-appraisals are performed without structured
forms or formal procedures, it can become lenient, fickle, and biased.
2. Managerial reviews
Performance reviews done by managers are a part of the traditional and basic form of
appraisals. These reviews must include individual employee ratings awarded by supervisors
as well as the evaluation of a team or program done by senior managers.
3. Peer reviews
As hierarchies move out of the organizational picture, coworkers get a unique perspective on
the employee’s performance making them the most relevant evaluator. These reviews help
determine an employee’s ability to work well with the team, take up initiatives, and be a
reliable contributor. However, friendship or animosity between peers may end up distorting
the final evaluation results.
4. Subordinates Appraising manager (SAM)

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This upward appraisal component of the 360-degree feedback is a delicate and significant
step. Reportees tend to have the most unique perspective from a managerial point of view.
However, reluctance or fear of retribution can skew appraisal results.
5. Customer or client reviews
The client component of this phase can include either internal customers such as users of the
product within the organization or external customers who are not a part of the company but
interact with this specific employee on a regular basis.

Advantages of using 360-degree feedback:

● Increase the individual’s awareness of how they perform and the impact it has
on other stakeholders
● Serve as a key to initiate coaching, counseling, and career development
activities
● Encourage employees to invest in self-development and embrace change
management
● Integrate performance feedback with work culture and promote engagement
c) Assessment Center Method:
The concept of assessment center was introduced way back in 1930 by the German Army but
it has been polished and tailored to fit today’s environment. The assessment center method
enables employees to get a clear picture of how others observe them and the impact it has on
their performance. The main advantage of this method is that it will not only assess the
existing performance of an individual but also predict future job performance.

Advantages of the assessment center method:

- Enhance a participant’s knowledge, boost his/her thought process, and improve
employee efficiency

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 - Can be tailored to fit different roles, competencies, and business needs
- Offer an insight of the employee’s personality (ethics, tolerance, problem-solving
skill, introversion/extroversion, adaptability, etc.)
d) Behaviorally Anchored Rating Scale (BARS):
Behaviorally anchored rating scales (BARS) bring out both the qualitative and quantitative
benefits in a performance appraisal process. BARS compares employee performance with
specific behavioral examples that are anchored to numerical ratings.
The first step in BARS creation is generation of critical incidents that depict typical
workplace behavior. The next step is editing these critical incidents into a common format
and removing any redundancy. After normalization, the critical instances are randomized and
assessed for effectiveness. Remaining critical incidents are used to create BARS and evaluate
employee performance.

Advantages of using BARS:

● Enjoy clear standards, improved feedback, accurate performance analysis, and
consistent evaluation
● Eliminate construct-irrelevant variance in performance appraisal ratings by
emphasis more on specific, concrete, and observable behaviors
● Decrease any chance for bias and ensure fairness throughout the appraisal
process

Common drawbacks of BARS:

● High chance for subjectivity in evaluations
● Hard to make compensation and promotion decisions
● Time-consuming to create and implement
● Demands more from managers and senior executives
e) Psychological Appraisals:
Psychological appraisals come in handy to determine the hidden potential of employees. This
method focuses on analyzing an employee’s future performance rather than their past work.
These appraisals are used to analyze seven major components of an employee’s performance
such as interpersonal skills, cognitive abilities, intellectual traits, leadership skills,
personality traits, emotional quotient, and other related skills.
Qualified psychologists conduct a variety of tests (in-depth interviews, psychological tests,
discussions, and more) to assess an employee effectively. However, it is a rather slow and
complex process and the quality of results is highly dependent on the psychologist who
administers the procedure.

Advantages of psychological appraisals:

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 ● Extract measurable, objective data about not just an employee’s performance
but also potential
● Can be deployed easily when compared with other performance appraisal
methods
● Offer introverted or shy employees a platform to shine and prove their
potential
f) Human-Resource (Cost) Accounting Method:
Human resource (cost) accounting method analyses an employee’s performance through the
monetary benefits he/she yields to the company. It is obtained by comparing the cost of
retaining an employee (cost to company) and the monetary benefits (contributions) an
organization has ascertained from that specific employee.
When an employee’s performance is evaluated based on cost accounting methods, factors
like unit-wise average service value, quality, overhead cost, interpersonal relationships, and
more are taken into account. Its high-dependency on the cost and benefit analysis and the
memory power of the reviewer is the drawback of human resources accounting methods.

Advantages of the human cost accounting method:

● Effectively measure the cost and value that an employee brings to the
organization
● Help identify the financial implications that an employee’s performance has
on the organization’s bottom line
Implementation of human resource cost accounting method:
● Identify the gap between the market and the current package of an employee
● Determine the monetary and non-monetary value that an employee brings to
the table
● List down the things that an employee achieved in the review period (increase
in the subscriber count, improvement in revenue, number of new deals won,
etc.,)

Construction of BARS
A BARS is a tool for evaluating employees in a defined set of performance dimensions by
comparing their behaviors with specific behavior examples that anchor each performance
level, usually on a five-, seven- or nine-point scale.

1. Write critical incidents (CIT)

Ask Jobholders or supervisors to describe behavior (critical incidents) that have a significant
impact on the performance.

2. Develop performance dimensions

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It involves grouping the behaviors in different
dimension sets, then define each dimension.

3. Recheck
Recheck refers to verifying these groupings by a
different group of jobholders and supervisors.

4. Scale the critical incidents

This second group then rates how effective or
ineffective these behaviors affect the
performance on a scale.

5. Develop a final instrument

About 7-8 of these dimensions are chosen as
behavioral anchors which would then be used across organizations to evaluate.

Pros and cons of using a Behaviorally Anchored Rating Scale

Most industry-leading companies have moved toward continuous feedback. However, they
still need annual reviews to create metrics for differentiating among employees for pay
increases and internal promotions. They need a structure that can support strength-based
coaching through the year and serve as a summary review at the end of the period. BARS can
do both functions well and you can use it in combination with other feedback methods.

Advantages of BARS
● Validity: Jobholders and their supervisors who know the job develop the behavior
descriptions. Their expertise creates construct validity, which means BARS measure
what they are intended to measure. For example, if you evaluate whether a
customer-facing employee treats visitors well, you can specify that the expected
performance is greeting them with a smile. The evaluation matches the operational
definition. Their content validity means they represent actual behaviors of good
customer service.
● Easy to use: Because behaviors are well-defined, managers and their employees
understand them without extensive explanations or training. As a result, managers
don’t have to spend hours writing long narratives to justify ratings. Behaviors are
present, or they are not.
● Clear standards: BARS create mutual understanding between managers and their
employees on what they are reviewing and opportunities for improvement. That
understanding facilitates a developmental discussion.

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 ● Consistent: Because behavioral statements are simple and straightforward, there is
little variance regardless of who is the assessed and the assessor.
● Individualized: There are commonalities among roles across the organization, but
each position in the organization will have a unique set of role-related behaviors.
● Impartial: The focus is on behavior, not the value of the person being evaluated,
which enables frank, open discussions.
Disadvantages of BARS
● Complex implementation: Although many roles will have similarities in soft skills,
citizenship, and leadership behaviors, every role will have different behavioral
indicators that require analysis. You must develop, review, and calibrate every
performance level for each behavior. Behaviorally Anchored Rating Scale is easier to
maintain in businesses like retail, insurance, or contact centers with many similar
roles.
● Expensive: Developing a BARS requires job analysis and advanced skills to review
behavioral statements written by subject matter experts. You may need an industrial
psychologist or consulting company’s services. Experienced workers, supervisors, and
HR staff must be away from their jobs to write down the behaviors.
● Time-consuming: Especially in businesses with similar roles, it can be a burden on
managers to discuss the performance of 60 or more behaviors with each individual. In
industries like contact centers, first-level managers often have a span of control of up
to 30 workers.
● Frequent updates: In today’s workforce, where skills have a short half-life, you must
update behaviors frequently. In some cases, roles can change with every job posting.
● Leniency bias: BARS removes or reduces many bias errors, but it doesn’t eliminate
leniency errors. The assessor must focus on each behavior in the review.

Performance Appraisal of Bureaucrats

Performance management in government is the managerial activity necessary to promote
well-performing policy management and service delivery

This section looks at different approaches to performance management in government in a

few select countries.
a. Public Service Agreements (United Kingdom): Public Service Agreements (PSAs)
outline the objectives for the agency or department regarding the services to be delivered as
agreed between the department and the Prime Minister’s Delivery Unit. PSAs set out targets
for achieving the strategic objectives for a medium time frame of three years.
b. Strategic Plans (United States of America and South Africa): The strategic plan
approach for performance management is prevalent in South Africa and the United States. In
South Africa, the departmental objectives are captured in three years strategic plans, which

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are then converted into operational work plans and performance agreements. Strategic plans
in the USA are developed for five years outlining the policy and operational objectives.
c. Pluri-Annual Planning Programme (Brazil): This divides all governmental objectives
into about 400 programmes, each of which has its own programme manager who is a senior
civil servant accountable for the results. The targets of the program become the performance
agreement for the civil servant.
d. Balanced Scorecard (New Zealand & Australia): These countries have adopted the
Balanced Scorecard approach, which is a set of measures that are directly linked to the
organization’s strategy. The score card allows managers to evaluate financial performance,
customer knowledge, internal business processes, and learning and growth.
e. Performance Contracts (Kenya): Similar to PSAs, these are also agreements between the
government and public agency, setting targets, besides developing charters to communicate
the service standards. There are incentives for achieving the targets.

Aims of Performance Management

Performance management is a corporate management tool that helps managers monitor and
evaluate employees' work. Performance management's goal is to create an environment
where people can perform to the best of their abilities and produce the highest-quality work
most efficiently and effectively.
Performance management is about aligning individual objectives to organizational objectives
and ensuring that individuals hold the corporate core values. It provides for expectations to
be defined in terms of role responsibilities and accountabilities expected to do, skills
expected to have and behavior expected to be.
The overall aim of performance management is to establish a good culture in which
individuals and teams take responsibility for the improvement of their own skills and their
organizations.
Specifically, performance management is all about achieving the individual objectives
according to the organizational objectives and ensuring that every individual is working
towards it.
Another aim is to develop the capacity of individuals to meet the expectations of the
organization. Mainly, performance management is concerned with the support and guidance
for the people who need to develop.
The major objectives / aims of performance management are discussed below:

● To enable the employees towards achievement of superior standards of work

performance.
● 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.

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 ● Boosting the performance of the employees by encouraging employee empowerment,
motivation and implementation of an effective reward mechanism.
● 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
transparent feedback for improving employee performance and continuous coaching.
● Identifying the barriers to effective performance and resolving those barriers through
constant monitoring, coaching and development interventions.
● Creating a basis for several administrative decisions strategic planning, succession
planning, promotions and performance based payment.
● Promoting personal growth and advancement in the career of the employees by
helping them in acquiring the desired knowledge and skills.

Purpose of Performance Management

A performance management system consists of the processes used to identify, encourage,
measure, evaluate, improve, and reward employee performance at work. Employees’ job
performance is an important issue for all employers. However, satisfactory performance does
not happen automatically; therefore, it is more likely with a good performance management
system.
A performance management system serves a two fold purpose: (1) to improve employees
work performance by helping them realize and use their full potential in carrying out their
firm's missions and (2) to provide information to employees and managers for use in making
work related decisions. More specifically, performance management system serve the
following purposes:

1. Feedback Mechanism:
Appraisals provide feedback to employees
therefore serve as vehicles for personal and
career development. Performance
appraisals must convey to employees how
well they have performed on established
goals. It’s also desirable to have these goals
and performance measures mutually set
between the employees and the supervisor.
Without proper two-way feedback about an
employee’s effort and its effect on
performance, we run the risk of decreasing
his or her motivation.

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 2. Development Concern:
Once the development needs of employees are identified, appraisals can help establish
objectives for training programs. It refers to those areas in which an employee has a
deficiency or weakness, or an area simply could be better through effort to enhance
performance. For example, suppose a college professor demonstrates extensive knowledge in
his or her field and conveys this knowledge to students in an adequate way. Although this
individual’s performance may be satisfactory, his or her peers may indicate that some
improvements could be made. In this case, then, development may include exposure to
different teaching methods, such as bringing into the classroom more experimental exercises,
real world applications, internet applications, case analysis, and so forth

3. Documentation Concern:
A performance evaluation system would be remiss if it did not concern itself with the legal
aspects of employee performance. The job related measure must be performance supported
when an Human Resource Management (HRM) decision affects current employees. For
instance, suppose a supervisor has decided to terminate an employee. Although the
supervisor cites performance matters as the reason for the discharge, a review of this
employee’s recent performance appraisals indicates that performance was evaluated as
satisfactory for the past two review periods.

4. Diagnoses of Organizational Problems:

As a result of proper specifications of performance levels, appraisals can help diagnose
organizational problems. They do so by identifying training needs and the knowledge,
abilities, skills, and other characteristics to consider in hiring, and they also provide a basis
for distinguishing between effective and ineffective performers. Appraisal therefore
represents the beginning of a process, rather than an end product.

5. Employment Decisions:
Appraisals provide legal and formal organizational justification for employment decisions to
promote outstanding performers; to weed out marginal or low performers; to train, transfer,
or discipline others; to justify merit increases ( or no increases); and as one basis for reducing
the size of the workforce. In short, appraisals serve as a key input for administering a formal
organizational reward and punishment system.

Employee Engagement and Performance Management

Performance management and employee engagement are often treated very differently as HR
responsibilities. Understandable as they feel like almost polar opposites, particularly if you
have a traditional mindset when it comes to HR.

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But highly engaged employees consistently outperform their less engaged colleagues in all
measures, including productivity.
With a clear positive link between them, it makes sense that a successful approach to
performance management should be one that takes employee engagement into account.
Despite the fact that we’re about to make the case for why these two approaches should be
linked, performance management and employee engagement differ in some key respects that
have a lot to do with the goals each approach originates from.

Performance management: The goal of performance management is to improve individual

performance and overall productivity. This traditionally takes the form of an assessment that
highlights ways that the employee can improve, and ideally, their personal strengths too.

Employee engagement: Engagement is the employee’s sense of commitment and

attachment to their job, their colleagues, and the business as a whole, including its goals.
Employee engagement uses ongoing, two-way feedback that emphasizes the needs and
motivations of employees, rather than just their output. While performance management is
about making employees be more productive, a byproduct of high engagement is the actual
motivation for employees to strive for better performance.

How to combine engagement and performance management

Check in with employees regularly: The most important aspect of regular communication is
consistency. Employee check-ins don’t need to take much time at all, and can enable you to
exchange feedback and respond to problems in a much timelier manner. Plus, by having an
ongoing feedback process, both you and the employee will have a much more solid idea of
what to expect from performance review meetings, which helps make them a lot less
daunting.

❖ Use recognition and 360° feedback: The fact that so many employees in Vine’s
study weren’t getting enough praise is quite telling. But another finding of theirs that
we found particularly interesting is that almost two thirds of employees want more
feedback from their colleagues. Implementing 360° feedback and recognition
platforms gives employees the tools to help manage their performance together, and
praise each other’s hard work. This helps to build social bonds that play a key role in
engagement.

❖ Discuss personal growth and career goals: When it’s time to discuss ways to
improve, it’s important to address them as opportunities for growth, rather than flaws
to be corrected. Showing employees that their career development matters to you is a
great way of inspiring loyalty and cutting turnover. If they want to advance in the

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 company, you can establish a shared understanding of the skills they need to get there,
and how they can obtain them.

❖ Support workplace education: Workplace education initiatives are extremely useful,

whether they’re training courses, employee mentorships or anything else. It’s one
thing to be able to help your employees set practical goals for personal development.
It’s another entirely if you can directly help them to achieve those goals.

❖ Take a strengths-based approach: One of the best things for engagement is when
our strengths are recognised and put to good use. It makes you feel valuable, which
helps you form an attachment to your organization. A good way to cut out the
punitive feeling of some performance review methods is to focus on developing our
employee’s strongest areas.

Principles of Performance Management

Performance management can bring quality and effectiveness only when certain basic and
fundamental principles are followed. These include:

Transparency
The system should be transparent, free from partiality, bias and discrimination among the
employees. If not, the base of the system itself will not be strong to build anything above
that. For example, work allocation, promotions, transfers, incentives, and bonus – if based on
Performance management, then the system should be transparent and gives no room for
employees to complain.

Employee Empowerment
Participative and empowered employees take the responsibility well. They develop the
belongingness towards the organization. Recognizing and rewarding the employees brings
them together to work and achieve.

Organizational Values and Culture

Fair treatment and ensuring due satisfaction to the employees, empathy and trust, respect and
treating people equally – are all the foundations for the development of the Culture and
values of the organization, which reflects in overall output.

Amicable Workplace
A work environment which attracts the employee rather than expecting the weekend to be
away from the workplace is the principle. The workplace should be congenial, warm and

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amicable to the employees. This helps in improving the quality of work life and balancing
the work life.

More continuous, self-directed learning for all - less focus on training catalogs
Anyone who is supposed to take over responsibility and actively participate in thinking and
designing, needs the necessary skills and relevant knowledge. However, as knowledge
becomes obsolete more and more quickly and competence requirements are constantly
increasing, continuous learning and further development must be given a far greater priority.
Modern performance management relies on strong self-control and multiple learning
opportunities and moves away from the classic training catalog.

More focus on value creation - less actionism

Traditional cascading of goals has so far usually been accompanied by a large number of
measures which - once decided - have been successively processed and rarely put to the
effectiveness test again. In the future, the value created for the company should be the
guiding principle for action, and this should be accompanied by the courage to remove
activities from the list that have not been identified as creating value.

More regular, multi-perspective feedback - fewer annual performance reviews

If you want to develop yourself continuously, you need regular, honest feedback from the
people who can best assess the effects of your own behavior. And this is not always just the
manager, but often the team colleagues with whom the company is working particularly
closely, or even the customer. Ideally, feedback should become daily practice and go in all
directions: From bottom to top, from top to bottom, collegially and from the customer's
perspective.

Overview of Performance Management as a System

A performance management system is a mechanism for tracking the performance of

employees consistently and measurably. It allows the company to ensure that employees and
departments across the organization are working effectively towards achieving the business’
strategic goals. Successful businesses gain an advantage from having employees better
aligned with corporate goals.
A performance management system is a continuous methodical process by which the human
resources arm of a company makes personnel participatory in advancing the effectiveness of
the company, by achieving the stated vision, mission, and objectives of the organization.
Performance management encapsulates key human resource functions like frequent
communication, employee training for improved performance, acknowledgment of good

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work, presentation of benefits for improved performance, goal-setting, continuous progress
review, and real-time feedback

An effective performance management system is one in which the following are done:

● The performance management cycle is continuous and not annual

● Leadership, executive, and upper-level management buy-in to performance
management has been secured
● Making certain verbal performance exchanges and reviews are significant and not just
routine
● Verifying your managers, are both willing and capable of delivering result-oriented
performance management on a daily basis
● Utilizing user-friendly performance management software that grants you visibility of
performance management activity

Purpose of a Performance Management System

● To improve the company profit margin: Performance management improves

business performance by reducing staff turnover which helps to boost the company
profit margin thus generating great business results.
● To guide personnel along a suitable career path: In line with best practices
worldwide for performance management, personnel in a supervisory role are expected
to guide the staff under them along a clearly defined and progressive career route.
● To furnish staff with valuable progressive feedback: Prompt real-time feedback
makes performance management systems run by HR more engaging and proactive.
● To ensure staff attain their SMART goals: Company staff can only attain goals set
for them and surpass expectations when they are absolutely clear about what exactly
is expected of them. Goals that are regularly set, that are short-term, and which are
frequently discussed are often more effective.
● To ensure employee goals relate to and advance organizational objectives:
Human resources employ performance management systems to aid staff in seeing the
nexus between their individually assigned goals and the overall organizational
strategy. This gives the meaning and purpose employees seek in their careers.

Dimensions of Performance Management,

Result and Output:
The most acceptable and measurable dimension of performance is result and output. It
describes the conditions of inputs which include raw material, working conditions, process
capabilities and talent of employees in the final form of product or service. It is necessary to

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plan all the performance activities in a scientific and systematic manner so that the desired
result or output may be obtained.

Input:
This dimension deals with the activities to be accomplished by the employee. Performance
can be achieved if the nature of inputs can be managed without mistake, because
performance is a function of three sets of factors – ability, motivation and organizational
support. If any of these three factors is less, the performance is poor.
Time:
Time is a precious and very important dimension of performance. In the current scenario of
the world, the performance management is time bound, otherwise the survival of the
organization is not possible in the future. Performance of an employee in relation to a given
role during a particular period of time under the set of circumstances operating at that point
of time. Therefore, time may become the target

Focus:
Performance also has a focus dimension. For example in case of sales, profits and new areas.
Focus means attention, not only on your own activities but should also keep close watch on
related activities.

Quality:
‘Quality is not a destination but a journey’. Quality refers to doing the things right from the
first time rather than making and correcting mistakes in order to achieve total customer
satisfaction. It means quality is conformance to customer requirements, not goodness. Higher
is the quality greater is the satisfaction of customers. It is the responsibility of each and every
employee as well as management to build a quality standard which provides reasonable
customer satisfaction at economical cost. Quality is the core dimension of performance
management

Cost:
The ultimate principle of purchasing is the low cost with best quality. Therefore cost
effectiveness is another dimension of performance management. It implies the capacity of a
business unit to produce a given commodity at a lower cost through more effective utilization
of existing resources. It is the process of cost reduction by improving efficiency of
operations.
Output:
Output relationships and analysis- It is relevant and essential to understand the input-output
relationships and analysis. The purpose of input-output analysis is to find out the
interdependencies and complexities of the economy in order to determine the conditions for

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maintaining balance between demand and supply. It describes the inputs required to produce
the outputs of different sectors of the economy. It also involves the study of the exchange of
goods and services among industries.

MBO
Management by objectives (MBO) is a strategic management model that aims to improve the
performance of an organization by clearly defining objectives that are agreed to by both
management and employees. According to the theory, having a say in goal setting and action
plans encourages participation and commitment among employees, as well as aligning
objectives across the organization.
Management by objectives (also known as management by planning) is the establishment of
a management information system (MIS) to compare actual performance and achievements
to the defined objectives. Practitioners claim that the major benefits of MBO are that it
improves employee motivation and commitment and allows for better communication
between management and employees.
This is one of the best methods for the judgment of an employee's performance, where the
managers and employees set a particular objective for employees and evaluate their
performance periodically. After the goal is achieved, the employees are also rewarded
according to the results. This performance appraisal method of Management by Objectives
depends on accomplishing the goal rather than how it is accomplished.

Need for Management by Objectives (MBO)

● The Management by Objectives process helps the employees to understand their
duties at the workplace.
● KRAs are designed for each employee as per their interest, specialization and
educational qualification.
● The employees are clear as to what is expected out of them.
● Management by Objectives process leads to satisfied employees. It avoids job
mismatch and unnecessary confusions later on.
● Employees in their own way contribute to the achievement of the goals and objectives
of the organization. Every employee has his own role at the workplace. Each one feels
indispensable for the organization and eventually develops a feeling of loyalty
towards the organization. They tend to stick to the organization for a longer span of
time and contribute effectively. They enjoy the workplace and do not treat work as a
burden.
● Management by Objectives ensures effective communication amongst the employees.
It leads to a positive ambience at the workplace.
● Management by Objectives leads to well defined hierarchies at the workplace. It
ensures transparency at all levels. A supervisor of any organization would never

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 directly interact with the Managing Director in case of queries. He would first meet
his reporting boss who would then pass on the message to his senior and so on.
Everyone is clear about his position in the organization.
● The MBO Process leads to highly motivated and committed employees.
● The MBO Process sets a benchmark for every employee. The superiors set targets for
each of the team members. Each employee is given a list of specific tasks.

Advantages of Management by Objectives

1 . Management by objectives (MBO) is a result-oriented process and focuses on setting and
controlling goals, and encourages managers to do detailed planning.
2. Both the manager and the subordinates know what is expected of them and hence there is
no ambiguity or confusion.
3. The managers are required to establish measurable targets and standards of performance
and priorities for these targets. In addition, the responsibilities and authority of the personnel
is clearly established.
4. It makes individuals more aware of the company goals. Most often the subordinates are
concerned with their own objectives and the environment surrounding them. But with MBO,
the subordinates feel proud of being involved in the organizational goals. This improves their
morale and commitment.
5. Management by objectives (MBO) often highlights the area in which the employees need
further training, leading to career development.
6. The system of periodic evaluation lets the subordinates know how well they are doing.
Since MBO puts strong emphasis on quantifiable objectives,the measurement and appraisal
can be more objective, specific and equitable.
7. It improves communication between management and subordinates.

Disadvantages of Management by Objectives

1. MBO can only succeed if it has the complete support of the top management.
2. Management by Objectives (MBO) may be resented by subordinates. They may be under
pressure to get along with the management when setting goals and objectives and these goals
may be set unrealistically high. This may lower their morale and they may become
suspicious about the philosophy behind MBO.
3. There is considerable paperwork involved and it takes too much of the manager’s time.
Too many meetings and too many reports add to the manager’s responsibility and burden.
Some managers may resist the program because of this increased paperwork.
4. The emphasis is more on short-term goals. Since the goals are mostly quantitative in
nature, it is difficult to do long-range planning because all the variables affecting the process
of planning cannot be accurately forecast due to the constantly changing socio-economic and
technological environment which affect the stability of goals.

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5. Most managers may not be sufficiently skilled in interpersonal interaction such as
coaching and counseling, which is extensively required.
6. The integration of the MBO system with other systems such as forecasting and budgeting
etc., is very poor. This makes the overall functioning of all systems more difficult.
7. Group goal achievement is more difficult. When the goals of one deportment depend on
the goals of another department, cohesion is more difficult to obtain. For example, the
production department cannot produce a set quota if it is not sufficiently supplied with raw
materials and personnel.
Suggestions for Improving the Effectiveness of MBO
1. It is important to secure top management support and commitment. Without this
commitment, MBO can never really be a success. The top managers and their
subordinates should all consider themselves as players of some team. This means that
the superiors must be willing to relinquish and shore the necessary authority with
subordinates.
2. The objectives should be clearly formulated, should be realistic and achievable. For
example, it is not realistic for the R&D department of an organization to set a goal of,
say, 10 inventions per year. These goals should be set with the participation of the
subordinates. They must be properly communicated, clearly understood and accepted
by all. MBO works best when goals are accepted.
3. MBO should be on overall philosophy of management and the entire organization,
rather than simply a divisional process or a performance appraisal technique. MBO is
a major undertaking and should replace old systems rather than just being added to it.
4. The goals must be continuously reviewed and modified, as the changed conditions
require. The review technique should be such that any deviations are caught early and
corrected.
5. All personnel involved should be given formal training in understanding the basics as
well as the contents of the programme. Such education should include as to how to set
goals, the methods to achieve these goals, methods of reviews and evaluation of
performance and provisions to include any feedback that may be given.
6. Management by Objectives (MBO) system is a major undertaking based upon sound
organizational and psychological principles. Hence it should be totally accepted as a
style of managing and should be totally synthesized with the organizational climate.
All personnel involved must have a clear understanding of their role authority and
their expectations. The system should be absorbed totally by all members of the
organization.

Performance Appraisal - Performance Management differences.

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Performance management Performance appraisal

Performance management is about actually Performance appraisal evaluates the actual

helping an employee to develop and increase his performance of the employee, but it does not
performance and productivity focus on the employee’s performance
productivity.

Performance management looks at an Performance appraisal evaluates the employee’s

employee’s performance keeping in mind the performance based on how he has performed in
present and the future. the immediate past.

It proactively manages an employee’s Performance appraisal only looks at the

performance and ensures that the employee has employee’s performance objectively for the year
accomplished all the goals, vision, mission and and gives a final feedback to the employee.
the core values of the organization

Performance management has a holistic Performance appraisal is individualistic in

approach that evaluates the relationship between nature and pertains to the employee and his past
the employee and the organization performance.

Performance management is strategic in the A performance appraisal system is operational

sense that it is constantly measuring an because it follows certain protocol for
employee’s performance and formulating new performance, and it focuses only on the result of
strategies for the employee’s development the employee’s performance.

Performance management is very dynamic Performance appraisals are very linear in terms
because it involves a lot of dialog between the of the communication because it has a very top
employee and the senior managers. There is down approach towards employee performance.
more room for discussion in performance There is a discussion that takes place only after
management. the performance appraisal process.

It is future oriented keeping in mind the it is very retrospective in the sense that it looks
strategies required for maintaining the employee back on past events and situations. It looks at an
performance for the next year. Performance employee’s performance over a period.
management finds ways to improve employee Performance appraisal is very past oriented.
performance.

Performance management is a continuous Performance appraisal system facilitates

ongoing process by giving real time instant performance appraisals only once or twice a
performance reviews. year.

Performance management has a qualitative and Performance appraisal on the other hand, has a
quantitative approach in the sense it has ratings quantitative approach towards an employee’s
and more continuous feedback. performance.

Performance management is flexible in terms of Performance appraisal is usually rigid because it

keeping in mind the growth of the organization. is only confined to an employee’s past
performance. It has little to do with his growth

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UNIT 2: Overview of Performance Management Process

Performance Management
Performance management involves measuring, reporting and managing progress – from the
individuals who work for a company, right up to the organization as a whole – with the aim
of improving performance. Performance Management builds a communication system
between Manager and an employee that occurs throughout the year, in support of
accomplishing the strategic objectives of the organization.Performance management is an
important aspect in HRM. It is used to create a work environment where people are
motivated to provide their best performance and do quality work.
Examples of performance management processes or tools include performance appraisals,
key performance indicators (KPIs) and management dashboards. Essentially, performance
management is what organizations do to become more successful and stay ahead of their
competitors.

Definition

According to Walters “The process of ‘Directing and supporting employees to work as

effectively and efficiently as possible in line with the needs of the organization”

Performance Management is continuous and systematic approaches to achieve organizational

business goals by streamlining the employee performance and efforts to match the set goals
efficiently.

The objectives of the performance management :

● It enables the employee to achieve the work performance of set standards
● It helps to identify the skills and knowledge required to perform a job efficiently.
● It is very important factor to motivate employees and boost employee empowerment
● It provides a communication
● channel between team and supervisor. It makes the goal setting process more
transparent.
● It identifies the issues which lead to low performance and also resolve the issues by
providing suggestions about development interventions.
● It provides data for several important decisions such as promotions, strategic
planning, succession planning and performance based compensation

Importance of performance management system:

● Performance management system helps in reducing conflicts among peers and the
subordinates and thus helps in improving the performance.

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 ● All the employees including supervisors and managers would be highly motivated.
● It helps to improve the organizational performance and helps in retaining employees
and improving their productivity.
● Motivated employees would be more loyal and thus management will have valuable
employees
● Performance management system helps in achieving job satisfaction
● It provides ample learning opportunities and helps in the career growth of the
employees.
● The employees will grow in maturity and responsibility if their efforts are judged
● An employee who gives low output can be spotted and dismissed with more certainty.
Similarly high performing candidates can be rewarded which would be more fair and
accurate.

Performance Management Process & Performance Management Cycle at a Glance

Performance Management Process

The performance management process is a collaborative, communication-based process
where employees and management work together to plan, monitor and review the employee’s
objectives, long-term goals, job trajectory and comprehensive contribution to the company.
The steps in the performance management process can be broken down into four broad
categories: Planning, coaching, reviewing and rewarding. Each step is equally important, and
together form the backbone of a company’s performance management process.

1. Planning : This stage entails setting employees’ goals and communicating these goals
with them. While these goals should be disclosed in the job description to attract quality
candidates, they should be communicated once again when the candidate becomes a new
hire. Depending on the performance management process in your organization, you may
want to assign a percentage to each of these goals to be able to evaluate their achievement.

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 2. Monitoring : In this phase, managers are required to monitor the employees performance
on the goal. This is where continuous performance management comes into the picture. With
the right performance management software, you can track your team's performance in
real-time and modify and correct courses whenever required.
3. Developing : This phase includes using the data obtained during the monitoring phase to
improve the performance of employees. It may require suggesting refresher courses,
providing an assignment that helps them improve their knowledge and performance on the
job, or altering the course of employee development to enhance performance or sustain
excellence.
4. Rating: Each employee's performance must be rated periodically and then at the time of
the performance appraisal. Ratings are essential to identify the state of employee
performance and implement changes accordingly. Both peers and managers can provide
these ratings for 360-degree feedback.
5. Rewarding: Recognizing and rewarding good performance is essential to the
performance management process, as well as an important part of employee engagement.
You can do this with a simple thank you, social recognition, or a full-scale employee rewards
program that regularly recognizes and rewards excellent performance in the organization.

Performance Management Cycle

A performance management cycle is a continuous improvement process for planning,
checking, and measuring employee performance. It works in a way that meets the overall
goal of performance management: aligning the success of employees with the success of an
organization

1. Planning
The first step of the performance management process is Planning.
a. The defining stage
The performance management process begins with the planning stage.
HR and management need to define the job itself, including a comprehensive description,
long and short-term goals, identify key objectives and develop a clear metric for how those
objectives and goals will be assessed.
Goals should be clear, done in the SMART format (specific, measurable, attainable, relevant,
time-based) and clear performance standards should be set.
b. The feedback stage
Once management has completed the defining stage, employees should have the opportunity
to give input on this material. They are the one doing their job and will have a key insight
into what skills, competencies and goals will best assist the company to achieve
organizational goals.
c. The approval stage

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Management and employees both agree to the definition of the role, goals and objectives.
By making this first step of the performance management process collaborative, management
sets the stage for the process as a whole to be collaborative, and the employee feels that they
are involved in goal setting - an important thing, as evidenced by the Gallup study.

2. Coaching
a. Organize meetings on a timely, regular basis
Once the parameters of the job and objectives for the future have been set, the next step of
the performance management process begins.
The coaching process is extremely important and must be done on a regular basis. Meetings
should be at least quarterly, although monthly meetings are the ideal.
b. Provide necessary training, coaching and solutions
These meetings should focus on solutions and coaching opportunities, rather than punitive
measures for lackluster performance.
If accountability is made into a negative, then employees will avoid it rather than being
honest about where they are struggling.
In some cases, management training in this area can be very helpful to an organization.
c. Solicit feedback on both sides
Management should be able to give - and receive - honest feedback and work with
employees rather than adopting a combative stance. The ability to give actionable feedback is
important here.
d. Revisit objectives as necessary
As the performance management process continues, management should revisit objectives to
see if adjustments should be made, as well as pay attention to career development
opportunities for their employees.
This step involves reviewing the overall performance of the employee, how well the process
itself worked, and it also includes the reward - which is an extremely important part of the
overall process.

3. Reviewing
a. Reviewing employee performance
At the end of the yearly performance management cycle, there should be an employee
review, which is sometimes also called a performance appraisal. Typically, these are held
once a year, to look at how well the employee performed over that span of time.
There should be a clear record from previous check-ins to show the employee’s progress
throughout the year. The monthly check-ins are to help the employee with problem-solving,
adjusting goals and other future-looking tasks. This performance review is the only step that
looks backward, to assess the behavior of the past year.
b. Reviewing the performance management process

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At this stage, it is important for both management and employees to look over the previous
year and see how well the performance management process worked.
Questions that can be asked are:
● Were personal and organizational objectives met? If not, why?
● What challenges did the employee face?
● What training would help the employee perform better?\
● How did management feedback help? If not, why?
● How could the process be made better?
● Was the time spent on this process effectively?
c. Reviewing overall goal completion
Of course, one of the main questions to answer is ‘did the employee reach their goals?’ How
well did the employee succeed at the tasks given to them throughout the year?
It is important to look at both smaller and larger goals, as this can give an indication to
problem areas where training or interventions can be applied.
d. Giving actionable feedback
A key part of the review is to give and receive feedback.
Management should give actionable feedback for the employee so that they know areas
where they can improve future performance.
The employee should also be invited to give feedback on the process, and how management
can do better on their end.

4. Action
The last step in the performance management process is Action.
a. Reward and recognition
The last step of the performance management process is the reward and recognition.
This step is absolutely key - employees will not stay motivated if they are given no reason to.
This does not necessarily have to be monetary, although it likely will include monetary
compensation. Other rewards could be new projects, company-wide recognition, time off, or
leadership opportunities.
b. Setting the stage for next year’s performance management cycle
The end of the performance management cycle gives management and employees one last
chance to offer feedback on the process as a whole and asks for thoughts and feedback for
the planning stage for the next year’s cycle.

Deming’s Model

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William Edwards Deming is one of the most influential industrialists of the 20th century. He
is responsible for introducing the quality systems that drove the industrialisation of Japan
following the Second World War, turning it from a backwater humiliated and destroyed at the
the end of the war, into a modern leader of technology and innovation by the end of the 20th
century. This came about with Deming’s philosophy, pushing quality ahead of production
which was taken to heart by the leaders of Japanese industry and developed into some of the
the most successful production systems, most famously the Toyota production system.

The Deming Cycle, or PDCA, is one of the first formalized approaches to utilize an iterative
approach to improving processes, and it still serves as a fundamental tool today for
continuous improvement.The Deming Cycle (or Plan-Do-Check-Act (PDCA)) is a four-step
iterative technique used to solve problems and to improve organizational processes.
● Plan: In this step, you investigate the current situation in order to fully understand the
nature of the problem being solved.​Be sure that you develop a plan and a framework
to work from, and specify the
desired outcomes and results.
● Do: To identify the real problem
by analyzing the data and defining
and implementing a solution plan.
The PDCA cycle focuses on
smaller, incremental changes that
help improve processes with
minimal disruption. You should
start with a small-scale pilot so as
not to disrupt the organization
should the solution not work as
expected.
● Check: To monitor the effect of
the implementation plan and find countermeasures if necessary to further improve the
solution. You should do a check during implementation to make sure that the project’s
objectives are being met. Do a second check upon completion to allow for successes
and failures to be addressed, and for future adjustments to be made based on lessons
learned.
● Act: Implement your solutions and recommendations. Decide if the solution is
effective, and either integrate it into standard work practices or abandon it. If you
abandon it, you should ask what you’ve learned from the process and restart the cycle.

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Deming codifies his view on how organizations work into his system of profound
knowledge:
The system of profound knowledge is made up of four components through which the world
is looked at simultaneously. These components function as lenses
through which we see, and all four are related to each other:
● Appreciation for a system,
● Knowledge about variation,
● Theory of knowledge, and
● Knowledge of psychology

In more detail the four elements:

Appreciation of a System: A business is a system. Action in one
part of the system will have effects in the other parts. We often
call these “unintended consequences.” By learning about systems
we can better avoid these unintended consequences and optimize
the whole system.
Knowledge of Variation: One goal of quality is to reduce variation. Managers who do not
understand variation frequently increase variation by their actions. Critical to this is
understanding the two types of variation — Common cause which is variation from the
system and Special cause which variation from outside the system
Theory of Knowledge: There is no knowledge without theory. Understanding the difference
between theory and experience prevents shallow change. Theory requires prediction, not just
explanation. While you can never prove that a theory is right, there must exist the possibility
of proving it wrong by testing its predictions.
Understanding of Psychology: To understand the interaction between work systems and
people, leaders must seek to answer questions such as: How do people learn? How do people
relate to change? What motivates people?
Deming’s theory of profound knowledge is a management philosophy grounded in systems
theory. It is based on the principle that each organization is composed of a system of
interrelated processes and people which make up the system's components. The success of all
workers within the system is dependent on management’s capability to orchestrate the
delicate balance of each component for optimization of the entire system.

The Torrington Hall Model

1. Determine performance expectations

- Ensure staff are aware of the performance standards expected of them
- Ensure managers are aware of the impact of their behavior on others
- Organizational, departmental and individual

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 2. Supporting performance
- From informal interaction between managers & staff to the provision of
resources & systems which facilitate achievement of organizational,
departmental individual targets
3. Review & appraisal
- Often synonymous with performance management
- The formal part of the cycle
- An appropriate, equitable
- process (more in HRM)
4. Management of performance standard
- Actions taken to address issues which are highlighted during reviews linked to
- Targets/productivity
- Skills/competences
- Career development
- Pay/recognition

Characteristics of Healthy Organizations

Healthy Organization
● According to the World Health Organization (1998), “health is a state of complete
physical, mental, spiritual and social well-being and not merely the absence of
disease.
● Healthy people respond to various challenges and tend to lead a happy and productive
life.
● Healthy organizations are good for business, good for people, and good for society. At
the end of the day, employees are the lifeblood of the company driving both the
revenue and the innovation. Today brings many more risks to consider, pushing the
topic of health way up to the CEO

Characteristics of Healthy Organization

1. Effective Sharing of Goals
A healthy organization shares its business goals with employees at every level of the
organization. Management shares goals with employees and gets them on board with the
mission and vision of the organization. Employees and managers understand what is required
to reach these shared goals and make every effort to achieve them.
2. Great Teamwork
Another characteristic is teamwork. Healthy companies know how to develop teams that
collaborate to achieve common goals. Employees and managers readily offer their assistance
to each other to meet corporate objectives.

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3. High Employee Morale
Healthy organizations possess high employee morale. Employees value their positions in the
organizations and desire to work there for a long time. Productivity is high and
organizational events are enjoyable and successful.
4. Strong Leadership
Good leadership is one of the main characteristics of a healthy organization. Employees have
good relationships with management that are based on trust. Managers know how to get
employees to function together. When correction is needed, employees readily accept the
constructive criticism offered by leaders.
5. Handles Poor Performance
Companies confront poor performance instead of ignoring it. Organizations take corrective
actions to improve performance. Upper-level management values the input of employees
who make suggestions on how to improve productivity and achieve high performance rates.
Companies may even bring in specialists to detect problems and offer solutions.

Performance Reviews and Feedback:

A performance review, also called a “performance evaluation” or “performance appraisal,” is
an assessment where supervisors review an employee’s work performance.
Performance feedback is a communications process. Adjustments are made based on the
information exchanged between manager and team member
A performance review is a formal assessment in which a manager evaluates an employee’s
work performance, identifies strengths and weaknesses, offers feedback, and sets goals for
future performance. Performance reviews are also called performance appraisals or
performance evaluations. In the past, many organizations conducted annual performance
reviews for their entire workforce; however, more and more companies are moving toward a
frequent feedback performance management system in which managers conduct quarterly,
monthly, or even weekly reviews. In fact, some organizations are doing away with formal
performance reviews altogether in favor of more casual manager check-ins and one-on-ones.

How Should Employees Prepare for Performance Reviews

Regardless of whether a performance review is formal or casual, employees should be
encouraged to prepare for it. Here are a few suggestions to offer employees that will help the
review be successful for both parties:
Prepare notes. Encourage employees to make notes before each performance review. They
should document topics they want to discuss, strengths, weaknesses, and goals.
Brainstorm examples. Employees should be able to share concrete examples of how they
have met goals set at the last review and how they have improved overall.

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Self-evaluate. Employees should practice self-evaluation by giving themselves a mock
performance review. They should identify new strengths, weaknesses, accomplishments, and
goals.
Come with questions. Employees should have a safe environment to ask questions in
performance reviews. Preparing questions ahead of time can help ensure everything that
needs to be asked is asked.

Feedback
A performance review, also called a “performance evaluation” or “performance appraisal,” is
an assessment where supervisors review an employee’s work performance.
Performance feedback is a communications process. Adjustments are made based on the
information exchanged between manager and team member.
Performance feedback is critical to helping employees understand expectations, make
adjustments and get the coaching necessary to improve and succeed. On the other side of the
equation is feedback managers may receive in the process as well that helps them more
effectively lead the organization.

Role
● One of the most effective and lucrative ways is through frequent performance
feedback. Providing employees with feedback about their work performance can only
have positive results, which is why it’s so important to incorporate frequent
performance feedback as part of how you run your business.
● Performance feedback should really begin during the onboarding process. Meaning
that from the get-go, your potential and established employees always know what
they’re doing well, where they can approve, and how they can improve. Below you’ll
find the why, how, and various benefits of providing your employees with frequent
feedback on their work performance
● If you’ve ever done a task in an inefficient way, you can probably remember how
good it felt to learn a new, more efficient way of doing it that saved you both time and
stress. Now imagine having employees who are great at what they do, but are lacking
in some areas. They could improve these areas with just a little feedback and
direction, and you can provide it!
● Performance feedback helps employees grow because it trains them in effectively
corresponding with their managers, following directions, and thinking critically. Each
of these skill sets helps the employee become a little better at their job, making the
whole operation better as well.

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Types and Principles

Types of feedback
● Informal feedback
Informal feedback can occur at any time as it is something that emerges spontaneously in the
moment or during action. Therefore informal feedback requires the building of rapport with
students to effectively encourage, coach or guide them in daily management and
decision-making for learning. This might occur in the classroom, over the phone, in an online
forum or virtual classroom.
● Formal feedback
Formal feedback is planned and systematically scheduled into the process. Usually
associated with assessment tasks, formal feedback includes the likes of marking criteria,
competencies or achievement of standards, and is recorded for both the student and
organization as evidence

Principles of Feedback
Feedback is especially important because the sender takes further steps or decisions based on
the feedback received from the receiver. So both parties must be careful about the feedback
of a message.
1. Clarity: Clarity is an important principle of both effective communication and
effective feedback. Principle of clarity requires that feedback should be free from
ambiguity and exaggeration. Clarity comes from attentive listening and careful
interpretation of messages
2. Promptness: Feedback should be delivered without unnecessary delay. Delay in
feedback destroys its utility. Promptness depends on the nature of communication. In
face-to-face communication, feedback is instant while written communication may
allow a time lag in feedback.
3. Validity
4. Completeness: Feedback is effective when it is complete. Completeness of feedback
means it should answer all the queries of the sender.
5. Relevance: Principle of relevance requires that feedback should be relevant and
consistent to the content of the message received. Relevant feedback can only help the
sender to understand the receiver's reaction. Irrelevant feedback may irritate the
sender and hamper the objective of communication.
6. Informality: Efficacy of feedback also depends on the use of information channels
along with formal channels. If there is any informal channel for providing feedback,
employees come forward to show the reaction spontaneously.
7. Solicited: Feedback must be spontaneous. This principle is attained when the receiver
willingly responds to the sender’s message.

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 8. Descriptive: To make the feedback clear and worthwhile to the sender, it should be
descriptive in nature. In feedback, the receiver should maintain a logical sequence of
messages he received and incorporate his opinion in detail.
9. Specific: The receiver should convey his response specifically. Specific response
helps the sender to understand the receiver's attitude towards the message.

Situations Requiring Feedback

1. Providing Specific performance pointers
2. Giving Corrective guidance
3. Letting someone know the consequences of the behavior
4. Encouraging positive behavior
5. Encouraging and supporting someone who is doing well
6. Letting team member know when they have done something positive

360 Degree Feedback and its relevance,

A 360-degree feedback is a process through which feedback from an employee's
subordinates, colleagues, and supervisor, as well as a self-evaluation by the employee
themselves is gathered. Such feedback can also include, when relevant, feedback from
external sources who interact with the employee, such as customers and suppliers or other
interested stakeholders. 360-degree feedback is so named because it solicits feedback
regarding an employee's behavior from a variety of points of view . It therefore may be
contrasted with "downward feedback, or "upward feedback" delivered to supervisory or
management employees by subordinates only.

Organizations have most commonly utilized 360-degree feedback for developmental

purposes, providing it to employees to assist them in developing work skills and behaviors.
However, organizations are increasingly using 360-degree feedback in performance
evaluations and employment decisions . When 360-degree feedback is used for performance
evaluation purposes, it is sometimes called a "360-degree review".

There is a great deal of debate as to whether 360-degree feedback should be used exclusively
for development purposes or for evaluation purposes as well.This is due primarily to
feedback providers' subjectivity and motivations, inter-rater variations, and whether feedback
providers have the ability to fairly evaluate attainment of work and organizational objectives.
While these issues exist when 360-degree feedback is used for development, they are more
prominent when employers use them for performance evaluation purposes, as they can
unfairly influence employment decisions, and even lead to legal liability.

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Relevance of 360 degree feedback

A 360 feedback system is implemented well, it can have a number of benefits for the
individual, their team and the organization:

Valuable development tool: The 360 feedback system shows the subject the differences
between how they see themselves and how others see them. This increases their
self-awareness which means that the subject is more conscious of their personality, strengths,
weakness, beliefs, motivations etc. With this information they can adjust their behavior and
identify their training needs. Consequently, the subject can become more effective in their
role and for the role they may be aiming for.

Multiple sources: A variety of people have contributed to the feedback, so the information is
thought to be more valid and objective than feedback from, for example, just one manager.
Also, the feedback is more likely to be accepted if multiple individuals "agreed" on the
answers.

Motivation: Knowing multiple individuals gave the same feedback provides the subject with
the drive to develop.

Company competencies: The company's fundamental competencies will be reinforced, not

only for the subject, but also for the respondents. During the survey the respondents will be
answering questions which remind them of what behaviors and values are important to the
company.

Customer service: Customer service can improve if customers and clients have completed
the survey.

Method over outcomes: The 360 feedback system assesses the method rather than the
outcome. It's more important to do something the right way even if it doesn't produce the
correct outcome - nothing is ever certain so by focusing on the method you give yourself the
best chances of producing the preferred outcome. For example, a tight deadline is coming up,
but a manager tells his staff that they can only work a maximum of one hour overtime a day
and no work is allowed on the weekends. The manager has made this decision because he
believes that stress and overworking can increase the chances of mistakes being made and of
producing poorer outcomes.

Large teams or autonomous workers: This type of feedback is significant in organizations

where the subject works independently or with several teams because their manager will be
unable to observe everything.

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Safe environment: Answers are safely given as the system is confidential. A lot of the
feedback would be too uncomfortable for colleagues to share and it would probably never be
given if the system was not anonymous.

Improves communication: Communication increases between the team because the subject
understands how others perceive them which in turn assists with teamwork.

Addresses personality and behavior: It helps subjects understand how their behavior
affects themselves, their department and the organization. This is also useful for reducing
conflict.

Career development: The organization benefits by this feedback improving career

development planning and execution of this. This also promotes the organization's assurance
of employee development which aids recruitment and staff retention

Steps in giving a Constructive Feedback

Constructive feedback is supportive feedback given to individuals to help identify solutions
to areas of weakness they may have. Therefore, it comes with positive intentions and is used
as a supportive communication tool to address specific issues or concerns.

Step 1: Identify the specific area for feedback

Before delivering feedback, identify the issue, success or area for improvement that you
would like to address. This will help you prepare specific examples, and keep the interaction
objective. For example, if you are looking to guide a new sales representative to hitting
quota, it is important to think about where the area for improvement is. The more specific,

43
the better. Instead of discussing their entire sales flow, it would be better to focus on the deal
stage where you see opportunities falling off.

‍ tep 2: State the purpose and share the goal

S
During the conversation (or video or digital note if using feedback in WorkPatterns), start by
stating the purpose of feedback and the positive outcome you are seeking. This offers context
and primes the recipient to hear what insight you have to offer as opposed to feeling
criticized out of the blue. It also highlights the mutually beneficial goal and ensures
alignment.

Step 3: Describe specifically what you have observed

‍ Set the stage and objectively highlight the observation you made. Do not be vague. Give
concrete, specific examples so the person receiving feedback has a direct reference point. An
example of how detailed to be might sound like: “I noticed when you were on the phone with
John Doe this morning, there was a lot of hesitation in your voice when you explained why
our company doesn’t offer discounts.”

‍ tep 4: Describe your reaction to the observation

S
While it might seem obvious or redundant, it is important to share your personal reaction.
Oftentimes, the person who needs the feedback may not realize the “why” behind your
feedback. Offering insight will further reassure them that it is not personal and you are there
to help. Continuing the above example, this might sound like: “When I heard your hesitation,
my reaction was that you sound uncertain. Putting myself in John Doe’s shoes, it would be
difficult for me to buy from someone that did not exude confidence.”

Step 5: Give the person a chance to respond

As much as we try to be objective, there are always two sides to every story. Sometimes,
observing a situation as a third party could end up in misinterpretation. This is why it is
important to encourage the person to respond to your initial observation. That’s why we
encourage feedback to be exchanged asynchronously in WorkPatterns, it gives the recipient a
chance to digest your feedback and consider your point of view. This often leads to better
follow up conversations. They may bring up missing details that change your feedback
altogether! If not, this also gives you a good sense of how they are feeling and allows you to
address any of their concerns, before moving on.
Step 6: Offer specific suggestions
Once again, the difference between criticism and constructive feedback is whether it results
in a better outcome. After sharing the area of improvement, giving specific suggestions on
how to improve, will empower the individual to act upon it and course-correct immediately.
This means that instead of saying: “Try not sounding so hesitant next time!”, you might want

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to say something like: “It is better to say ‘I’m actually not sure, but I’ll find out’ with
confidence than to power through the conversation hesitantly.”

Step 7: Summarize and set a time for follow up

Recap the conversation and set up a time to check-in. This gives a future time frame where
you can check in. In WorkPatterns, we encourage quick asynchronous feedback on a
bi-weekly cadence. If the suggestions didn’t work, it will also give you a chance to receive
feedback and iterate on your tips. Additionally, it will incentivize the person more to
implement your feedback if they know you are going to follow up on that specific area.

Step 8: Reiterate your support and gratitude

When ending the conversation or wrapping up the meeting, make sure to express your
support and gratitude. Constructive feedback is all about making sure the recipient is
empowered to take action and improve. By sharing your appreciation, it prevents the
feedback from being a negative encounter and reminds the employee that you are there to
support them.

Role of a Transformational Leader

A transformational leader is someone who: Encourages the motivation and positive
development of followers. Exemplifies moral standards within the organization and
encourages the same of others. Fosters an ethical work environment with clear values,
priorities and standards.
Transformational leaders inspire and motivate their workforce without micromanaging —
they trust trained employees to take authority over decisions in their assigned jobs. It’s a
management style that’s designed to give employees more room to be creative, look to the
future and find new solutions to old problems. Employees on the leadership track will also be
prepared to become transformational leaders themselves through mentorship and training.

A transformational leader is someone who:

● Encourages the motivation and positive development of followers
● Exemplifies moral standards within the organization and encourages the same of
others
● Fosters an ethical work environment with clear values, priorities and standards.
● Builds company culture by encouraging employees to move from an attitude of
self-interest to a mindset where they are working for the common good
● Holds an emphasis on authenticity, cooperation and open communication
● Provides coaching and mentoring but allowing employees to make decisions and take
ownership of tasks

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Advantages of Transformational Leadership
There are several benefits of Transformational leadership over other styles. Some important
advantages of transformational leadership are:
1. Keeps employees motivated as they are inspired to perform better.
2. Individual mentoring ensures team members have the opportunity to learn new skills
and grow.
3. Transformational leadership encourages members to be creative and do interesting
work.
4. It builds trust and enhances enthusiasm within the team.
5. Transformational leadership requires leaders to explain the vision to their employees.

Disadvantages of Transformational Leadership

Despite several pros, there are also certain drawbacks of Transformational leadership. Some
of them are:
1. Transformational leadership focuses on long term vision through inspiration and
hence might miss the minute details.
2. Too much passion and motivation can sometimes disrupt logical thinking.
3. Transformational leaders can sometimes be bad for companies as team members are
too engaged with the team leader and lose focus of company goals.

Performance Goal Setting

Performance goals enable employees to plan and organize their work in accordance with
achieving predetermined results or outcomes. By setting and completing effective
performance goals, employees are better able to:

● Develop job knowledge and skills that help them thrive in their work, take on
additional responsibilities, or pursue their career aspirations;
● Support or advance the organization's vision, mission, values, principles, strategies,
and goals;
● Collaborate with their colleagues with greater transparency and mutual understanding;
● Plan and implement successful projects and initiatives; and
● Remain resilient when roadblocks arise and learn from these setbacks.
● Without setting clear performance goals, employees may feel aimless about
prioritizing and completing their work and become disengaged in their jobs, and
teams can become mired in confusion, misunderstandings, and conflict. For both
individuals and teams, the absence of effective goal setting substantially reduces
productivity.
● Although focused attention on performance goals typically happens during the annual
evaluation process, goal-setting really pays off when employees monitor their goal

46
 progress throughout the year, discuss the status of goals with their manager on an
ongoing and regular basis, and propose and make adjustments to remain on track
toward completion.

Goal Framing
Goals can be framed in several different types of ways that affect how well people learn and
perform. When goals are challenging, it is important to help people to frame them as a
challenge from which they may learn, rather than a threat in which failure is foreseeable. The
goal framings are standing on four important Pillars
1. Clarity
A clear goal is one that can be measured and leaves no room for misunderstanding. Goals
should be very explicit regarding what behavior is desired and will be rewarded. The clear
goal reduces work order errors by 10-30% in general. It also creates a system for ensuring
that every team member is informed of changes in policy, changes in hours or other
important information i.e. it improves communication within team members.
2. Challenges
A goal should be challenging but must be achievable. By positively rewarding the
achievement of challenging goals, would encourage employees to achieve more and meet
new milestones. At the time of goal settings, it is most important to identify rewards and
awards that are appropriate for the special achievement of challenging goals versus normal
expectations.
3. Commitment
In order for goals to be effective, they need to be agreed upon. The goal should be in line
with the general established expectations as per role and level of an individual. The employee
and employer of an organization must both be committed to using the resources needed to
complete the goals and should also agree on what the reward will be.
4. Feedback
Goal setting will not be effective if there is not an opportunity for any feedback. Feedback is
a chance to correct or clarify before the goal has been reached. Ideally, feedback is a type of
progress reporting. That gives the managers the chance to clarify expectations and to adjust
the level of difficulty to achieve goals, if it seems too hard or too easy. For the employee of
the company, it provides a chance to make sure they are meeting their supervisor’s
expectation and to get reorganization for what they have achieved up to this point. When the
goal is complete to achieve , the manager can also conduct a formal feedback and
acknowledgement session so that the employee can discuss his performance and
improvement areas for future based performances.

SMART model

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Specific: Great goals are focused so that employees have clear direction. Any actionable goal
should answer questions like “who” and “what,” and any employee in this culture should
know specific expectations and the customers he serves.
Measurable: A goal without a measurable outcome is like a sports competition without a
scoreboard. Any goal should explain “how” so an employee understands successful impact.
Attainable: Goals should challenge us to do our best, but they also need to be realistically
achievable. Goals set too high can demotivate; goals set too low do not serve our customers.
Relevant: An effec­tive performance objec­tive should be rel­e­vant to what the organization
and/or the team needs to achieve. Otherwise, objec­tives could be suc­cess­ful­ly deliv­ered but
have no impact on the over­all per­for­mance of the organization — defeat­ing the ulti­mate
pur­pose of per­for­mance man­age­ment.
Time-Bound: Set goals that give employees enough time to achieve them but also challenge
them to be productive. Time-bound expectations answer the question “by when.” When our
performance goals are S.M.A.R.T., they ensure that we have specific information, clear
success measures, and that what we are working to achieve will benefit the organization.

Setting of Objectives
● Goals are specific and quantifiable outcomes. People set goals for themselves by
carefully deciding on, committing to and planning to attain specific targets within a
fixed time frame.
● The objective of goal setting is to help you break down your tasks, set deadlines and
work towards meeting them.
● If one wants to achieve goals, one must set the correct goals. Proper goal setting is
crucial for professional success as well as for personal growth.
● Goal setting can be short-term or long-term, but all kinds of goals should have
pre-decided milestones.

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UNIT 3: Measurement & Evaluation of Performance
Performance measurement and program evaluation can both help identify areas of programs
that need improvement and determine whether the program is achieving its goals or
objectives. They serve different but complementary functions:
● Performance measurement is an ongoing process that monitors and reports on a
program's progress and accomplishments by using pre-selected performance
measures.
● Program evaluation, however, uses measurement and analysis to answer specific
questions about how well a program is achieving its outcomes and why.
So, performance measurement data describes program achievement, and program evaluation
explains why we see those results.

Enhancing performance at Individual, Team and Organizational levels

➢ Enhancing performance at Individual level

a. Performance appraisal system.
b. Reward and recognition system.
c. Increasing ability: by recruitment selection and learning and developing.
d. Increasing opportunity: opportunity to use, practice, and develop skills.
e. Create a More Productive Work Environment
f. Encourage Clearer Communication
g. Build Strong Work Relationships
h. Manage Work Performance to Encourage Growth
➢ Enhancing performance at team level
a. Choose, hire, and lead a team that’s ready to collaborate
b. Diversify your team
c. Lead with gratitude, and share yours regularly
d. Clarify each person’s role
e. Communicate with context
➢ Enhancing performance at organizational level
a. Management by Objectives
b. Performance evaluation and benefits
c. Quality of work
d. Feedback mechanism and Participative style of management
e. Engaging your people
f. Better internal controls and eliminating internal roadblocks
g. Using Training and Development
h. Effective business strategy
i. Communicate your expectations and lead by setting a positive example

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Measurement of performance at Organizational Level
Performance measures are metrics along which organizations can be gauged. Most
executives, investors and stakeholders watch and examine measures such as profits, stock
price, and sales in an attempt to better understand how well their organizations are competing
in the market, as well as future predicted results. But these measures provide just a glimpse
of organizational performance. Performance referents are also needed to assess whether an
organization is doing well. A performance referent is a benchmark or standard used to make
sense of an organization’s standing along a performance measure.
Using a variety of performance measures and referents is valuable because different
measures and referents provide different information about an organization’s functioning. As
well, many commonly used measures, including accounting ratios, are highly past-focused.
These indicators show stakeholders the end-results of past decisions, but do little to predict
future firm performance. Strongly managed organizations must develop a deep understanding
of what events or actions support strong(er) performance (i.e., increased product training for
sales force leads to increased sales the following quarter), and then ensure they measure these
as well.

A. Ratio Analysis
Ratio analysis is a quantitative method of gaining insight into a company's liquidity,
operational efficiency, and profitability by studying its financial statements such as the
balance sheet and income statement. Ratio analysis is a cornerstone of fundamental equity
analysis.
Ratio analysis has served as a veritable means of monitoring, measuring and improving
performance in an organization. Hence, the study examines a tool for measuring organization
performance using ratio analysis. It also ascertains the relevance of internal and external
financial reports during ratio analysis for the purpose of establishing key relationships and
results in order to appraise financial performance. The study confirmed that there is a
significant relationship between ratio analysis and organizational performances as well as
financial ratios highlight the importance of effective management of an organization. Based
on the findings of this study, it was recommended that financial ratios should be computed
periodically to reveal areas of strengths and weaknesses, as well as, ratio analysis should be
used to measure performance in terms of profitability.

B. Fund Flows
Fund flow is the net of all cash inflows and outflows in and out of various financial assets.
Fund flow is usually measured on a monthly or quarterly basis. The performance of an asset
or fund is not taken into account, only share redemptions, or outflows, and share purchases,
or inflows. Net inflows create excess cash for managers to invest, which theoretically creates
demand for securities such as stocks and bonds.

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 C. Cash Flows,
Cash flow can be defined as the movement of money into or out of a business, project, or
financial product. It is usually measured during a specified period of time. Measurement of
cash flow can be used for calculating other parameters that give information on a company’s
value and situation
Organizational agility is found to be sensitive to both an organization’s cash flow and its
financial leverage. While many factors such as technology, organizational processes, and
organizational architecture impact the flexibility of an organizational response to change, in
the last analysis the agility of an organization is dependent on the norms, values and
behaviors of individuals within that organization. We find that the size of an organization’s
cash flow and debt impacts the cultural climate of that organization. Specifically that ample
cash flows and low debt supports cultural attributes that promote organizational agility and
low cash flows and high debt contributes to a cultural environment that retards organizational
agility.

D. EVA
Economic value added (EVA) is a measure of a company's financial performance based on
the residual wealth calculated by deducting its cost of capital from its operating profit,
adjusted for taxes on a cash basis. EVA can also be referred to as economic profit, as it
attempts to capture the true economic profit of a company. This measure was devised by
management consulting firm Stern Value Management, originally incorporated as Stern
Stewart & Co
EVA assesses the performance of a company and its management through the idea that a
business is only profitable when it creates wealth and returns for shareholders, thus requiring
performance above a company's cost of capital. EVA as a performance indicator is very
useful.

E. EFQM
The European Foundation for Quality Management (EFQM) Excellence Model, is a
self-assessment framework for measuring the strengths and areas for improvement of an
organization across all of its activities. The term ‘excellence’ is used because the Excellence
Model focuses on what an organization does, or could do, to provide an excellent service or
product to its customers, service users or stakeholders.
EFQM wants to support managers and directors in training, sharing ideas and innovating
with the aid of the so-called EFQM model as a common framework. The EFQM Model or
EFQM business excellence model is the most popular quality management tool in Europe,
used by more than 30.000 organizations to improve performance. It supports you to
self-assess and reflect. 84% of our members say that the EFQM model helps to improve their
organization.

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This quality management model aims at sustainable excellence in which quality, efficiency
and sustainability are the key elements. The basis of the EFQM Model consists of the Total
Quality Management (TQM) concept. It consists of a universal framework of concepts, thus
enabling organizations to share information in an effective way, irrespective of the different
sectors, cultures and life stages in which they are located.
Organizations can thus take other organizations as a model, so that they obtain insight into
how far they meet the image of a high-quality organization. The EFQM consists of nine
criteria that are subdivided into five Enablers and four Results:

The five organizational areas indicate how these objectives can be achieved:
1. Leadership
2. People
3. Policy & Strategy
4. Partnerships & Resources
5. Processes
The four results indicate what the intended objectives are:
1. People Result
2. Customer Result
3. Society Result
4. Key Performance Results

F. DashBoard
A performance dashboard is a layered information delivery system that parcels out
information to users on demand so they can measure, monitor, and manage business
processes and achieve strategic objectives.
Dashboards are a collection of graphs, charts, gauges or other visual representations that are
used to monitor the levels of the selected KPIs(key performance indicators). The dashboard
is used for monitoring operational activities and is not necessarily directly linked with the
strategic directions of a company. Moreover, the dashboard usually provides instant review
of results and is constantly updated. Data available in dashboards is used to provide a

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foundation for better decision making and more efficient day-to-day management of teams,
resources, and expenses. For most organizations, dashboards present a high-level idea of an
organization’s overall performance. Dashboards are made up of multiple report types,
allowing users to easily compare and contrast different reports or access diverse datasets
within one business intelligence environment.

Benefits & Uses of A Dashboard

● Data transparency – Data is any company’s most important asset. However, it
doesn’t do much good if no one can understand or access it. A well-designed
dashboard provides on-demand access to all of your most important metrics.
● Access to data – As the name implies, a dashboard gathers multiple data sources,
including Excel, into a single interface. That means you can immediately see a
detailed overview of your business in one quick glance. Better yet, it reduces the
amount of time it takes to compile reports, saving you time.
● Better decision making – Dashboards provide an unbiased view not only of the
company’s performance overall, but each department as well. If each department is
able to access the dashboard, it can offer a foundation for further dialogue and great
decision making. For example, the sales and marketing department can align their
data and experiences to increase customer acquisitions and improve demand
generation. Business dashboards provide a good starting point for these decisions,
which is one of the biggest advantages of dashboards.
● Accountability – While it’s always nice to see what you’re doing right, you also need
to see and understand what you’re doing wrong in order to increase your
performance. Business dashboards can show you exactly where your trouble areas are
and arm you with the information you need to improve. Also, by making the
dashboards visible throughout the company, they can hold different departments
accountable for both the ups and downs.
● Interactivity – Some of the best dashboards provide a dynamic experience. Rather
than providing static information, you and your users can filter data, interact with
charts to see changes over time, and even allow for an ad-hoc component for
on-the-fly. That means you can get as much or as little detail on specific metrics as
you want.
● Gamification – Your metrics, whether traffic to your website or products sold, are the
key numbers you want to continuously improve upon. The top businesses have
managed to gamify certain business metrics to increase the likelihood of customer
retention. If you’re considering gamification, business dashboards can track the
success of your efforts.

G. Balanced Scorecard

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The balanced scorecard was first published by Professor Robert Kaplan and Professor David
Norton in the early ‘90s. In 1996 the two published a book that bore that title. The balanced
scorecard is a strategy performance management tool. The scorecard lists financials goals,
customer goals, internal business goals, and innovation & learning goals. These four goals
give a good overview of what the company tries to achieve, i.e. the company strategy. As we
know, the HR strategy follows the business strategy, so the HR scorecard is heavily
influenced by the business scorecard. Indeed, the HR scorecard takes the strategy as defined
in the balanced scorecard as the starting point and then identifies the HR deliverables that
drive these outcomes. The balanced scorecard method transforms an organization’s strategic
plans and goals from mere statements into execution plans and “orders''. This can be done at
a very granular level if needed. Balanced scorecard provides a framework that not only
provides performance measurements, but it also helps planners identify what should be done
and how it should be measured. Balanced scorecard enables executives to truly execute their
strategies.
The balanced scorecard method today is often implemented as a full strategic planning and
management system where data is fed directly from accounting and company IT systems into
the model to calculate metrics and compare them with strategic goals and plans.

1. FINANCE
Financial measures of performance relate to organizational effectiveness and profits. Under
the financial perspective, the goal of a company is to ensure that it earns a return on the
investments made and manages key risks involved in running the business. The goals can be
achieved by satisfying the needs of all players involved with the business, such as the
shareholders, customers, and suppliers.
The shareholders are an integral part of the business since they are the providers of capital;
they should be happy when the company achieves financial success. They want to be sure

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that the company is continually generating revenues and that the organization meets goals
such as improving profitability and developing new revenue sources. Steps taken to achieve
such goals may include introducing new products and services, improving the company’s
value proposition, and cutting down on the costs of doing business

Objectives:
● Revenue Growth
● Cost Reduction
● Asset Utilization
● Shareholders value

Measures:
● Operating Income
● ROI
● Sales Growth
● Reduction of administrative expenses

2. CUSTOMERS
The customer perspective monitors how the entity is providing value to its customers and
determines the level of customer satisfaction with the company’s products or services.
Customer satisfaction is an indicator of the company’s success. How well a company treats
its customers can obviously affect its profitability.
The balanced scorecard considers the company’s reputation versus its competitors. How do
customers see your company vis-à-vis your competitors? It enables the organization to step
out of its comfort zone to view itself from the customer’s point of view rather than just from
an internal perspective.
Some of the strategies that a company can focus on to improve its reputation among
customers include improving product quality, enhancing the customer shopping experience,
and adjusting the prices of its main products and services.

Objectives:
● Customer satisfaction
● Increased quality of products
● Reduced delivery time
● Customer loyalty

Measures:
● Number of warranty claims
● Percentage of on time deliveries

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 ● Customer complaints
● Customer satisfaction
● New customer acquisition
● Market share

3. INTERNAL PROCESS
A business’ internal processes determine how well the entity runs. A balanced scorecard puts
into perspective the measures and objectives that can help the business run more effectively.
Also, the scorecard helps evaluate the company’s products or services and determine whether
they conform to the standards that customers desire. A key part of this perspective is aiming
to answer the question, “What are we good at?”
The answer to that question can help the company formulate marketing strategies and pursue
innovations that lead to the creation of new and improved ways of meeting the needs of
customers.

Objectives:
● Improve productivity or efficiency
● Improve product quality
● Reduce manufacturing or process time

Measures:
● Defect rate
● Lead time
● Number of suppliers
● Material turnover
● Cycle time and velocity
● Manufacturing cycle efficiency

4. LEARNING AND GROWTH

Organizational capacity is important in optimizing goals and objectives with favorable
results. The personnel in the organization’s departments are required to demonstrate high
performance in terms of leadership, the entity’s culture, application of knowledge, and skill
sets.
Proper infrastructure is required for the organization to deliver according to the expectations
of management. For example, the organization should use the latest technology to automate
activities and ensure a smooth flow of activities.

Objectives:
● Efficient and effective use of employee

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 ● Product innovation
● Information system capabilities

Measures:
● Amount spent on employee training
● Employee satisfaction rating
● Employee retention
● Number of suggestions per employee
● Number of new products
● New products sales as percent of total sales
● Number of patents
● Amount spent on Research and Development

Balanced scorecard advantages and disadvantages

Balanced scorecard is a popular approach which has its own set of advantages and
disadvantages. It helps organization in certain aspects but it gets criticized by experts for the
difficult changes organization has to put up to implement a balanced scorecard.

Advantages of Balanced Scorecard

● It builds up the necessary focus required for the company to create an extraordinary
performance.
● It integrates a variety of business programs.
● It makes the organizational strategy operational by reflecting it in performance targets
and measures.
● It connects the corporate level with the local managers to see what actions have to be
taken to improve organizational efficiency.
● It improves the communication within the organization and provides a feeling of
togetherness among employees.

Disadvantages of Balanced Scorecard

● It increases the number of performance indicators which can be confusing for the
employees.
● It is very difficult to manage all the four perspectives and create a required balance.
● Although the employees put hard work to make internal processes effective, the
senior management will still look for results in terms of instant financial performance.
● The balance scorecard system has to be updated regularly to make it relevant to the
given point of action.

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Purpose and Objectives of balanced scorecard
It is a common concern about why organizations should use a balance scorecard? There are
some purposes and objectives due to which a balanced scorecard is generally used in the
organization.

Purpose- The main purpose of a balance scorecard is to integrate the organization on one
platform. It also empowers the employees who can now contribute to the organizational
system through their thoughts and actions. The balance scorecard has a purpose of measuring
both tangible and intangible aspects of performance. The balance scorecard serves a purpose
of overall improvement of organization by taking care of four important perspectives of
organization.

Objectives- Every organization has a vision and mission, however, it often feels lost in
day-to -day operational work. The main objective of the balanced scorecard is to ensure that
at operational level the vision, mission and value of the organization is properly reflected.
The objective of using a balanced scorecard to make sure that the set financial goal is
achieved through a planned workout. The balance scorecard also helps to uplift the
organization at the skill and talent level. The objective of a balance scorecard is to
understand the wants and needs of customers and to set internal processes to satisfy the
customers.

Performance of Learning Organizations and Virtual Teams:

Learning organizations are skilled at five main activities: systematic problem solving,
experimentation with new approaches, learning from their own experience and past history,
learning from the experiences and best practices of others, and transferring knowledge
quickly and efficiently throughout the organization. Each is accompanied by a distinctive
mind-set, tool kit, and pattern of behavior. Many companies practice these activities to some
degree. But few are consistently successful because they rely largely on happenstance and
isolated examples. By creating systems and processes that support these activities and
integrate them into the fabric of daily operations, companies can manage their learning more
effectively

Virtual Teams
“Virtual team” is an odd phrase. It sounds like something that only exists in a digital alternate
reality. But virtual teams are very much a reality, and they’re becoming more prevalent with
each passing day. A virtual team is a group of workers who communicate and work together
using digital tools. While they can be located in the same physical space, virtual teams are
often distributed, working remotely in different parts of the city, state or country—even on
the other side of the world!

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So let's take it one step at a time and check out eight tips to help you manage a
high-performing virtual team.

1. Give Your Employees the Right Equipment

Online workers need high-quality and reliable equipment because it’s the only way to keep
the workflow smooth and uninterrupted. As a business owner or manager, you cannot neglect
this aspect and expect employees to obtain the best technology on their own.

2. Goal-Setting Is Fundamental
The first tip is rather technical, but the second one is fundamental performance-wise.
Namely, you need to think through your business goals carefully and determine the right
objectives and deliverables for each member of the virtual team.

3. Delegate Tasks Properly

Micromanagement does not work in the online environment, so you’ll need to learn to
delegate tasks properly. Every member of the digital workforce should know his/her
responsibilities and focus on a single project at a given moment.

4. Use Multiple Communication Channels

Although it may seem counterintuitive, the experience taught us that multiple communication
channels can contribute to the greater efficiency of virtual teams.

5. Organize Online Meetings Regularly

The fact that you cannot meet colleagues in person does not mean you shouldn’t organize
online meetings. This is the core of virtual work, so we encourage you to schedule meetings
regularly and discuss the most important topics with your coworkers.

6.Take Advantage of Project Management Tools

Traditional means of online communication are always useful, but you can boost employee
productivity with project management tools.

7. Recognize Achievements and Reward Top-Performers

If you want the most talented individuals to stay with your team for a long time, you better
recognize their achievements and reward top-performers. Unlike traditional business teams,
virtual colleagues don’t have the chance to meet in person, exchange praises, and celebrate
professional victories.

8. Keep In Mind the Life-Work Balance

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You don’t have to be a top-level manager to understand that your virtual team needs some
rest from time to time. A survey shows that unplugging after work hours is the biggest pain
point for 40% of employees who work in a virtual environment.

Virtual teams are very specific because they rely on alternative channels of communication
and cannot count on traditional face-to-face interactions. In such circumstances, managers
have to be careful and plan out everything in a way that suits the new business model.

Team Performance Management

Team performance management is a set of interventions on individual, team and

organizational level to improve the way team members work together towards a mutually
agreed-upon goal. Team performance is closely related to team effectiveness. Thus, team
performance management interventions should be combined with team effectiveness
interventions for best results.
Team performance management is the act of ensuring that team performance is continuously
improving, whether it's dividing the employee base into groups, performing evaluation
checks or setting diversified goals. Team performance management involves returning to
activities not only to evaluate how the team can perform them better but also how each part
of the team reacts to the goal, including leaders.

How to manage team performance

If you want to manage your team for performance goals, consider some of the following
steps:

1. Set effective goals

To have a team understand and complete new goals, consider making them SMART goals.
These are objectives with qualities that make them easier to perform due to their clarity of
expectation and detail. SMART goals meet the following sets of criteria:

● Specific: Be specific concerning expectations, measurements and due dates of team

members.
● Measurable: Try to use units that are measurable and easy to understand. This can
help establish expectations quickly.
● Achievable: Setting goals well within your team's capabilities ensures you can
evaluate their performance on an accurate scale.
● Relevant: While the purpose of performance evaluation is a measurement, the goals
your team completes should still be relevant to the company. Keep your goal relevant
to company duties and current employee obligations in the workplace.

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 ● Time-based: Make your evaluated goals time-based. This can ensure expectations
have a limit so that proper evaluation of work can result from your SMART goal.

2. Select capable leaders for each team

When managing team performance goals, consider appointing leaders to each team who are
either management employees or capable leaders. Appointing capable individuals to lead
your teams can ensure knowledgeable and skilled employees are available to consult during
projects. Not only does this help lessen the stress of staff during this time, but it also builds
communication between team members and the leadership skills of all leading employees.

3. Schedule training
As you evaluate each team during the management project, consider scheduling training for
each team based on the data you find. If you notice a team excels in one aspect of the project
and not another, creating training courses for individual members, or the entire team, can
help evaluate results and determine the next steps toward progress. Training may be the best
path toward an increase in production, as it provides your team with new skills and more
confidence in their abilities.

4. Ensure communication is available and reactive

If you've established leaders during this project, ensuring communication is available for all
employees can be easy and effective. If you haven't already, consider appointing leaders who
are available for answering questions or addressing concerns during a project. Employees
may have questions concerning project criteria, such as due dates, deliverables, changing
expectations or project notes.

5. Align team goals with organizational or familiar goals

When you manage your team performance, try to create goals that align with expectations
that are familiar to your employee base. Having familiar or similar goals that your employees
understand can help simulate what normal, daily goals look like in the typical schedule. This
makes your evaluation more accurate.

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UNIT 4

Issues in Performance Management

Effective performance management is an integral part of the employee lifecycle and is as
crucial to organizational success as talent acquisition and retention. Performance
management encompasses monitoring and evaluating employee performance, productivity
and efficiency. To contribute to organizational growth one needs to constantly improve one’s
performance.
Performance management encompasses monitoring and evaluating employee performance,
productivity and efficiency. To contribute to organizational growth one needs to constantly
improve one’s performance.
However, there are certain performance issues that employees and employers face at work
that make performance management challenging and hinder quick yet sustainable growth.
We will discuss the top 11 performance issues and obstacles to effective performance
management that are common in fast growing companies and how to overcome the same.

1. Lack of clarity in vision and objectives

One of the first performance issues which prevents effective performance management is a
lack of clarity in what needs to be achieved. A vague vision and unclear objectives leads to
situations where employees do not know what is expected of them and the leadership is
unable to identify parameters to evaluate their performance. Without specific objectives,
there will always be an ambiguity in what constitutes effective performance.

Solution for fast growing organizations: Start with a clear vision and strong company
values. Clearly and regularly communicate them along with long term and short term
objectives. It is possible for the vision to be dynamic and change from time to time. In such
cases, keep the team members updated on what the organization is progressing towards.
Additionally, fast growing organizations must clearly indicate the role of each employee in
achieving the vision and objectives to ensure transparency across all levels. When employees
know the how and what of their roles, they perform better.

2. Lack of well-defined work processes

The next employee performance issue that organizations come across is a lack of clarity on
how the vision and objectives are to be achieved. This obstacle is especially true for fast
growing organizations which lack clear processes and systems to achieve an identified goal.
Often, employees have no institutional benchmark for a particular task and hence, face
performance issues.

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Solution for fast growing organizations: Leaders need to guide team members on how to
navigate their way to the end and collectively brainstorm and ideate on the best path. While
internal benchmarks might be lacking, fast growing companies can always take inspiration
from external benchmarks and processes. Additionally, hypergrowth organizations can give
their employees the freedom and autonomy to experiment the best way forward.

3. No alignment between employee and leadership thinking

Another performance issue is a lack of alignment between employee and leadership thinking.
This is again more relevant to fast growing companies, where a dynamism of vision and best
practices leads to conflicting views between employees and the leadership. They may have
different notions of what constitutes effective performance, and, thus, achieving the same
will have different pathways and metrics for evaluation.

Solution for fast growing organizations: Involve employees across the organization in
brainstorming and promote shared goal setting. Identify a middle way on what success will
look like and how it can be achieved. The best way for fast growing organizations to mitigate
this obstacle is by having effective OKRs which communicate the top objectives and
associated key results to align expectations across.

4. Lack of evaluation metrics and tools

Effective performance management and the path to dealing with performance issues requires
mapping and measuring performance and productivity. However, most fast growing
companies lack metrics and key performance indicators to measure the same. Often, they
have an ad hoc approach and understanding of what constitutes good performance, which is
neither inspirational nor uniform.

Solution for fast growing organizations: It is important to have specifically defined KPIs
and metrics to measure performance effectiveness. It is important to customize the KPIs to
specific roles and tasks, instead of simply implementing those that appear on the first page of
Google search. Since the work culture of fast growing companies is different from others, the
KPIs must be customized and adapted accordingly to suit specific business needs.

5. Shortage of the right talent, skills, and resources

This performance issue is faced by almost all organizations as there is an overall shortage of
skilled, qualified talent with the right attitude and work ethic. However, it is more apparent
for hyper growth organizations which have financial constraints and limitations on how
much they can spend along with a relatively lesser know brand name. Shortage of competent
talent and resources leads to inefficiency in performance and other employee performance
issues.

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Solution for fast growing organizations: Despite financial constraints, fast growing
companies can deal with shortage of talent and resources by focusing on upskilling existing
employees through intensive learning and development opportunities to address
organizational needs.

6. Inadequate rewards and recognition

Performance issues arise when employees feel their efforts are going unrecognized. Often, in
the hustle of growing the businesses and 1000 other things that go on, fast growing
organizations miss rewarding, acknowledging, and appreciating everything their employees
do, especially when they go the extra mile. Many companies in the growth stage feel the
financial limitations prevent them from rewarding exceptional performance. However, this
leads to a lack of motivation, resulting in low levels of performance.

Solution for fast growing organizations: Focus on showing gratitude to employees for
everything they do. Most performance issues can be solved by creating incentives for higher
outcomes. Rewards don’t have to be monetarily driven and can simply be Thank You notes,
public acknowledgement and appreciation, gift vouchers, an extra day off, etc. The idea is to
show that their performance and efforts are being recognized.

7. Overlooking employee voice and opinion

Employee performance issues are intrinsically linked to overlooking what employees have to
say. Most employees who join fast growing companies are driven by their purpose and
passion and seek to make a difference. This requires organizations to hear what employees
have to say, and when this does not happen, there is a performance disconnect.

Solution for fast growing organizations: Focus on gauging employee pulse and opinion by
leveraging different platforms. It is important to understand what employees have to say
about the culture, factors contributing to performance problems and much more. If employee
performance issues are to be addressed to facilitate effective performance management,
understanding their side of the story is crucial to uncover the challenges as well as potential
solutions.

8. Lack of leadership commitment

Unless the leadership is committed to addressing performance issues and removing the
obstacles to effective performance management, it is very difficult to move the needle. Often,
leaders in fast growing companies are occupied with multiple things on their plate and find
themselves stretched for time. Invariably, they are unable to understand the causes of
performance problems and thus, unable to manage the same.

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Solution for fast growing organizations: Leaders must set time aside to address employee
performance issues and commit to their growth and development. They need to display their
commitment by regularly communicating with team members, understanding the challenges,
and identifying solutions collaboratively.

9. Inability to provide coaching and mentoring

Coaching and mentoring are integral to effective performance management. Due to lack of
mentoring and guidance, employees find themselves lost in the way, leading to performance
problems. Leaders and managers find themselves pressed for time and are often unable to see
the return on investment with respect to coaching and mentoring.

Solution for fast growing organizations: While companies in the growth stage may not have
enough leaders to offer coaching and mentoring support to all their employees, leveraging
external partnerships and technology to facilitate personalized 1:1 meetings can be a good
option. The idea is to invest in the personal and professional development of employees to
encourage and motivate them to bridge the performance gap.

10. Poor communication and siloed working

Employee performance issues often stem from lack of transparent communication and a
siloed approach to working. Adapting to new models of working, especially in the new
normal, employees in hybrid organizations find it difficult to communicate with everyone on
the team. This leads to miscommunication and prevents everyone from being on the same
page. Consequently, these collaboration barriers result in declining performance.

Solution for fast growing organizations: Explore and experiment with unconventional forms
of communicating with team members. Have an open door policy and share as much as
possible. Promote a clear and transparent communication policy without hierarchies. Greet
everyone in the team with a smile and have coffee/ virtual coffee breaks to bond beyond
work. Finally, conduct icebreakers and different activities to facilitate communication and
collaboration, which fall in your financial constraints, but are also effective and impactful.
Using technology to keep employees engaged is often a useful and cost-effective solution.

11. Inability to offer feedback

Finally, many fast growing companies lack the patience to allow their employees to make
mistakes and offer feedback to help them improve. This often results in performance issues
or rapid turnover. Either way, it is an obstacle to effective performance management.

Solution for fast growing organizations: Encourage leaders to provide constructive and
timely feedback to all their team members to help them learn from their mistakes. Share what

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team members can improve and also listen to their side of the story. Explain how small
changes will not only improve their performance, but add to their professional development
in the longer run.

Role of Line Managers in Performance Management

ROLE OF LINE MANAGERS

● A line manager has a significant impact on an employee’s behavior, attitude and level
of performance.
● An organization’s overall quality is shaped by a line manager.
● Employees feel free to communicate directly with their line manager about any
problem.
● Day to day responsibility of managing employees have gone down from the HR
manager to line managers.
● As employees and line managers are always in close and are in regular contact with
each other, line managers tend to have a greater impact on employees.

Line manager involvement in performance management

The line managers or the front-line management play a very crucial role in implementing and
enacting the HR policies. Hence, it is very important for the management to ensure that the
line managers possess a right attitude towards the performance management approaches and
equally possess the right competencies for executing it. The line managers mostly consider
the performance management process as a mere bureaucratic chore and hence they consider
it as a sheer waste of time. Some managers lack the required skills for reviewing the
performance of the employees, providing feedback and identifying objectives along with
them. These limitations can be overcome by adopting the following remedies:

● By providing leadership from the top.

● By communicating with the line managers about the importance of performance
management in driving successful results and how it is a part of their responsibility.
● By maintaining simplicity in the overall process of performance management.
● By reducing the pressure from the line managers by making the process an ongoing
one instead of an annual review.
● By involving the line managers in the design and development of the performance
management processes by representing them in pilot studies.

Skills needed for the role of line manager

● Self-management

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 ● Communication
● Decision-making skills

Performance Management and Reward

Linking performance to pay band is the most basic way of linking performance to reward.
Organizations have a pay band for each category of employees. Managers will be having
three or four categories based on their experience and competency level required for a job.
Performance-based compensation models are extremely popular, particularly for sales-based
roles.

Benefits of Linking Compensation and Performance

● There’s no denying that paying your team more when they perform at a higher level
(for example, when they make more sales or move the needle on company goals) can
be a powerful motivator.
● The promise of earning more money can inspire people to work harder, and when
they get paid more, it can also act as indirect feedback that they’re doing their job
well

Significance of rewards

The elements of reward management within a business organization are all the things that
they use to attract potential employees into their business which includes salary, bonuses,
incentive pay, benefits and employee growth opportunities such as professional development
and training opportunities. Having a reward management system in place provides the
business with many advantages, especially in small to medium size organizations where the
managers must have a good relationship with the employees. Reward programmes have
proved to be very successful in motivating employees and in turn increase the performance
of the organization as a whole.

Below are some of the reasons why a reward system is important:

1. Mutually beneficial – A reward system is beneficial not only to the employee but
also to the organization. The employee will feel more motivated to work harder by
having a reward system in place. The employee will feel more committed to their
work and their productivity will increase. An increase in productivity will then
benefit the organization. Therefore, a reward system is mutually beneficial to the
employee and the organization.

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 2. Motivation – A reward system will motivate employees by reaching targets and
organizational goals in exchange for rewards. A reward system is great at
motivating employees but they will also be motivated to prove themselves to the
organization.

3. Absenteeism – A reward system will reduce absenteeism in the organization.

Employees like being rewarded for a job well done and if there is a reward system
in place, employees will be less likely to be ringing in sick and not showing up for
work. Also, by having a reward system in place the employees will be clearer
about the targets and goals of the organization as they will be rewarded when they
reach certain targets. So, by having a reward system as an incentive they will be
less likely to be absent from work.

4. Loyalty – A reward system will increase the employee’s loyalty to the

organization. By a reward system being in place the employee feels valued by the
organization and knows that their opinion matters. If an employee is happy with
the reward system, they are more likely to appreciate work place and remain loyal
to the organization

5. Morale – Having a reward system in place providing employees with incentives

and recognition will boost their morale. By encouraging employees to meet goals
and targets it gives them clear focus and purpose which will improve their morale.
By the employees morale being boosted this will increase the morale of the entire
organization. This is all down to a reward system in the organization.

6. Teamwork – The reward system will increase the teamwork spirit in the
organization. The reward system will promote teamwork to the employees. The
employees will work together as part of a team to achieve their targets in return
for rewards. Teamwork within the organization will help increase efficiency and
create a happier workplace. This is another reason why reward systems are
important in business organizations.

Linking Performance to Pay

Linking performance to pay band is the most basic way of linking performance to reward.
Organizations have a pay band for each category of employees. Managers will be having
three or four categories based on their experience and competency level required for job.

E.g.; level 1 pay band is from 20,000/- to 40,000/- with a gap of Rs 500/-. i.e., 20,000 –
20,500 – 21,000 – 30,000 etc.

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Managers placed a higher priority on potential discretion in their attempts in manage their
employee than on organization’s edict that accuracy be their primary concern.

The main reasons for this are;

● The belief that accurate rating would have a damaging effect on the subordinate’s
motivation and performance.
● The wish to avoid creating a negative permanent record of poor performance that
might hound the employee in the future.

How these increments are given

- Without any condition: One way is to give it every year without any condition. Every
year the employer gets a fixed rate of increment.
- Some performance conditions: Another way is to have some performance condition
such as “increment is granted if the performance meets the expectation”.
- Motivate: It is possible to give two or more increments at a time to motivate a person
who has exceeded the performance standard.

Pay Bands & Structures

A pay structure can be defined as a collection of wage grades, bands or levels that link
related jobs within a hierarchy or series. It is a system that defines what each person is paid,
or what a particular job role attracts, based upon the value of that job or individual to the
business and their effectiveness within that role. For each type of possible pay structure there
are a variety of different methods for deciding on and separating employee pay, providing a
framework for pay progression and reward strategies.
Salary bands give structure and process to pay decisions. But the benefits of having them
extend beyond traditional total rewards and finance, touching focus areas like employee
engagement, performance management, and talent acquisition. “Formalized salary bands
aren’t just essential for the management of your compensation strategy.
Pay structures matter because businesses not only need to indicate rates of pay for different
jobs or people within an organization, and develop clear processes for managing pay, they
need to ensure that they are consistently paying their staff appropriately for what they do and
to reflect their worth to the business. A logically-designed framework within which
equitable, fair and consistent reward policies can be implemented will also enable you to
encourage the desired behaviors and performance in your workforce to meet your end goals.

The principle objectives of a pay structure are therefore:

● to align your reward strategy with your business strategy
● to help ensure fairness and equity within your organization

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 ● to develop clear processes for effectively managing pay
● to enable staff to understand how pay is managed within the organization and what
pay opportunities are available to them.

Types of salary structure

There are three main types of salary structure businesses use:

➢ Traditional
➢ Broadband
➢ Market-based

Traditional structure
Traditional salary structures are divided into numerous pay grades. Salary increases are
relatively small jumps between pay grades. Employers can use traditional structures to
prevent employees from capping out at the maximum salary too quickly.
Decide what an employee needs to do to move onto the next pay grade. You may use a
variety of metrics to determine a pay raise, such as performance and length of employment.
Set the minimum and maximum salary range for each employee or employee group. Then,
determine the number of pay grades within the structure

Broadband structure
Broadband structures are more flexible than traditional salary structures. These salary
structures utilize fewer pay grades. And, each pay grade has a wider salary range than
traditional structures.
If you use the broadband structure, you have more leeway when deciding an employee’s
salary. You aren’t limited by a narrow salary range like a traditional structure.
However, using a broadband system can lead to greater pay inequalities between employees.
Consider conducting a pay audit to identify pay disparities due to race, gender, disability, etc.
An employee may max out at the high end of their salary range if you implement a
broadband salary structure. Although this might be great in the moment, the employee may
start looking at other jobs when they no longer receive raises.

Market-based structure
Market-based structures are based on what other employers pay employees. Under a
market-based salary structure, conduct an external pay audit to determine your salary ranges
for each position.
To find out what workers are earning outside your business, do some research. Use resources
like the U.S. Bureau of Labor Statistics or Glassdoor to see what employees in similar
positions earn.

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Put together a list of positions and their descriptions before collecting market data. That way,
you can better compare positions.
In some ways, market-based structures are a combination of traditional and broadband salary
structures. The salary ranges can be high like broadband structures, but the ranges are
generally narrow and consistent.

Realities of Ethics in Performance Management

For defining ethics, it is a system or code of moral standards of a particular person, group or
profession. It may be defined as the actions an individual takes on himself to ensure his
continued survival across the dynamics.
Ethics deals with whether to perform certain kinds of action or not in line with what is
acceptable to the society as a whole and therefore, ethics is the process of deciding as to what
is good for human beings and also of rational thinking aimed at establishing ‘what values to
hold and when to hold them’?

Principles of Ethics in Performance Management

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

Importance of workplace ethics

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 - Workplace ethics promotes teamwork and cooperation. An organization that
introduces the workplace ethics program aligns the behavior of employees. As a
result, this fosters openness, partnership, and trust. Moreover, when employees know
supervisors’ expectations they perform better in their jobs.

- Workplace ethics fosters a positive public image. Workplace ethics help an

organization establish a positive reputation in the eyes of the public. This is especially
important for non-profit organizations and high-profile companies that rely more on
private donations and government grants. Such donors need to be aware of how these
firms plan to use their money.

- Workplace ethics protect company assets. A company can prevent property theft
and falsification of documents by implementation of workplace ethical standards.
Work ethics also help to protect an organization from loss of income due to
employees taking false sick leave.

- Workplace ethics provides emotional security. Recognizing the importance of

ethics at the workplace helps employees to feel secure, because there is no harassment
from other workers and the supervisors treat employees with respect. In case these
ethics are violated, disciplinary actions are taken to foster a better working
environment.

Unethical practices in performance measurement and evaluation and how to curb this.

Managerial malpractice:
When the top level of employees or managers are involved in illegal behavior or practices
then it becomes the culture of the organization. By seeing the top-level personnel behavior,
the junior levels of employees are motivated to do the unethical behavior.
Not engaging employees in decision making:
In time of making the performance decision managers should involve the employee for
whom the specific decision is made. Because when the employee is involved in the
decision-making process then he or she becomes clear about his or her personal goal of
achievement and the process and he or she can act ethically. But when employees are not
engaged in decision making then they may choose an unethical path for goal achievement.
Workplace policies:
When the managers and employees get involved in the policies of the workplace then
unethical behavior arises.
Corporate goal achievement:

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Sometimes managers of an organization give complex targets for employees. When the target
level becomes hard for employees to attain then they get involved in unethical behavior.
Managerial favoritism:
In some organizations in some cases the managers favor unethical or illegal behavior for
their personal interest which in term increases the unethical behavior.
Having less mutual respect:
One's role as a manager involves making sure his or her employees all treat each other
respectfully as well. While they don't all have to agree with each other, they should show
proper respect for each other's ideas and opinions. When they have less respect for each other
than the ethical dilemma arises.
Unethical culture:
A company's culture comprises the shared norms and values among workers. Influenced by
top managers and HR initiatives and trickling down through frontline management ranks, a
company's ethical nature is built into the fabric of its culture. In some businesses, peers
demand high ethical standards and behaviors among colleagues. In companies that routinely
exhibit bad ethics, employees either condone or go along with poor ethical decisions or
passively condone them through inaction.
Unclear Policies:
In some cases, managers and employees exhibit poor ethical behavior because the company
does not offer a clear model of ethics in Performance management. A company policy
manual and ethical code of conduct normally establish ethical standards and consequences
for poor decisions. Some businesses have no formal ethical policy documents and offer no
guidance at all. Others have policies that are unclear, vague, inconsistent or not consistently
enforced.

Ways to Prevent Unethical Behavior in the Workplace

Unethical behaviors can plague a workplace, whether an executive steals money from the
company or an associate falsified documents. Unethical behaviors can damage a company's
credibility, causing the business to lose customers and ultimately shut down. However,
business owners and their management teams can work with employees to prevent unethical
behaviors.

Create a Code of Conduct: A written code of conduct provides employees and managers
with an overview of the type of conduct and behaviors the company expects. It outlines what
behaviors are unacceptable and what measures are taken if an employee violates the code of
conduct.

Lead By Example: Employees look to business owners and managers for direction on how
they should conduct themselves. As a business owner, make ethics-based decisions and

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monitor the individuals you put into leadership roles at your company for the same values. If
you see a manager violating company practices, such as a policy against workplace
relationships, intercede immediately to retain credibility with other workers.

Consequences for Unethical Behavior: Business owners must hold their employees
accountable when they act unethically. Start by informing new employees of the rules during
their orientation sessions. Make sure all new workers know the consequences of policy
violations. If an employee acts unethically, refer to the code of conduct and take the
necessary measures to warn or terminate.

Show Employees Appreciation: Loyal employees feel that a company values the hard work
they put into accomplishing tasks on a daily basis. A loyal employee is less likely to act
unethically. Show appreciation to workers on a regular basis to encourage loyalty. Consider
offering an extra day off per quarter or year to top performers or institute a bonus program in
the sales division to reward hard work.

Welcome an Ethics Speaker: Schedule an ethics trainer to visit your work site to discuss
ethical behavior and explain why it is important in organizations, regardless of the size or
industry. Ethics trainers use role-playing, motivational speaking, videos and handouts to
illustrate the importance of ethics in the workplace.

Create Checks and Balances: Rather than putting related responsibilities in the hands of
one employee, create a system of checks and balances to minimize the opportunities for
unethical behavior. For example, a sales associate rings up customer purchases, while an
accountant balances the books to ensure that all payables are received and documented. Use
an annual audit to verify established procedures are being followed and develop new policies
to address any unique situations that arise during the year.

Hire for Values: When business owners hire employees, many seek to bring on individuals
who have the education and experience that prove they are skilled workers, capable of
handling the tasks at hand. Employers who want to prevent unethical behavior also look at
candidates' values to ensure they mesh with the company's culture. Make sure a new
employee believes in working diligently to earn a salary and are ready to comply with
company policies.

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UNIT 5
Facilitation of Performance Management System through Automation
Automated Performance Management systems allow employees to create, store and monitor
their progress and help achieve their development plans. User Experience allows them to
track progress for the same objectives over a period of time. Real time training inputs from
managers and supervisors ensures greater engagement.
Automated employee performance management tools enable agencies to simplify and create
more efficient goal-setting processes. Employees and supervisors can document their
accomplishments in a performance management system. In doing so, managers can monitor
and track employee progress effectively.
By automating the routine tasks and using data analytics as well as big data, HR Managers
can ensure that the end to end HR value chain can scale up and actualize synergies from the
integration of disparate and discrete tasks

Here are three benefits of automating performance management methods:

1. Create a more effective goal-setting and tracking process
Automated employee performance management tools enable agencies to simplify and create
more efficient goal-setting processes. Employees and supervisors can document their
accomplishments in a performance management system. In doing so, managers can monitor
and track employee progress effectively.
2. Increase employee productivity and achieve business goals faster
Implementing PM technology can facilitate the cascading of goals and the completion of
forms, saving the government time and money. Through tighter goal alignment, redundant
efforts are reduced and talent can focus on the actual execution of agency objectives. Thus,
the agency can improve overall performance.\
3. Provide higher quality feedback and training opportunities
With an automated PM system, managers can deliver more accurate and consistent employee
evaluations. Federal agencies can embed guidance and management coaching materials
within a performance management system, which should enhance the quality of feedback the
employees receive and ensure they improve their future performance. Using a digital
platform can also help managers to better identify and address skill development and training
needs.

Here are 7 consequences you can get once you automate the PM system.
1. Streamlined Workflow
The Performance Management system has a large scale flow of documentation which needs
to be accessed by different parties. Automation helps not only in reducing the chaos, but also
helps in flowing of information as per defined workflow. Every party can also electronically
access the necessary data and information without hassle.

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 2. Report Compilation
With the large value of data available during the performance review process, it becomes
very difficult for human resource personnel to proceed with creating reports and creating
information from data sources. Automation not helps in data calculation but makes it easy to
access and make reports out of them.
3. Report Compilation
By enabling completion and storage of information on-line, it becomes pretty easy to record,
access data without handling stacks of paper.
4. Easily accessible repository of information.
For investigation or reference purposes of present and previous performances, data becomes
pretty accessible if kept online.
5. Easy decision-making
With information available easily, decision making becomes an easy task. Online systems
allow in-depth analysis and analytics to plan personalized development guides and measure
results.
6. Enhanced Development and training support
Automated Performance Management systems allow employees to create, store and monitor
their progress and help achieve their development plans. User Experience allows them to
track progress for the same objectives over a period of time. Real time training inputs from
managers and supervisors ensures greater engagement.
7. Free time for useful engagement activities.
With entire effort becoming an easy task, managers and employees can actually dedicate time
to other useful employee engagement activities. There can be discussions on employee
development, improving bottom-line results and career progression.

Improving Quality of Planning and Design of Performance Management,

1. Research & Set Benchmarks For Performance Management Practices

To understand where your current performance management system is falling short, you need
to know what an effective performance management system looks like. Thorough research is
key in analyzing the elements to include in an effective performance management system.
Reading case studies of businesses that have been successful in revamping their performance
management strategies can give helpful insights for your system. Analyzing prevailing
performance management practices in your industry and leading trends in the market can also
help you set a benchmark for what an effective performance management system should
entail.

2. Establish Clear Business Goals/Objectives For Performance Management

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It is critical to define clear goals and objectives that your organization is trying to achieve
through the performance management system. Some of the common goals are:
Improve organizational performance
Align individual and organizational objectives
Develop a performance culture among employees
Improve individual performance
Align individual behavior to organizational values and culture
Identify personal development needs
Link performance to pay

3. Establish Success Measures For Your Defined Objectives

Once you have decided on what you are planning to achieve through a performance
management system, it is important to know what constitutes the achievement of your
objectives. In simple words, you need to analyze what measures will be considered to declare
that objectives were achieved successfully. Additionally, organizations need to agree on
measures to understand the effectiveness of the methods and tools employed to conduct
performance management such as an automated performance management system.

4. Evaluate Your Current Performance Management System

Once you have set the benchmarks, the objectives and defined the success measures, it is
time to collect data and start evaluating your current performance management system.
To fully comprehend the effectiveness of your performance management system and to
understand how to improve it, a combination of both quantitative and qualitative data should
be used. It is important to get data about the benchmarks, objectives, and success measures,
to the extent available. To collect this data, some methods that can be used are:
Interview a sample of employees and managers about their experience of performance
management

5. Extract reports from online performance management systems

After the collection of data, analyze the results based on the success measures you defined
and the benchmarks that you wanted to achieve. Compare these results with industry
benchmarks. This will help you understand how effective your current system for
performance management is and where it needs to be improved. Always remember that with
the changing times and market standards, the system of performance management in an
organization should also be continuously tracked and modified to meet the ever-changing
employee needs.

6. Time To Take Action On The Results

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At this stage, you have evaluated the actual capabilities of your performance management
system, compared it to the benchmarks you had set, and found the discrepancies or
shortcomings that you need to work on. Now, it is time to take action on the results you
found and take appropriate measures to improve the current performance management
system. It is important to include the stakeholders that are directly impacted by it, such as
employees, managers, and senior management in this process. Discuss with them what they
are looking for in a new-age performance management system and their views on how to
improve the performance management system. This will result in greater ownership from
those who have to implement the system and be a regular part of it.

Improving the Objectivity of Performance Management

Steps for improving the objectives of performance management

1. Set goals effectively

Goals are the basis of an effective performance management process. There are two key
elements to consider when developing goals. First, are goals written clearly and objectively?
Second, are they directly contributing to the achievement of business strategy?

Typically, the process begins with departmental managers setting goals for their departments,
based upon organization-wide goals, which support the general business strategy. Making
departmental goals accessible to all managers ensures there is no overlap, reduces conflict,
and allows members of different departments to see where they support each other and
ensure they are not working at cross purposes. Each manager in turn shares the overall goals
with his/her department and meets with employees to identify individual performance goals
and plans.

An accepted framework to use to help write effective goals is SMART:

❖ S – Specific
❖ M – Measurable
❖ A – Achievable/Attainable
❖ R – Results-Oriented/Realistic/Relevant
❖ T – Time-Bound
A focus on objective, behavioral-based, and observable outcomes that are job-related helps
ensure fairness of the process and reduces discrepancy. Although sometimes difficult to hear,
objective feedback supported with regular documentation is difficult to dispute. This is also
where an understanding of the organization's overall objectives and goals and how individual
efforts contribute becomes essential. If for example, an individual understands that their
actions support an area of the business then it is easier to understand the impact when

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deadlines are not met. Using the SMART framework provides clarity up front to employees
who will be evaluated against these goals.

2. Begin with performance planning

Using established goals as a basis, performance planning sets the stage for the year by
communicating objectives, and setting an actionable plan to guide the employee to
successfully achieve goals.
Using the performance plan as a reference document, the employee and manager then should
regularly monitor progress against goals, problem-solve roadblocks, reassess goals, change
goals as business direction changes, and re-evaluate training and resource needs. This is
where the conversation is critical and often where the follow-through sometimes falls down.
Performance planning and ongoing performance feedback are critical because they facilitate
continuous improvement and aid open communication.

3. Create an ongoing process

Performance management – including goal setting, performance planning, performance
monitoring, feedback and coaching – should be an ongoing and continuous process, not a
once or twice-yearly event. Feedback that is delivered when it is most relevant enhances
learning and provides the opportunity to make any adjustments needed to meet objectives.
The attitude towards ongoing feedback is also crucial. If there is organizational support for
building constructive feedback into the fabric of day-to-day interactions, then the
environment will encourage development and drive goal-directed performance improvement.

4. Improve productivity through better goal management

Regular goal tracking allows for the opportunity to provide feedback as needed, make
adjustments to performance plans, tackle obstacles and prepare contingencies for missed
deadlines. Without a mechanism to regularly track progress against goals, the ongoing,
cyclical nature of the process falls apart and productivity dips.

Goal progress discussions, along with all performance feedback, should be delivered with
respect and should be objective and supportive. Specific examples provide clarity and help
the employee focus on future improvements. It is crucial that the manager listens to the
employee's perspective and incorporates the employee's observations into future plans – the
employee often experiences roadblocks the manager may not see

5. Gather information from multiple sources

Gathering performance information from a variety of sources increases objectivity and
ensures all factors impacting performance are considered. This information should include
objective data like sales reports, call records or deadline reports. Other valuable information

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includes: feedback from others, results of personal observation, documentation of ongoing
dialogue, records of any external or environmental factors impacting performance. Many
reviews also include an employee self-evaluation. Other documents that help define
performance objectives include: past performance appraisals, current departmental and
organizational objectives and documented standards related to career goals.

6. Documents
Note-taking must be consistent and include all significant occurrences, positive or negative.
Documentation is important to support performance decisions, and notes should be written
with the intent to share. In addition to documenting the details of an occurrence, any
subsequent follow up should be detailed.
The performance log is a record that the manager keeps for each employee and is a record of
performance "events." The maintenance of a performance log serves a number of purposes.
The manager can record successes or performance that requires improvement. And also used
as a historical record of some event. In addition, this documentation can be used to support
performance decisions or ratings.
But it also can be used as a reminder for the manager –that means if an employee does
exceptionally well, or meets deadlines consistently, the log can be used as a reminder to
provide recognition for a job well done.
In addition, if a manager notices an area of deficiency, the log can serve as a reminder and a
record of circumstances.
The performance log can also act as a reminder for coaching, i.e. record of upcoming tasks,
manager can make note to discuss with the employee to ensure he/she is prepared for the
individual for a task ahead, and then follow up discussion can promote learning and
continuous improvement This log should be objective and based on observable, job-related
behaviors – including successes, achievements and, if applicable, any documentation related
to disciplinary actions taken

7. Prepare and train your managers

Managing the performance of another individual is not an easy task and requires many skills.
Training may be required to ensure managers feel adequately prepared to effectively
complete all the tasks related to performance management. This is especially the case for
newly promoted supervisors.
Managers need to understand human behavior, how to motivate, how to develop, provide
coaching and deal with conflict.
To a great extent, managers must be observers and able to assess a situation, provide
motivation and identify problems that interfere with performance In addition, managers must
understand that individuals at different levels of comfort, ability and experience with their
jobs will require different levels of input, support and supervision manager who feels

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adequately prepared to provide and receive feedback, deliver a performance evaluation and
conduct a performance evaluation meeting will be a major contributor to a successfully
functioning process.

8. Perfect the performance review

The employee performance appraisal or review should be a summary of all that has been
discussed , the appraisal should be a written confirmation of what has already been discussed
with the employee.
The form should include key job responsibilities, current project work, relevant
competencies, goals and achievements. Previously completed performance appraisals should
be used as reference documents. It should also contain an area to allow employees to record
their comments and input.
All comments included on the appraisal form need to be job-related and based upon
observable behaviors
For the appraisal meeting, it is imperative to prepare ahead of time. Schedule an appropriate
place and time with no interruptions. Ensure the employee has the information necessary to
allow them to prepare adequately
Begin the discussion with job requirements and strengths/ accomplishments. The focus, as
pointed out previously, should be forward looking. The manager must be prepared in regard
to what he/she wants to discuss, but just as importantly must be prepared to listen.
Many suggest that it is important to first define the purpose of the meeting and provide an
agenda. A factual discussion with a focus on job-related behaviors will keep the discussion
objective
At the end of the meeting, key points should be summarized. It is important to note that the
employees will be asked to sign the appraisal, whether or not there is agreement.

9. Link performance with rewards and recognition

Organizations are linking performance to compensation. This link, however, cannot
effectively be established without the existence of sound performance management processes
that are seen as fair and equitable.
Clear documentation of progress against performance expectations also allows proper
recognition for a job well done. This can be provided in a number of ways, i.e. formal
recognition events, informal public recognition or privately delivered feedback. It is
important also to note the benefits of a consistent pay-for-performance process across the
organization. A consistent process creates a sense of fairness and significantly increases job
satisfaction.
Employees need to know that if an individual in one department is identified as a top
performer and compensated accordingly, then an employee performing at the same level in
another department will receive similar rewards.

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10. Encourage full participation and success
The value of the performance management process must be increased, otherwise problems
with defense and non-participation will arise. In addition, the process itself should be as
efficient and simple as possible. Automated reminders and scheduling tools help keep the
process on track. Another factor that contributes to success is the high level of management
support.
This support is needed not only in the form of verbal support, but also through participation
in the same performance management process for evaluation. Also, consider your
organization's current culture when it comes to performance appraisal and performance
management.
Employees must be able to honestly discuss performance and consider how to make
improvements in order to move forward. Another thing to consider is a system for evaluating
the process itself, which includes an annual survey, focus groups, manager feedback,
reporting or a combination of these and other methods.

Improving Execution Aspects of Performance Management

Performance execution contains both managerial and individual responsibilities. Managers
are responsible for creating conditions that motivate the employee, eliminating performance
problems, providing development opportunities, and reinforcing effective behavior. It is the
manager’s responsibility to create a work environment where all employees can be
recognized and fairly rewarded for their performance. Managers must also be aware of
society’s stereotypes and biases which can negatively impact some of their employees’
self-esteem and performance.
A performance evaluation system, which should be an integrative part of a comprehensive
performance management program, is as a process that involves continuous feedback as it
relates to an employee’s performance and where he or she fits within the organization, goal
alignment, contributions that he or she has made, and goal setting for areas of improvement.
Employees should be given objectives, clear expectations and a depiction of how they will be
evaluated related to their performance. These expectations must be clear and specific with
measurable goals tied to the goals of the organization

Automation in Performance Management

A performance evaluation system, which should be an integrative part of a comprehensive
performance management program, is as a process that involves continuous feedback as it
relates to an employee’s performance and where he or she fits within the organization, goal
alignment, contributions that he or she has made, and goal setting for areas of improvement.
Employees should be given objectives, clear expectations and a depiction of how they will be

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evaluated related to their performance. These expectations must be clear and specific with
measurable goals tied to the goals of the organization
An automated system allows managers to more frequently track employee performance.
Through the real-time measurement of progress, managers can quickly identify gaps and
make corrections. Equally important, an automated system improves the quality of feedback.
A good Automated performance management system is very must for any business to grow
and succeed. In today’s world, businesses are fast-paced and move quickly with their
strategies and goals. The performance system being followed in a company should be agile
enough to adapt quickly to the changing business priorities and should be able to provide
employees with a clear understanding of how they can support the corporate vision through
their work and individual goals. Goal alignment is a complicated and complex process.

Major Features of Automated Performance Management Systems

● Streamlined Workflow
The Performance Management system has a large scale flow of documentation which needs
to be accessed by different parties. Automation helps not only in reducing the chaos, also
helps in the flow of information as per defined workflow. Every party can also electronically
access the necessary data and information without hassle.
● Report Compilation
With the large value of data available during the performance review process, it becomes
very difficult for human resource personnel to proceed with creating reports and creating
information from data sources. Automation not helps in data calculation but makes it easy to
access and make reports out of them.
● Report Compilation
By enabling completion and storage of information on-line, it becomes pretty easy to record,
access data without handling stacks of paper.
● Easily accessible repository of information.
For investigation or reference purposes of present and previous performances, data becomes
pretty accessible if kept online.
● Easy decision-making
With information available easily, decision making becomes an easy task. Online systems
allow in-depth analysis and analytics to plan personalized development guides and measure
results.
● Enhanced Development and training support
Automated Performance Management systems allow employees to create, store and monitor
their progress and help achieve their development plans. User Experience allows them to
track progress for the same objectives over a period of time. Real time training inputs from
managers and supervisors ensures greater engagement.

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 ● Free time for useful engagement activities.
With entire effort becoming an easy task, managers and employees can actually dedicate time
to other useful employee engagement activities. There can be discussions on employee
development, improving bottom-line results and career progression

Automation Process

Process automation uses technology to automate complex business processes. It typically has
three functions: automating processes, centralizing information, and reducing the
requirement for input from people. It is designed to remove bottlenecks, reduce errors and
loss of data, all while increasing transparency, communication across departments, and speed
of processing

1. Identify Tasks and Process That Can Be Automated

Not every task can be automated. There are some easy wins though, where some processes
can easily be automated with existing software. Think about tasks within an organization
that:
● Are repetitive
● Are time sensitive
● Include a number of people and pieces
● Need auditing or compliance trails
● Impact other processes and systems within the business
● Are rule based, standardized
● Have the potential for high return on investment
Find these tasks and create a process map that shows the current system

2. Set Your Organizational Goals

Unless you have a firm idea of where you want to go, your changes may not result in any
positive, lasting change. The organization needs to decide what their goals are, and how
automation will help to achieve them. Also it’s important to plan how success will be
measured: less customer complaints, a drop in turnaround time, an increase in profitability?
Once you have clarified your goals, decision making becomes a lot easier, as every choice
simply becomes: is this taking us closer to our goals, or further away?

3. Choose the Right Tools

This is where research is required to find the best solutions. This could benefit from
involving professionals who have had experience in creating successful process automation
systems. The ideal system is simple and easy to understand, with intuitive interfaces and
great usability. It should be scalable, with flexibility for future growth and change within the

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organization. It should also integrate with existing software and tooling, be able to
communicate with other programs, and have a system to deal with data.

4. Change Management
This is arguably the most important step in transitioning to the new automation. Getting the
buy-in of staff and training employees in the use of the software helps to ensure it is used
effectively and with a positive attitude.
Involving the team with the planning process, getting a feedback loop that is open to change
from both sides, and ongoing education all help to transition smoothly to the new process.

5. Measure and Monitor

Your new process, and the tools used, are not intended to be static. As the business needs
change, so should the system. Continually monitor key performance indicators, and if
performance drops, assess the process and re-evaluate needs that are vital to system
longevity.

Benefits of process automation

Five benefits of automating processes and tasks, specifically in business settings, include:
● Reducing cost: when businesses consolidate tasks, they have to perform fewer steps,
which can reduce the amount of money they spend on all combined steps.
● Increasing productivity: when businesses automate manual processes, they give their
employees more time to perform other important tasks. More total work is
accomplished.
● Ensuring high availability: particularly in technology, automation can make services
more available to users.
● Increasing reliability: automation is a way to avoid human error. Computers can
often find solutions more rapidly and reliably than can people.
● Optimizing performance: the brief overview of historical automation above
demonstrates how drastically automation changes job performance. Automation can
shift a task from being time-consuming to ordinary or even obsolete.

Prepared by
Anna, Susu, Jud

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