INDIAN INSTITUTE OF MANAGEMENT SAMBALPUR

EXMBA TERM V,

Course - Organizational Transformation and Change

ASSIGNMENT
"Revolutionizing Performance: The Evolution of Our Management System"

Submitted By

Deepak Dash : 2022EXEMBA39

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"Revolutionizing Performance: The Evolution of Our Performance Management
System"

Synopsis:-

Mr. Rohit Singh was not feeling inspired in his current organisation, therefore Mr. Pankaj
Sinha had a one-on-one discussion with him. A manufacturing company called XYZ
Industries Ltd. recognised a number of issues with its current performance management
system. Employees felt that the procedure was too bureaucratic, that it should have been more
in line with business objectives, and that there were little prospects for professional
development. The business started a revolutionary performance management journey in order
to address these problems.

About the protagonist/actors :-

Mr Pankaj Sinha is working as HR Head in XYZ industries .

Mr Rohit Singh is working as AGM in XYZ Industries

Mr Amit Mishra is working as AVP in XYZ industries , reporting manager for the Mr Rohit
Singh

About the incident/ problem :-

After receiving his compensation letter, Mr. Rohit Singh is letting his reporting manager, Mr.
Amit Mishra, know that he disagrees. He said that despite his hard work on several initiatives
over the year, he felt that his contributions and efforts were not being enough acknowledged
during the appraisal, which is why he chose to leave his current position. Following their
interaction, Mr. Pankaj Sinha, the HR Head, gained an understanding of the many problems
with the current performance management system from Mr. Rohit Singh.

About the company:

XYZ Industries Ltd. has 5000 employees in their payroll system. All these employees have
the same appraisal system and performance management system. The company's net profit is
more than 11000 crore yearly, and its net sales are around 2 lac crore. They are leaders in
aluminium and copper manufacturing globally.

Existing Performance Management System:

The company follows the yearly appraisal cycle (April to March). Employees set goals based
on the P&B at the start of the financial year and submit their final achievements at the end of
the year. Managers are rating their employees based on their performance. Like Excellent
(>125% output), Very Good (>110% output), Good (=100% output), Average (<90% output),
and Below Average (<50% output).

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The ratings are related to the percentage of hikes for that year. Its increment percentage varies
each year based on the company’s performance and economic situation. Example

For 2021, Excellent: 12%, Very Good: 10%, Good: 8%, Average: 5%, Below Average: 0%

The increment is flat based on the ratings given by the managers. All these systems follow a
bell curve for normalisation.

XYZ Industries provides a website platform to capture their employees' ratings and normalise
all increments based on the manager's input and budget availability.

Drawbacks of the Existing Performance System:

Existing performance systems follow a bell curve for normalisation, also known as forced
ranking or stack ranking, which has been a common practice in performance appraisal
systems in many companies.

Limited Option : This system gives very limited options for managers. They have only a few
options to motivate the employees. Managers also have a restriction on sharing the monetary
benefits with a few employees. This system does not respect retention or potential candidates.

Competitive Environment: The existing system fosters a competitive environment where

employees are pitted against each other for limited top ratings. This can lead to unhealthy
competition, undermining collaboration and teamwork within the organisation.

Subjectivity and bias: The forced ranking system relies heavily on subjective judgements by
managers, which can introduce bias and unfairness into the appraisal process. Managers may
be influenced by personal preferences, stereotypes, or recency bias, resulting in inaccurate
employee performance evaluations.

Demotivation and disengagement: Employees who consistently receive lower ratings due to
the bell curve may feel demotivated and disengaged. This can lead to decreased morale, job
dissatisfaction, and ultimately higher turnover rates as employees seek opportunities
elsewhere.

Focus on Short-Term Goals: In order to secure higher ratings and avoid being ranked in the
lower percentiles of the bell curve, employees may prioritise short-term goals and individual
achievements over long-term strategic objectives and collaboration with colleagues.

Inaccurate Performance Measurement: Forced ranking may not accurately reflect employee
performance, as it fails to consider individual contributions within the context of team
dynamics and organisational goals. High-performing employees may be unfairly penalised if
they are part of a team with disproportionately strong performers.

Negative Impact on Employee Relationships: The existing system can strain relationships
between managers and employees, as managers are forced to assign ratings based on
predetermined distributions rather than on objective assessments of performance. This can
erode trust and communication between managers and their direct reports.

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3 P: A game changer in the performance system:

Understanding the drawbacks of the existing performance system, XYZ Industries Ltd. has
implemented 3 Ps (Ping me, Praise, Perform Fit) for their performance management system.

Ping me: This is a real-time feedback platform where any colleagues,managers, or functional
managers can give their feedback at any time. An employee can also seek feedback from
others on his or her performance.

•Provides platform to share real time feedback

•Cross functional managers can give feedback
Ping me

•Provides platform to praise /Motivate employees

•Employees can be praised for many reasons , not only for KPI. Exp - for values
, Training , Learning etc
Praise

•Provides platform to do appraisal of the employees on the real time feedback

•All the benefits are captured in this portal , like retention bonus, variable pay,
talent pool member
Perform fit

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Praise System:
This is a praised platform that can be utilised to motivate or praise any employee for his or
her contributions to the organization. Everyone can like and share the contributions made by
the employees. It carries some points in each praise, which can be redeemed on an online e-
commerce portal.

Perform Fit:-

This platform gives all the information about the employees. Information like past 3 years
ratings, CTC, talent pool member or not, level, last upgrade, last promotion, etc. All this
information helps the managers give proper increments based on real-time feedback. There is
no fixed increment aligned to ratings. A manager can give more increments to an employee
with fewer ratings.

Managers can decide the variable pay, increment percentage, and market correction for the
employees. This tool gives many options for managers to share the benefits with desirable
candidates for better performance.

In 2022, data

Excellent: 10 to 14%

Very Good: 8 to 12%

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Good: 6 to 10%

In this model, the manager can give an employee a Very Good rating with a 12% increment
or an Excellent rating with a 10% rating based on the CTC. Higher ratings can also bring
some other benefits.

Another feature of this new appraisal method is MDP (My Development Plan). The employee
must use the 70:20:10 approach to create a learning plan that spans the entire year. 360-
degree feedback is used to prepare the areas that need development (DAC). Therefore, the
new appraisal approach trains prospects for future responsibilities in addition to focusing on
the financial benefits.

This model promotes high-performing people. They deserve more, so the manager can give
maximum benefits to the high-performing employees. This platform can be accessed by all
levels and normalised by super managers and plant head levels. This eliminates all bias, and
appraisal has been done through a real feedback system at different levels.

Benefits of the Ping me , Praise , Perfrom Fit System :-

Multiple Benefits :- This system provides a platform for managers to choose various benefits
that they want to share with the employees. Benefits like Retention Bonus , Market
Correction , Increase in variable pay can be given to employee through this platform only .
Clear Expectations: This system helps clarify expectations by setting specific, measurable
employee goals and objectives. This clarity ensures that employees understand what is
expected of them and how their performance will be evaluated.
Continuous Feedback: This systems facilitate ongoing feedback and coaching between
managers and employees. Regular check-ins provide opportunities to discuss progress,
identify strengths and areas for improvement, and course-correct as needed, leading to
increased employee engagement and development.
Employee Development: By identifying strengths and areas for improvement, performance
management systems support employee development and career growth. Training, coaching,
and development opportunities can be tailored to individual needs, helping employees reach
their full potential and contribute more effectively to organizational success.
Recognition and Rewards: Performance management systems enable organizations to
recognize and reward high-performing employees for their contributions. Merit-based pay
increases, bonuses, promotions, and other forms of recognition motivate employees to excel
and reinforce desired behaviors and outcomes.
Alignment with Organizational Goals: An effective performance management system ensures
alignment between individual performance goals and organizational objectives. By cascading
goals down from top leadership to individual contributors, employees understand how their
work contributes to the overall success of the organization, fostering a sense of purpose and
alignment.

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Data-Informed Decision Making: Performance management systems generate valuable data
and insights that inform talent management decisions, such as staffing, succession planning,
and workforce optimization. By analyzing performance metrics and trends, organizations can
identify patterns, address performance gaps, and make informed decisions to drive business
outcomes.
Improved Communication and Accountability: Regular performance discussions foster open
communication between managers and employees, enhancing transparency, trust, and
accountability. Employees feel valued and supported when their managers provide
constructive feedback, recognize their achievements, and help them overcome challenges.
Employee Engagement and Retention: A strong performance management system contributes
to higher levels of employee engagement and retention. When employees feel valued,
challenged, and supported in their development, they are more likely to be committed to their
jobs and stay with the organization long-term.
Summary of this Transformational Jouney in the performance Management:-
Every worker at XYZ Industries, including Mr. Rohit Singh, had experienced this
metamorphosis. Ms. Pankaj was interviewing Rohit after 3 years discussing the
transformation. Following the introduction of the new PMS, Rohit has expressed his delight
and said that the staff is feeling more motivated.
This 3P Performance management system is a boon to the XYZ industries for maximizing
employee performance, driving organizational success, and fostering a culture of continuous
improvement and development. It helped to create a positive work environment where
employees thrive and contribute to long-term business growth by providing clear
expectations, ongoing feedback, development opportunities, and recognition.

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