Maharana Pratap Group of Institutions, Mandhana, Kanpur

(Approved By AICTE, New Delhi And Affiliated To AKTU, Luck now)

Digital Notes
[Department of Management]

Course : MBA
Branch : HUMAN RESOURCES
Semester : Even
Subject Name : PERFORMANCE AND
Subject Code REWARD MANAGEMENT
Lecture No. : KMBNHR04
/Topic : Introduction to PRM

Prepared by : Shweta Parmar 1

Introduction to Performance Management System
Meaning:

• Performance management is a process used by organizations to measure and improve the

performance of their employees. Performance management systems (PMS) are the tools
and processes used by organizations to achieve this goal.

• APMS typically includes several key components, such as goal setting, performance
feedback, coaching, and evaluation. The goal of a PMS is to provide employees with the
support, feedback, and resources they need to improve their performance and contribute
to the organization’s success.
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 Key Components of a Typical PMS:
• Goal setting: The first step in a PMS is to set clear, measurable, and achievable goals for employees. This
helps to align individual performance with organizational goals and ensures that everyone is working
towards the same objectives.

• Performance feedback: Feedback is a critical component of performance management, as it provides

employees with insight into how they are performing and what they can do to improve. Feedback can come
from managers, colleagues, customers, or other stakeholders.

• Coaching: Coaching is a process of providing guidance and support to employees to help them develop
their skills and improve their performance. Coaching can be done by managers, mentors, or other
experienced employees.

Evaluation: Evaluation is the process of assessing an employee’s performance against predetermined

standards or expectations. This can involve regular performance reviews, as well as periodic evaluations to
determine whether an employee is meeting their goals and contributing to the organization’s success.
 Key Components of a Typical PMS
• Overall, a PMS is a critical tool for organizations to ensure that their employees are
performing at their best and contributing to the organization’s success.

• By setting clear goals, providing regular feedback and coaching, and evaluating
performance on an ongoing basis, organizations can create a culture of continuous
improvement and drive success at all levels.
 Difference of Performance Management system is differ from Performance
Appraisal:-
• Performance appraisal is a specific aspect of a PMS that involves evaluating an employee’s performance
over a specific period of time, often annually or bi-annually.

• The appraisal process typically involves setting performance objectives, assessing the employee’s
performance against those objectives, and providing feedback on strengths and areas for improvement.
• The results of the appraisal are often used to make decisions about promotions, bonuses, and other rewards.

• PMS encompasses a broader set of activities and tools aimed at managing and improving employee
performance.

• This may include ongoing feedback and coaching, goal setting and alignment, performance metrics and
analytics, employee development and training, and other processes and tools designed to help employees
improve their performance and contribute to the success of the organization.

• In summary, performance appraisal is one component of a larger performance management system, which
encompasses a broader set of activities and tools aimed at improving employee performance and driving
organizational success.
 Performance Management and its Challenges in Current Scenario
The key challenges facing performance management in the current scenario:

• Remote Work and Distributed Teams: With the rise of remote work and distributed
teams, it can be more difficult to track and manage employee performance. Managers
need to find new ways to provide feedback and coaching, and to ensure that employees
are aligned with organizational goals and objectives.

• Changing Workforce Demographics: Today’s workforce is more diverse than ever, with
employees from different generations, cultures, and backgrounds. This can pose
challenges for performance management, as different employees may have different
expectations and preferences when it comes to feedback, recognition, and career
development.

• Digital Transformation: Many organizations are undergoing digital transformation,

which can change the nature of work and the skills required to perform it. Performance
management systems need to be able to adapt to these changes and provide employees
with the support and resources they need to develop new skills and stay competitive.
 Performance Management and its Challenges in Current
Scenario
Continuous Performance Management: There is a growing trend towards continuous
performance management, where feedback and coaching are provided on an ongoing basis rather
than once or twice a year. This can be challenging for managers, who need to find ways to provide
regular feedback without overwhelming employees.

Performance Metrics and Analytics: With the rise of big data and analytics, there is a growing
emphasis on measuring and analyzing employee performance. However, this can be challenging
for organizations that lack the necessary data infrastructure or expertise.

Overall, performance management faces several challenges in the current business environment,
but these challenges also present opportunities for organizations to improve their performance
management systems and drive success.

By embracing new technologies, adapting to changing workforce demographics, and focusing on

continuous improvement, organizations can create a culture of high performance and achieve their
strategic goals
 Performance Management Systems and Process
Performance management systems (PMS) and processes refer to the tools, procedures, and
practices used by organizations to measure, evaluate, and improve employee performance.
A performance management system typically includes several key components, such as:

• Goal setting: This involves setting clear, measurable, and achievable goals for employees that
are aligned with the organization’s strategic objectives.

• Performance feedback: Feedback is a critical component of performance management, as it

provides employees with insight into how they are performing and what they can do to
improve. Feedback can come from managers, colleagues, customers, or other stakeholders.

• Coaching and Development: Coaching involves providing guidance and support to employees
to help them develop their skills and improve their performance. Development involves
providing opportunities for training, education, and career advancement.
 Performance Management Systems and Process
•Evaluation and Appraisal: Evaluation is the process of assessing an employee’s performance
against predetermined standards or expectations. Appraisal involves formally assessing an
employee’s performance over a specific period of time, often annually or bi-annually.

Performance metrics and Analytics: Performance metrics and analytics are used to track and
analyze employee performance, and to identify trends and patterns that can inform decision-
making and drive improvements.

The performance management process involves the regular and systematic application of these
components to measure, evaluate, and improve employee performance. It typically involves
ongoing feedback, coaching, and development, as well as periodic evaluations and appraisals to
assess progress and make decisions about promotions, bonuses, and other rewards.

Overall, a well-designed and executed performance management system and process can help
organizations to improve employee performance, align individual goals with organizational
objectives, and drive success at all levels.
 Effective Appraisal system and Criteria
An effective appraisal system is a critical component of performance management and
involves assessing an employee’s performance against predetermined standards or
expectations.

Here are some key criteria for an effective appraisal system:

Clear and objective criteria: The criteria for evaluating performance should be clear,
objective, and measurable. Employees should be able to understand the standards and
expectations for their role and how their performance will be evaluated.

Regular feedback and communication: Appraisals should not be a one-time event but
rather an ongoing process of communication and feedback. Managers should provide
regular feedback and coaching to help employees improve their performance throughout
the year.
 Effective Appraisal System and Criteria, Reasons for Performance
Appraisal
Fairness and equity: The appraisal process should be fair and equitable, with all employees
assessed based on the same standards and criteria. There should be no bias or discrimination based
on factors such as age, gender, race, or ethnicity.

Employee involvement: Employees should have a say in the appraisal process, including setting
goals, providing input on their performance, and contributing to their own development plans.

Training and development: Appraisals should not just focus on past performance but also on
future development. Managers should work with employees to identify areas for improvement and
provide opportunities for training, education, and career advancement.

Accountability: The appraisal system should hold employees accountable for their performance
and provide consequences for poor performance or non-compliance.
Overall, an effective appraisal system is a critical component of performance management and
should be designed to assess employee performance objectively, provide regular feedback and
communication, and contribute to employee development and career advancement. It should be
fair, transparent, and involve employee input and accountability.
 Reasons for Performance Appraisal
Performance appraisal is a process used by organizations to evaluate and assess employee
performance. Here are some common reasons why organizations conduct performance appraisals:

Feedback and development: Performance appraisals provide employees with feedback on their
performance and areas for improvement. This feedback can be used to create development plans
and training opportunities to help employees improve their skills and knowledge.

Goal-setting and alignment: Performance appraisals can help align employee goals with
organizational objectives. By setting clear and measurable goals, employees can understand how
their work contributes to the success of the organization.

Recognition and rewards: Performance appraisals can be used to identify high-performing

employees and reward them with promotions, bonuses, or other incentives. This can help to
motivate employees and improve retention.
 Reasons for Performance Appraisal
Performance improvement: Performance appraisals can identify areas where
employees are underperforming and create action plans to improve their performance.

Legal compliance: Performance appraisals can help organizations ensure they are
complying with legal requirements related to equal employment opportunity and anti-
discrimination laws.

Succession planning: Performance appraisals can be used to identify employees with

potential for leadership roles and create succession plans for key positions.

Overall, performance appraisals are a critical tool for organizations to evaluate and
improve employee performance, align individual goals with organizational objectives,
and identify and develop talent for future success.
 Reasons for Performance Appraisal
Performance appraisal is a process used by organizations to evaluate and assess employee
performance. Here are some common reasons why organizations conduct performance appraisals:

Feedback and development: Performance appraisals provide employees with feedback on their
performance and areas for improvement. This feedback can be used to create development plans
and training opportunities to help employees improve their skills and knowledge.

Goal-setting and alignment: Performance appraisals can help align employee goals with
organizational objectives. By setting clear and measurable goals, employees can understand how
their work contributes to the success of the organization.

Recognition and rewards: Performance appraisals can be used to identify high-performing

employees and reward them with promotions, bonuses, or other incentives. This can help to
motivate employees and improve retention.
 Reasons for Performance Appraisal
Performance appraisal is a process used by organizations to evaluate and assess employee
performance. Here are some common reasons why organizations conduct performance appraisals:

Feedback and development: Performance appraisals provide employees with feedback on their
performance and areas for improvement. This feedback can be used to create development plans
and training opportunities to help employees improve their skills and knowledge.

Goal-setting and alignment: Performance appraisals can help align employee goals with
organizational objectives. By setting clear and measurable goals, employees can understand how
their work contributes to the success of the organization.

Recognition and rewards: Performance appraisals can be used to identify high-performing

employees and reward them with promotions, bonuses, or other incentives. This can help to
motivate employees and improve retention.
 Criteria: (KRA, KSA VS KPI)
KRA, KSA, and KPI are all different criteria used in performance management to evaluate
employee performance. Here’s how they differ:

KRA – Key Result Areas: KRAs are the broad areas of responsibility that an employee is
accountable for. They are usually aligned with the organization’s strategic objectives and are
used to evaluate an employee’s overall performance. KRAs are typically set at the beginning of
the performance management cycle and are used to define an employee’s major duties and
responsibilities.

KSA – Knowledge, Skills, and Abilities: KSAs refer to the specific competencies, knowledge,
and skills required for an employee to perform their job effectively. KSAs are usually used as a
basis for job descriptions and are assessed during the hiring process or in the employee’s annual
performance appraisal.
 Criteria: (KRA, KSA VS KPI)

KPI – Key Performance Indicators: KPIs are the measurable indicators used to evaluate how
effectively an employee is achieving their KRAs. They are specific, measurable, and quantifiable
metrics that track progress towards achieving a goal. KPIs are often used in conjunction with
KRAs to provide a more detailed assessment of employee performance.

In summary, KRAs define an employee’s broad areas of responsibility, KSAs assess their specific
competencies and skills, and KPIs track progress towards achieving specific goals. All three
criteria are important for evaluating employee performance and contributing to organizational
success.