Performance Management System Design, Implementation and Outcomes in Indian Software Organizations: A Perspective of HR Managers

Anuprya Singh*

Organiiadons' concern regardingcontribution of HR systems to business level performance continues to grow. In such context, effective design, implementation and outcomes ofperformance management system may resuk in greater strategic alignment of HR processes with business goals and objectives. This may be especially true in context of software industry, given its dynamic team-based work structures and agility requirements. This researchwas conducted in four Iruiian software services organizations with the purpose ofunderstanng the perceptions ofHR marutgers regarding design, implementation and outcomes of their organizational perforrrutnce management systems'. Resultsof this study present some interesting insights regarding the performance maruigement process; present and future trends with respect to system design; implementation and its underlyingchallenges; and outcomes of the system as perceived by HR managers and has important implications for greater alignment between performar^ce management system and business strategy.

haUenges of knowledge economy has catalyzed the search for relarively sustainable sources of competitive advantage. As a result, organizational leaders and strategists are ascribing greater importance to the role of human capital in driving business success. Moreover, organizations' concern for HR funcrion's contribution and accountability has grown significantly over the recent years. In such a context, performance management is being considered as a critical HR sub-system which may substantially contribute to organizational growth and effectiveness (Nnkervis and Compton, 2006). Performance management has been seen as a complex system in which managers work with their employees to set expectations, measure and review results, and reward performance, to ultimately improve organizational success (Armstrong and Baron, 1998; Mondy et al, 2002) and has consequences for both individuals and organizations. As with any other organizational system, performance management system's effectiveness
* Assistant Professor, Lai Bahadur Shastri Institute of Management, Plot No. 7, Sector 11, Dwarka, Delhi 75, India. E-mail: anupriya@lbsim.ac.in, anupriyasingh@yahoo.com

SOUTH ASIAN JOURNAL OF MANAGEMENT

is heavily dependent upon the way it is designed and implemented and perhaps, the reason for it being one of the."most praised, criticized and debated management pracrices for decades" (Lawler, 1994) lies in this only. Achieving the best organizational fit (in terms of design) and ensuring effective implementation of Performance Management System (PMS) are far fiom easy and need concerted effort by the HR managers. Identifying significant performance areas and developing key indices; developmental planning; devising performance measurement tools/methods; ascertaining periodicity of assessment; soliciting constructive involvement of employees and managers; ensuring fair implementation; improving individual, team and organizational performance are some of the intricate challenges encountered by the HR specialists with respect to a PMS. Moreover, in knowledge based industry like the software services, where performance outcomes are not essentially in terms of sales targets achieved or volume of goods produced, challenges seem to multiply. Software development work relates to transforming business information and knowledge into software products/services, requiring collaborative effort by cross-functional teams of knowledge workers and often involves high degree of experimentation with different analysis, strategy, priorirization, innovation and adaptability requirements for customization of software products/services (Moran, 2010). Knowledge workers with their high level abstract reasoning and cognition to synthesize and communicate new perspectives for effective solutions/processes (Stamps, 1996) possess skills that are in high demand, prefer work autonomy and resist traditional command and control culture while dealing with work related problems/issues (Kinnear and Sutherland, 2000). Managing performance of knowledge workers, thus, has been said to involve various intricate challenges and practitioners (e.g., Johnson, 2006; Lawrence, 2009; Moran, 2010, etc.) have suggested various ways to overcome them. While, designing and implementing a PMS for managing performance of knowledge workers has its own complexiries, the software services industry, has its own peculiarities (Agrawal and Thite, 2003). Sudden upsurges and down surges in world markets/economies cause considerable volatility for Indian software services industry (Deloitte, 2009). Recessionary trends in global markets result in significant decline in business as organizations cut back on IT spending and posit multiple challenges like^ifficulty in getting new projects, increase in idle resources and highs compensation costs. All these make survival and sustenance a difficult challenge. However, in a growing market when there is significant upsurge in global demand, software organizations find it easier to get new projects and draw significant revenues, allocate fatter compensation budgets and offer significant growth opportunities to employees. This volatility in work context of software services industry, makes the backdrop in which HR team is expected to contribute through PMS and other activities. Most certainly, the nature of software development work and the software services industry context posit significant challenges for the HR team in terms of desigri and
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PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

implementation of a PMS that captures the performance of software professionals with respect to a range of key performance/result areas, while contrihuting to improve individual and organizational performance. Nevertheless, several research findings have emphasized that the way in which organizations manage and implement performance managemeiit systems have a significant impact on employee perceptions about PMS and the organization as a whole (Giles and Mossholder, 1990; Folger et al, 1992; Ilgen et al, 1993; and Williams and Levy, 2000). Considering the importance of PMS design and implementation and the fact that Indian software industry context has received little research attention (Agrawal and Thite, 2003), this paper makes an attempt to understand perceptions of HR managers about ceitain aspects relating to PMS design, implementation and outcomes. Additionally this research study also highlights the problems perceived/encountered by HR managers in system implementation. Findings of the study, though exploratory in nature may provide beneficial insights to HR practitioners and theorists for aligning the PMS with organizational and/or husiness requirements.

REVIEW OF LITERATURE
On reviewing the relevant literature it was found that studies with both practitioner and academic focus have been carried out on PMS design, implementation and its outcomes. Some significant research contrihutions in context of present research study have been incorporated in this literature review. Wyatt (1994) carried out a research study focusing on identifying best practices in performance management by examining the systems of a select group of 37 companies recognized for financial success and innovative human resource programs. What emerged fiom the study, are a set of best practices that could facilitate the process of designing, implementing, and monitoring performance management. These are: internal and external alignment; simplicity; flexibility; decentralized control; a measurement process; greater links between pay and performance; feedback from multiple sources; senior management involvement and employee development. Three different studies undertaken by McAfee and Champagne (1993), Lawler and McDermott (2003) and DeNisi and Pritchard (2006) have especially made significant and holistic observations in present research context. Lawler and McDermott (2003) in their study on performance management practices of medium and large US corporations found that PMS design related factors/practices Ukebusiness strategy driven performance goals; joint establishment of performance goals; performance results and salary linkage; and development planning were highly correlated with system effectiveness. In their study they also found certain 'high impact' practices which brought about 'differentiation' in performance management process and these are: training for appraisees, termination of lowest rated individuals, calibration meetings (that compare ratings by different managers) and e-HR systems.
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DeNisi and Pritchard (2006) in their expectancy based morivation model for individual performance improvement presented a number of implications for the design of an 'ideal' PMS. These are as follows: 1. The system should be simple and transparent so that performance ratings can be easily understood by employees. 2. Performance standards and expectations should be clearly stated so that everyone involved (appraisee, appraiser and HR) understands what is expected and what is rewarded. 3. Separate appraisals for feedback and decision making purposes (administrative) would make the process easier to explain and understand. 4. Besides formal appraisals (which happen once or twice a year) informal appraisals and feedback must be a part of the system and frequency of feedback should be increased. McAfee and Champagne (1993) identified the following as certain key aspects for successful PMS implementation: 1. Supervisor must chart out the critical competence areas, discuss and work them out with employees to establish a viable action plan. Further, organizations must establish a norm for self development"employees need to know that they are expected continually to enhance their job skills". 2. The goals must be mutually developed and should be specific, measurable, attainable, relevant, time-framed and challenging. 3. Supervisors/managers must be provided with training to explain them the purpose and specific methodology of performance management. 4. The organizarions need to establish specific follow-up procedures to help ensure that employees are achieving their goals as defined in the action plan. To facilitate this, managers must be prepared to follow through and must have a number of meetings with employees during the review period. Nankervis and Compton (2006) in their study (covering 961 organizations across Australian industry) came out with few ideal principles of PMS design and implementation. These are: "strategic alignment of organizational goals and employee goals and outcomes; user friendliness, consistency, equity and transparency, and clear links between appraisal and salary review, human resource development, coaching and succession plans". . . Rao (2008) has proposed the following as certain critical aspects for improvement of performance management systems' in Indian context: 1. Greater focus on contribution, improvement and transition from appraisal to management of employee performance.
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PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION ND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

2. Need for recognition of the complexities of multi-dimensional PMS. 3. Decentralization of PMS hy making it a responsihiUty of the line managers. 4. Rigorous implementation of the system and giving it the seriousness it deserves. With respect to outcomes of PMS, a numher of potenrially desirable outcomes has heen identified. Some of these are: Superior organizational (Huselid, 1995), team and individual performance (Mcafee and Champagne, 1993; and Armstrong and Baron, 1998). Positive influence on organizational success (Mondy et ai., 2002). Enrichment of atritudes, experience and skills which improve the effectiveness of employees (Boswell and Boudreau, 2002). Contrihution to cultural change/re-engineering and maintenance or enhancement of competitiveness (Grote, 2000). Increased role clarity, standardization of performance objectives, increased feedback on performance and the development of more accurate and relevant performance measures (Harper and Tricia, 2005). Opportunities for remedial skills development, retention, career development, training and upskilling programs for individuals (Nankervis and Compton, 2006). Improved employee involvement, commitment, perceived empowerment and motivation (Fletcher and Williams, 1992; and Taylor and Pierce, 1999). Increased competence, organizational commitment and customer orientation of employees (Paul and Anantharaman, 2003). There has also heen a numher of potentially negative outcomes associated with PMS (Bevan and Thompson, 1992; and Fletcher and Williams, 1992). Some of those reported are: Skepticism and resistance to the philosophy of performance management (Fletcher and Williams, 1992); Cynicism hecause of the high expectations related to practical implementation of a PMS (Fletcher and Williams, 1992) ; De-motivation due to stress associated with performance evaluation and assessment (Winstanley and Stuart-Smith, 1996; and Longenecker, 1997). But most of the researchers (Beer et ai., 1979; McAfee and Champagne, 1993; Allan, 1994; Armstrong and Baron, 1998; etc.) have strongly suggested that PMS if well designed and implemented leads to positive individual and organizational outcomes. ,
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However, researchers have seen very specific elements/outcomes of PMS rather than the whole system that raay have been implemented. For instance performance discussions between supervisors and subordinate, during the performance management process have been found to influence the behavior and performance of employees (Beer, 1981). Goal setting and feedback are widely believed to affect performance positively through enhancing the motivation necessary for work performance (Earley and Shalley, 1991). Roberts and Reed (1996) proposed that participation, goals and feedback impact on appraisal acceptance, which affects appraisal satisfaction and finally employee motivation and productivity. Very little research had considered the outcomes of an enrire PMS in action (Harper and Tricia, 2005) and thus such kind of a research can be useful to further enrich and align performance management systems' to organizational requirements. Review of literature has brought to surface certain key characteristics of an ideal PMS; has highlighted the importance of design and implementation of the system and outcomes it may lead to. While some researchers have suggested the essential elements that a system must have and how such systems should be implemented, others have highlighted the problem areas or difficulties encountered in the process. However, there are no models providing an overall view of the design, development and implementation of performance management especially in non-western cultures (Claus and Briscoe, 2009). It can be clearly observed fi-om review of literature that most of the research in system design, implementation and outcomes, has not been carried out in the Indian context. Additional research in the area of system design, implementation and outcomes can certainly contribute towards better understanding and increasing effectiveness of the system especially in Indian context. Further, since HR managers are important stakeholders in the process of design and implementation of PMS and are also held responsible for resultant outcomes to a large extent, it is important to study how they perceive the system on these three aspects. Continuous need for improvement in design and implementation and achievement of desired outcomes fiom PMS, further underscores the importance of research in this area.

METHOD S AMPLE AND DATA COLLECTION

This study is exploratory in nature and aimed at understanding the perceptions of HR mariagers of select organizations regarding design, implementation and outcomes of PMS in the context of software industry! Four reasons guided the choice of Indian software industry as a subject for this study. First, the software industry has been viewed as India's global brand ambassador contributing significantly in terms of revenue growth, employment generation and value creation (NASSCOM-Strategic Review, 2010). Second reason is the dynamic, volatile work context and nature of this industry. The complex characteristics of software
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PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

projects, nature of software development work, rapidly changing technologies, 24 x 7 work environment, globally distributed work teams posit unique design and implementation challenges for PMS. Third, since this industry primarily thrives on its employees' tacit knowledge, capabilities and performance; a well-meaning PMS (in terms of design, implementation and outcomes thereof) in such an industry may be a significant HR system directly contributing to attainment of organizational goals and objectives. Finally, though, this industry has been growing in its economic contribution and significance, but there has been very little research on performance management systems' in this industry especially in the Indian context (Agrawal and Thite, 2003). It is for these reasons that this study aims to provide an insight on HR managers' perceptions regarding PMS design, implementation and outcomes. Quantitative data is collected from four Indian software multinational organizations. In order to meet the objectives of this research it is important that the organizations under this study has an established PMS. After reviewing the literature available for various software organizations' and their websites, the Director (HR)/Vice President (HR) of six such multinational software organizations in the NCR region were contacted directly through a formal letter of request to grant permission for conduct of this research in their organizations. After satisfying themselves about the academic nature of the study, HR teams of four organizations granted permission for the same. Respondents, i.e., the HR managers, are selected on the basis of non-probabilistic judgmental sampling technique. The nature of the study made it important for respondents of the survey to be those who are directly involved in PMS activities. In most cases, middle to senior level HR managers having a reasonable work experience in their organization/industry are chosen for the study. A total of 60 HR managers fiom all four' organizations are approached for data collection. Out of the 50 responses received from the sample organizations, 46 are usable yielding to a response rate of 76.6%. Among the respondents, 28 (60.8%) were female, 40 (86.9%) are postgraduates, 27 (58.6%) had more than 4 years of work experience in their present organization, 36 (78.2%) had total work experience of more than 4 years in the software industry and 40 (86.9%) were at middle/senior/top level in the organizational hierarchy.

RESEARCH DESIGN
For the purpose of understanding the perceptions of HR managers regarding design, implementation and outcomes relating to PMS in their organizations, a questionnaire is developed after reviewing relevant literature and instruments used by previous researchers (e.g., Taylor and O'DriscoU, 1993; Bernthal, 1996; Talyor and Pierce; 1999; Rao, 2007; Nankervis and Compton, 2006; etc). The complete instrument included 46 items spread over three PMS aspects namely system design; implementation and outcomes. The system design scale consisted of 24 items (on aspects relating to purposes for which the system was designed; presence of grievance/appeals mechanism; steps involved in the PMS; fiequency of conducting appraisals; current and future use
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of select performance management practices, etc). The instrument has 14 items relating to implementation (e.g., 'Individual and team performance expectations are communicated on an ongoing basis during the performance year' and 'Specific and timely feedback is given to employees' etc). With respect to outcomes, the instrument had eight items (aimed at seeking HR managers' responses on the extent to which the PMS provided employees with clear, measurable targets; and increased commitment and accountability of erhployees towards the organization; etc). Responses for most questions in the instrument are obtained on a 5 point scale wherein 5 indicated 'to a very large extent' and 1 indicated 'not at all'. However, for some questions, responses are obtained in an open ended format or on a fixed number of categories. Internal consistency of the scale is tested by computing Cronbach alphas and alpha value is found to be higher than 0.80 in each of the aspects.

RESULTS AND DISCUSSION

Results of all four organizations have been discussed and ainalyzed together and presented in three sections. The first section discusses HR inanagers' views regarding certain design aspects of PMS. The next section discusses their perceptions regarding system implementation. Finally, certain outcomes of performance management systems' as perceived hy HR managers are presented.

SECTION I: DESIGN ASPECTS

One of the important design aspects of PMS as highlighted by researchers (e.g., Cleveland et al, 1989; and Nankervis and Compton, 2006) is to understand the purpose for which PMS is to he utilized in the organization. Therefore, it is considered important to understand the purposes and objectives for which PMS was perceived to be designed in the organizations under study. Results for these are presented in Table 1. Table I: Purposes for Which the PMS is Designed
To a Very To a To Some Toa Not Large Great Extent Little At All Extent Extent Extent Compensation and Rewards. Proinotion. Retention or termination. Assessing individual's contribution to the Project. Identifying below average performers. Identifying Training and Development nee'ds. Providing performance feedback. Assigning roles in a Project. Identifying individual strengths and weaknesses. Career planning and development. 52.2 23.9 39.1 56.5 39.1 54.3

2.2

6.5 6.5
13.0 '

2.2 2.2

13.0 39.1 21.7 10.9 37.0 17.4 32.6 17.4 26.1

8.7
21.7 26.1 28.3 37.0 10.9' 13.0 23.9
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13.0 10.9 19.6 17.4 10.9

50
21.7 45.7 37.0 52.2 37.0

PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

From the responses provided by HR managers, it is gathered that the most important purpose for which PMS is designed is: 'compensation and rewards' (more than 90% HR managers stated so). 'Promotion' and 'providing performance feedback' are two other important purposes to a large/great extent as identified by more than 80% HR managers. Other important objectives identified are 'assessing individual's contribution to the project' and 'identifying below average performers' (75% HR managers stated these as the purposes to a large/great extent). The least popular objectives for which the PMS is perceived to be designed are: 'retention/termination'; 'identification of training and development needs' and 'assigning role in a project'. It is evident that performance management systems' have been designed to be used for purposes which relate to immediate or near short-term timeframe.However, there may be a need for focus on long term PMS objectives like career planning and development; identification of training and development needs also. To understand the performance management process being followed by the organizations, HR managers are asked to delineate the constituent steps/elements. Responses provided by them suggest that the basic process is quite similar in all four organizations with some variations to suit organizational needs. Almost all HR managers suggested the following basic elements in the process: performance planning and mutual goal setting by appraisee and appraiser on pre-identified key result areas, self appraisal and assessment by supervisor, determination of component ratings with respect to each of the KRA's and composite performance rating of the appraisee, normalization of the performance ratings and appraisal discussion/interview followed by feedback discussions and compensation/promotion related decisions. Additional aspects mentioned by HR managers were^competency assessment, development of performance improvement plans and career planning, and self development plans, etc. The elements reported by some HR managers are represented verbatim in Table 2. Table 2: Elements/Steps Followed in PMS (Representative Responses of Some HR Managers)
1. Defining objectives; 2. Assessing individual's performance in line with the objectives on quarterly basis; 3. PDI (Performance Development and Improvement) workshops for team members and leaders; 4. Documenting the achievements and high points of an individual; 5. Filling up the online PDI form; 6. Discussions amongst the leaders and subordinates; and 7. Assigning individual ratings and maintaining the bell curve.

2.

1. Discussion and definition of KRA's at the beginning of the year; 2. Self evaluation by employee; 3. Manager's evaluation of employee performance; 4. Identification and creation of career development plan and training needs; and 5. Sanity check by reviewers. 1. Setting up KRA's by supervisor, self appraisal followed by manager's assessing self ratings; 2. Appraisal and feedback related discussions and identification of areas for development; and 3. Means to achieve the desired result are also suggested by the supervisor along with goal setting for the next year.
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Table 2 (Cont.)
4.
1. Automated PMS; 2. Training to managers and apprises on PMS; 3. KRA/goal setting exercise at the beginning of the cycle along with competency analysis (competencies required for fulfilling those KRA's); 4. Periodic review and feedback; 5. 3-tier appraisal system for all (self, supervisor and reviewer); 6. 360 degree appraisal for senior managers; 7. Competency analysis at the time of appraisal; 8. Training and development plansan integral part of PMS; 9. Career planning short term and long terms goals; and 10. Promotions and compensation revisions. individual; 2. Assessing competencies (behavioral and technical); 3. Self rating of KRA's by appraisee; 4. Appraiser's rating; 5. Reviewer's rating; 6. Training recommendations by appraisee, appraiser and reviewer; 7. Promotion recommendations; and 8. KRA setting for next review cycle.

5. 1. Setting performance objectives (KRA's) for individual by line manager in discussion with

6. 1. KRA and goal setting is done for the coming period of assessment; 2. Feedback is given by
manager to employee on quarterly basis; 3. On completion of assessment period, self appraisal is done by employee and after that by manager and reviewer; 4. In the end, feedback is given to employee on his past performance and new KRA's and goal setting is done for future; and 5. Based on his performance assessment the following is decided by management-promotion, increment, training needs, career planning, etc.

7.

1. KRA based PMS; 2. The competencies and KRA's of employees are assessed during the respective cycles of feedback and incremental appraisals; 3. Normalization is carried out to identify high performers and further remove the bias in the system; and 4. Every 6 months formal feedback is provided.

PMS of all the four organizations was e-enabled since virtual working by employees separated by geographies and time zones is very common in this industry, e-based systems are particularly quite suitable in such a case. e-Based systems are also quite compatihle with software work structures and the dynamic/hectic schedules of software professionals as they provide them the fieedom to key in their inputs as per their time and location related convenience. Further, e-based PMS may also help in fiequent performance evaluation changing the focus fiom appraisal as an annual event to more of a real time ongoing developmental process (Miller, 2003). Another advantage of e-hased PMS is that it significantly reduces the administrative hurden on HR managers providing them with greater time for strategic tasks like spotting skill and competency gaps; identifying high performers and designing suitahle performance improvement plans, etc. Frequency of formal performance assessment in all four organizations is annual Reason for this may be found in administrative, time and cost related constraints. However, HR managers mentioned that it is supported by fiequent informal perforniance assessments and feedback sessions. The study also sought to understand whether there is any provision of grievance redressai within the PMS to which 87% HR managers mentioned that their organizational PMS incorporated an appeal/grievance mechanism. Presence of an appeal/grievance mechanism is important fiom procedural justice perspective as it provides a fair opportunity to employees to seek and provide clarifications with respect to their performance and lends objectivity and transparency to the system. Further, in an effective PMS, employees must he treated as partners whose interests
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PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

are respected and who have a voice, on matters that concern them and a grievance mechanism serves as an important forum in such a case. During discussion with experts fiom software industry, it is found that, often there are certain constraints on managers whUe awarding exceptionally high performance ratings and that there are fiequent rounds of meetings amongst various project managers to discuss who could be awarded superior ratings/promotion across various teams. To confirm the actual existence of such practices, certain other details relating to PMS relating to distribution of performance ratings and conduct of moderation meetings were sought. In response, 83% HR managers agreed that the system provided for only a limited number of employees to be awarded high performance ratings/scores and 67% stated that some moderation/calibration meetings are held at top levels in their organizations. The frequency of these calibration meetings varied fiom once (largely) in a performance year to twice (infrequent). These systemic checks and balances may be necessary to reduce subjectivity and personal biases but, due care must be taken to ensure that they do not stifle high performance and reduce the motivation to excel. Another important objective of this study is to identify the present arid future trends of usage of select performance management practices considered central to PMS design. For this purpose, the method used by Nankervis and Compton (2006) is adopted. HR managers are presented a list of performance managerhent practices in the survey and are asked to indicate the extent of present and future use of each of these practices on a five point scale (very large extent to not at all). Summarized results for the same are presented in Table 3. Table 3: Present and Future Use of Performance Management Practices (in%)
Performance Matiagement Practice 360/Multi-rater feedback Upward appraisals Relative appraisals Forced tanking/Bell curve Competency based assessment Training of Appraisers/Managers about PMS Training of employees about PMS Line mgrs Involvement in system design Online performance management Present Usage* 19 19 30 61 Future Usage"* 65 39 46 65 80 89 87 35 91

49 61 48 24 93

Note: * Percentage of HR Managers indicating to a very large/great extent..

Certain interesting trends in performance management practices can be noted in HR managers' responses. Only 19% HR managers mentioned that 360/Multi rater feedback system is currently being used to very large/great extent, but 65% mentioned that it would be used to a great extent in future. Usage of upward and relative appraisals
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may also increase in future but not at a very large scale as there is only a marginal change in the pattem of responses of HR managers. Forced ranking/bell curve fitment seem to be an important part of performance assessment since more than 60% HR managers suggested its extensive utilization both in present and future time fiame. Further, though competency based assessment is currently being used to quite an extent (as stated by 49% HR managers); an increased usage can be expected since 80% indicated that it would be used in future to a very large/great extent. Appraiser training and employee training on PMS, as a practice, was used to quite an extent in present and HR managers seem to be almost institutionalizing it as a part of PMS in future also, since more than 85% have indicated that these practices would be used to a very large/great extent. As far as involvement of Line Managers in design of PMS was concerned, HR managers' response suggested that it is not a popular practice in their present systems and is less likely to be used in future also. However, it can be suggested that the involvement need not be at a very strategic/critical level, but participation can be sought in delineating key result areas, identifying performance assessment parameters and even in design of performance assessment form. Such participation may help in improving the PMS and facilitate more focused performance evaluation. Organizations seem to be seeing good benefits of online performance management, since, more than 90% HR managers indicate extensive present as well as future use. This may also be attributed to the nature of industry wherein software professionals tend to prefer e-enabled performance assessments.

IMPLEMENTATION ASPECTS
HR managers' opinion was also sought on certain aspects pertaining to implementation of PMS, viz., awareness of employees and supervisors regarding the PMS, employee participadon in objective setting, provision of feedback and supervisor's role in system implementation, etc. Results for these implementation aspects have been presented in Table 4. 85% HR managers felt that employees and supervisors were aware of the organizational performance management processes to a very large/great extent. However, feedback and communication of performance expectations were perceived by HR managers as the problem areas. As high as 46% HR managers expressed that 'individual and team performance expectations are communicated on ongoing basis during the performance year' to someAittle/no extent. Only 56% of them felt that performance is reviewed on an ongoing basis and still less, i.e., 48% HR managers felt that specific and timely feedback is provided to employees to a large/great extent and still less. Collating responses to all the three questions, there seems to be a iieed for

PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTGOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

Table 4: Perceptions of HR Managers Regarding Implementation Aspects of PMS

To a Very Toa To Some To a Large Great Extent Little Extent Extent Extent Communication of Individual and team performance expectations on an ongoing basis during tbe performance year. Awareness of employees and supervisors regarding organizational performance management process. Employee participation in establishing performance objectives. Ongoing performance reviews. Provision of specific and timely feedback to employees. Documentation of feedback and performance related information. Organization provides required support in development and implementation of PMS. Communication of future performance expectations in current year appraisal meetings. Supervisors do the appraisals in a fair and objective manner. Supervisors implement the PMS in tbe same way as designed/suggested by the HR department. Supervisors take ownersblp of tbe ratings recommended by them. Supervisors are able to devote time to PMS. Supervisors track the implementation of feedback provided to employees.

Not At M

17.4 39.1 23.9 13.0 21.7 19.6 17.4 34.8 21.7 28.3 13.0 10.9

37.0 45.7 41.3 43.5 30.4 41.3 47.8 21.7 45.7 58.7 56.5 58.7 23.9

28.3 13.0 30.4 26.1 39.1 30.4 28.3 34.8 30.4 10.9 26.1 26.1. 50

15.2 2.2 4.3 17.4 8.7 6.5 2.2 8.7 2.2 2.2 4.3 4.3 19.6

2.2

2.2 4.3

6.5

better and ongoing communication of performance expectations; regular performance review; and specific and timely feedback on performance. Considering the nature of industry also, these may be considered as important elejnents of PMS implementation. More than 60% HR managers felt that 'employees participate in estahlishing their own performance ohjectives' and 'feedhack and performance related information is well documented'. However, approximately 35% of the HR managers felt that the ahove was implemented to some extent only. Therefore, it is clear that there may he a scope for improvement with respect to these aspects also. An ericouraging fact was that HR was receiving good organizational support for PMS in all the four organizations, since, 65% HR managers felt the same. As far as supervisors' implementation of PMS is concerned, as high as 87% HR managers
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mentioned that 'supervisors implement PMS in the same way as suggested or designed by the HR department' to a very large/great extent. More than 65% HR managers opined that supervisors 'do the appraisals in a fair and objective manner', 'are able to devote time to the process of performance management' and 'take ownership of the ratings recommended by them'. However, it seems that supervisors needed to track implementation of feedback provided to employees, since close to 70% HR managers suggested that supervisors do so to only some/little extent. This practice could result in substantial difference because, when supervisors monitor feedback implementation, it would encourage employees to take constructive steps for improvement and would motivate them to deliver superior performance in future. To gain greater insight into implementation related challenges of PMS, an open ended item is also included in the survey instrument. Responses to this question indicate that most of the problems/challenges related to the role of Line Managers/assessors. The HR managers responses suggested that assessors, viz., the Team Leaders, Project Leaders, Project Managers and Reviewers, had a very critical role to play in smooth implementation of PMS, but in certain situations, gaining support from Line Managers was rather difficult. Some views of HR managers regarding the specific problems encountered while eliciting cooperation and support of assessors/Line managers during PMS implementation are presented below verbatim: Line Managers do not devote adequate time for performance assessment of their team. Line Managers must review the performance of their team on a periodic basis and must provide feedback to the team. There is lack of cooperation by the line, who always wait till the 11* hour to complete assessments. Some HR managers also mentioned that project managers/team leaders are unable to handle difficult situations during performance management process. They felt a need for sensitizing them about the whole process of PMS and how employees are to be assessed through some training/workshops and also suggested that managers must be objective in performance assessment. Some of the views expressed by them in this context are presented below verbatim: Managers are not able to take tough calls and are unable to handle sensitive situations with employees during feedback and performance review discussions, thus putting them (employees) on back foot.; Team leads and project heads must hold regular team meetings to share important information and take views of team associates so that performance is aligned with project goals. Managers should be able to help the employees in understanding the performance management process flow and must acknowledge the iniportance of timely and regular feedback,
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PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

Because of the general human tendency to make snap judgments, sometimes project managers base their assessment only on the recent performance of an individual. This may result in a rating which the employee actually doesn't deserve. Among other things, HR managers also mentioned that if supervisors take ownership of the ratings given hy them; provide specific and timely information on change in goals/objectives; and specific feedback to employees then it will facilitate smooth implementation of the system as well OUTCOMES OF THE PMS Review of literature (e.g., Bevan and Thompson 1992; McAfee and Champagne, 1993; Armstrong and Baron, 1998; Boswell and Boudreau, 2002; and etc.) revealed that proper PMS design and implementation result in desired outcomes which may contrihute
to macro level variahles like employee satisfaction, commitment, accountability, etc. Hence,

in this study perceptions of HR managers were also sought on the extent to which their organizational PMS contributed towards: 'providing employees with clear and measurable targets'; 'improvement in communication between employees and supervisors', 'employee satisfaction' and 'commitment and accountability of employees to the organization' etc. Results are presented in Tahle 5. Table 5: Perceptions of HR Managers Regarding Outcomes of PMS
To a Very To a To Some To a Not Large Great Extent Little At All Extent Extent Extent Providing employees with clear, measurable targets. Improving communication between employees and supervisors.Clarifying role requirements and performance expectations. Increasing commitment and accountability towards the organization. Improving employee performance. Improving employee satisfaction. Developing mutual understanding and agreement between employees and supervisors on project goals and in term milestones. Providing motivation for performance. 15.2 13.0 15.2
8.7

69.6
50

6.5

4.3
2.2 2.2

4.3 _ 4.3 4.3 6.5

34.8 26.1 34.8 41.3 37.0

52.2 43.5 32.6 39.1

8.7
2.2

23.9 10.9

6.5

13.0
6.5

39.1 58.7

45.7 28.3

2.2

4.3

2.2

. One of the important PMS outcomes as perceived hy HR managers was 'providing employees with clear and measurahle targets' since close to 85% of them felt that the system did so to a very large/great extent. However, at the same time only 56% of the HR managers felt that PMS actually helped an employee improve his/her performance. . .
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Close to 65% HR managers felt that PMS clarified role requirements and performance expectations; improved communication between employees and supervisors; and motivated the employees to perform. However, with respect to 'increasing commitment and accountability towards the organization' and 'developing mutual understanding and agreement between employees and supervisors/managers on the project goals and in term milestones' only close to 53% HR managers felt that their organizational performance management systems' contribute towards these to a very large/great extent. Further, only 50% HR managers felt that PMS of their organizations' contributed towards employee satisfaction to a large/great extent.

CONCLUSION AND RECOMMENDATIONS

The work context of software industry is known to be knowledge intensive; dynamic and team based. Multiple teams working fiom geographically dispersed and culturally diverse locations are involved in the entire software project. Starting from conceptualization stage to the final execution and delivery of the project, teams are required to put in synchronized efforts on multiple iterative tasks. This coupled with volatility in global demand requires work structures and systems to be very flexible and business centric. PMS, being no exception, also faces unique challenges in such a context, but also has the potential to provide distinct HR advantage. Since human performance is the primary asset in any knowledge based industry like software services, the PMS, if designed and implemented^ well, has the potential to result in desired outcomes such as: role clarity; enhanced performance; performance alignment at all levelsindividual, team and organizational; improved superior subordinate relationship; greater employee commitment and motivation to improve performance. While serving the immediate or short term purposes, it is important for performance management systems' of software organizations to focus on developmental aspects of their human capital as they confiont volatile markets and rapidly changing business landscape. Perhaps, sudden changes in technology and business make it difficult for organizational performance management systems' to focus on strategic long term performance development but, at the same time it is important to do so. Further, it is important to not limit the use of PMS to HR related aspects only. Using PMS for business/project related purposes may be a step further in making it effective; increasing its usage and acceptance by line managers. Line Managers may find PMS extremely helpful if employee performance ratings/feedback are weU documented and PMS information can be used in assigning specific roles and tasks in projects since this may result in greater person-role fit and superior project performance. Further, while designing the system, it may be important to achieve an internal and as well as external fit which shaU ultimately optimize the contribution of PMS to organizational growth and success. Therefore, for best results, the HR sub systems within PMS (such as performance planning and feedback; competency assessment; compensation and rewards; training and development, etc.) should function in an integrated manner and PMS must also fit to project and organizational requirements.

PERFORMANCE MANAGEMENT SYSTEM DESIGN, IMPLEMENTATION AND OUTCOMES IN INDIAN SOFTWARE ORGANIZATIONS: A PERSPECTIVE OF HR MANAGERS

Noted researchers (e.g., Pareek and Rao, 2003; Ramlall, 2003; and Ulrich, 1997) have highlighted the need for HR managers to understand business requirements and bow HR systems can help in achievement of organizational goals. It would be reasonable to assume that the HR function would not be able to deliver strategic value unless there is a deeper understanding of industry-related intricacies. For instance, in case of software organizations, if HR specialists are provided with basic functional training in project management and software development it may improve their' understanding of PMS design and implementation context. It may also help them in identifying certain critical dimensions for assessing performance of software professionals, team leaders, project managers, etc. Moreover, since the line managers may not be highly equipped in handling team related HR issues like: feedback, employee motivation, job scheduling, etc., HR functionaries can help them on these aspects also. Later on, HR specialists may be associated with different projects in an organization in a full-fledged manner. Depending on the complexity and team size of a project, one HR specialist may be associated with one software project or 2-3 projects to take care of employee performance related issues. HR specialists may also be involved in project team meetings. The results of this high HR involvement approach would be two-pronged it would empower the HR functionaries with better business knowledge and would also lead to better performance facilitation, improvement and assessment at individual, team and.organizational level. Further, fiequent communication between HR and Line, PMS related workshops and training sessions may facilitate greater understanding of line managers regarding interpersonal aspects of PMS and thus may result in greater system effectiveness. Certain encouraging PMS practices observed in organizations under study are that they all are e-based; had a grievance/appeal mechanism via which employees could express their concerns; incorporated systemic checks and balances in terms of moderation meetings and cap on number of employees who could be awarded high ratings. With respect to future trends in performance management systems, it appears clear from this study that the use of 360 degree/multi rater feedback and competency based assessment are likely to significantly increase; along with upward appraisals and training of employees and line managers regarding PMS. Similar trefids were observed by Nankervis and Coinpton (2006) also in their study on Australian organizations. HR practitioners seem to be ascribing greater importance to strategic aspects of HRM in future, thereby aiming to align PMS with organizational goals and requirements. Further, bell curve fitment or normalization: of performance ratings and online performance assessment seem to be an inseparable part of PMS design as HR managers perceive no decline in their .future^ usage tdo. . The results of this study highlight the crucial role played by project management layer in performance facilitation and assessment. For PMS to be effective, it has to be supported by strengthening of the project management layer which has heen a concem in the Indian context as noted by researchers (e.g., Arora et al, 1999; Tschang, 2001; and Agrawal and Thite, 2003). Line Managers, based on their technical understanding
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and interpersonal approach, define, facilitate and assess individual and team performance. Therefore, they are the face of the PMS for employees. The system may have been designed in accordance with the hest practices; however, if it is not wellimplemented hy the line it may he rendered as ineffective. Be it performance planning, appraisal interview, developmental planning, feedback or involving employees in the performance management process; line, managers have a very crucial role to play in PMS implementation. For instance, line managers need to encourage employees to set task oriented as well as developmental goals considering the dynamic nature of projects, technology and skill requirements in software work context. Further, real time communication of performance expectations, periodic project review meetings, ongoing performance reviews while implementing:PMS may result in greater alignment of performance at individual and team level. Frequent communication hetween HR and line; encouraging ownership sentiment amongst line managers regarding PMS; sensitization and greater training and holding line managers accountable on how well they conduct performance assessments, coach and mentor their subordinates rnay further improve PMS implementation. Feedhack has been considered as an important aspect in PMS and processes (DeNisi and Kluger, 2000; DeNisi and Pritchard, 2006; and Jawahar, 2006, etc.). Dynamic nature of software work environment further underscores the importance of feedhack mechanisms. Due to evolving nature of tasks, rapid changes in client expectations, dynamic performance goals and shifting task priorities, feedback almost becomes the lifeblood of teams and individuals working in the software set-up. Frequent and timely feedhack may help an employee re-focus and align his/her performance with team and project goals and take remedial actions if necessary! Results relating to PMS implementation however, reflect a need for greater attention on various aspects of feedback such as: focus, timeliness and documentarion. Perhaps, there is a need for line managers to reflect upon their feedback mechanisms and strategies. Feedback provided to employees can be more effective if, while pointing out the areas requiring improvement, line managers also address how performance can he improved (DeNisi and Pritchard, 2006). Further, it is also important for line managers to track whether the feedback provided to employees is actually being incorporated by employees in their future .tasks and activities which may enhance future performance. HR managers' perceptions regarding outcomes reflect that there may he still some time in PMS resulting in macro level outcomes such as increased employee satisfaction, organizational commitment, accountability and cooperative, dyadic relationships; Improvements in system design and implementation and greater strategic focus, over the period of time may certainly help in bridging the gap: ..

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2. Allan P (1994), "Designing and Implementing an. Effective Performance Appraisal System", Review of Business, Vol. 16, No. 2, pp. 3-9. . : 3. Armstrong and Baron (1998), Performance Management: The New Realities, Insritute of Personnel and Development, London. 4. Arora A, Arunachalam V S, Asundi J and Femandes R ( 1999), "The Indian Software Industry: Report to the Alfred Sloan Foundation", Carnegie Mellon University. Retrieved from http://www.heinz.cmu.edu/research/61full.pdfonjuly 1, 201L 5. Beer M, Dawson J E, Ruh R and McGAA B B (1979), "A Performance Management System: Research, Design, Introduction and Evaluation", Compensation Review, Vol. 11, No. 3, pp. 56-70. 6.. Beer M (1981), "Performance Appraisal: Dilemmas and Possibilities", Organizational Dynamics, Vol. 9, No. 3, pp. 24-36. 7. Bernthal P R (1996), "Comparing Performance Management Practices in the United States and Pacific EUm", Advances in International Comparative Management, Vol.'ll,pp. 1-29. ' 8. Bevan S and Thompson M (1992), S Bevan and M Thompson (Eds.), An Overview of Policy and Practice in Performance Management in the UK: An Analysis of the Issues, Part 1, IPM (now IPD),' London. 9. Boswell W R and Boudreau J W (2002)., "Separating the Developmental and Evaluative Performance Appraisal Uses", Journal of Business and Psychology, Vol. 16, No. 3, pp. 391-412. 10. Glaus L and Briscoe D (2009), "Employee Performance Management Across Borders: A Review of Relevant Academic Literature", International Journal of Marmgement Reviews, Vol. 11, No. 2, pp! 175-196. 11. Cleveland J N, Murphy K R and WilUams R E (1989), "Multiple Uses of Perfohnance Appraisal: Prevalence and Correlates", Journal of Applied Psychobgy, Vol. 74, No. 1, pp. 130-35. . 12. Deloitte (2009), "Global Economic Slowdown and Its Impact on the IT Industry [White paper]"..Retrieved from http://www.deloitte.com/assets/Dcom-India/ Local%20Assets/Documents/Global%20economic%20slowdownFinancial%20Services.pdf on July 11, 2011. 13. DeNisi A S and Kluger A N (2000), "feedback Effectiveness: Can 360-degree Appraisals Be Improved?", The Academy of Management Executive, Vol. 14, No 1 ^pp.129-139. ' . . . : 14. DeNisi A S and Pritchard R D (2006), "Performance Appraisal, Performance Management and Improving Individual Performatice: A Motivational Framework", Management and Organization Review, Vol. 2, No. 2, pp. 253-277.
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29. Longenecker C O (199.7), "Why Managerial Performance Appraisals. Are Ineffective: Causes and Lessons", Career Development Journal, Vol. 2, No. 5, pp.212-218. 30.. McAfee B R and Champagne P J (1993), "Performance Management: A Strategy for Improving Employee Performance and Productivity", Journal of Managerial Ps:ychoioi, Vol. 8, No. 5, pp. 24-33. ' . . 31. Miller S J (2003), "High Tech and High Perfonnance: Managing Appraisal in the Information Age", Journal of Labour Research, Vol. 24, No. 3, pp. 409-423. 32. Mondy R W, Noe R M and Premeaux S R (2002), Human Resource Management, 8* Edition, Upper Saddle. River New Jersey, Prentice- HaU. 33. Moran D (2010), "The Challenges of Managing Knowledge Workers", Supervision, Vol. 71, No. 5, pp. 18-21. 34. Nankervis A R and Compton R L (2006), "Performance Management: Theory in Practice?", Asia Pacific Journal of Human Resources, Vol. 44, No. 1, pp. 83-101. ; 35. NASSCOM (2010), T-BPO Sector in India: Strategic Review, Executive Summary. Retrieved fiom http://www.nasscom.in/upload/SR10/ExecutiveSummary.pdf on November 11, 2010. 36. Pareek U and Rao T V (2003), Designing and Managing Human Resource Systems, Oxford & IBH Publishing, New Delhi. 3 7. Paul A K and Anantharaman R N (2003), "Impact of People Management Practices on Organizational Performance: Analysis of a Causal Model", Intemationajouma of Human Resource Management, Vol. 14, No. 7, pp. 1246-1266. 38. Ramlall S J (2003), "Measuring Human Resource Management's Effectiveness in Improving Performance", Human Resource Planning, Vol. 26, No. 1, pp. 51-62. 39. Rao T V (2008), "Lessons From Experience: A New Look at Performance Management Systems", Vikalpa, Vol. 33, No. 3, pp. 1-15. 40. Rao T V (2007), Performance Management and Appraisal Systems, 11* Edition, Response Books, New Delhi. 41. Roberts G and Reed T (1996), "Performance Appraisal Participation, Goal Setting, and Feedback: The Influence of Supervisory Style", Review of Public Personnel Administration, Vol. 16, No. 4, pp. 29-60. 42. Stamps D (1996), "Are we Smart Enough for our Jobs?", Training, Vol. 33, No. 4, pp. 44-49. 43. Taylor P and O'DriscoU M (1993), "Functions and Implementation of Performance Appraisal Systems in New Zealand Organizations", Asia Pacific Journal of Human Resources, Vol. 31, No. 1, pp. 20-32.
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44. TalyorPJ andPierceJ L (1999), "Effects of Introducing a Performance Management System on Employees' Subsequent Attitudes and Effort", Public Personnel Management, Vol. 28, No. 3, pp. 423-452. 45. Tschang T (2001), "The Basic Characterisrics of Skills and Organizational Capabilities in the Indian Software Industry", ADB Institute Working Paper Series. 46. Ulrich D (1997), Human Resource Champions, the Next Agenda for Adding Value and Delivering Results, Harvard Business School Press, Boston. 47. Williams J R and Levy P E (2000), "Investigaring Some Neglected Criteria: The Influence of Organizational Level and Perceived System Knowledge on Appraisal Reactions", JouTTiai of Business & Psychobgy, Vol. 14, No. 3, pp. 501-514. 48. Winstanley D and Stuart-Smith K (1996), "Policing Performance: The Ethics of Performance Management", Personnel Performance Review, Vol. 25, No. 6, pp. 66-84. .' 49. Wyatt (1994), The 1994 Wyatt Performance Management Survey, The Wyatt Company.

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