LOVELY PROFESSIONAL UNIVERSITY

DEPARTMENT OF MANAGEMENT

TERM PAPER OF PERFORMANCE MANAGEMENT SYSTEM

PERFORMANCE MANAGEMENT SYSTEM NEED TO BE ORGANISATION

SPECIFIC.

In partial fulfillment of the

Requirements for the award of Degree of
Master of Business Administration

Submitted by:

MAMTA CHOUDHARY
RT1901B60
10900367

DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA
 PERFORMANCE MANAGEMENT SYSTEM NEED TO BE ORGANISATION
SPECIFIC.

PERFORMANCE MANAGEMENT SYSTEM ( PMS)

Performance management system (PMS) is the heart of any " people management " process in
organization. Organizations exist to perform. If people do not perform organizations don't
survive. If people perform at their peak level organization can compete and create waves.

Performance management is the process of creating a work environment or setting in which

people are enabled to perform to the best of their abilities. Performance management is a whole
work system that begins when a job is defined as needed. It ends when an employee leaves the
organization.

Most organizations focus on an annual evaluation process for employees and call that
Performance Management. However, annual evaluations are often subjective and can lack
specific measurements and supportive data to help the employee truly improve their behavior.

OBJECTIVES OF
PMS
A performance management system includes the following actions.

• Develop clear job descriptions.

• Select appropriate people with an appropriate selection process.
• Negotiate requirements and accomplishment-based performance standards, outcomes,
and measures.
• Provide effective orientation, education, and training.
• Provide on-going coaching and feedback.
• Conduct quarterly performance development discussions
• Design effective compensation and recognition systems that reward people for their
contributions
• Provide promotional/career development opportunities for staff
• Assist with exit interviews to understand WHY valued employees leave the organization

KEY BENEFITS OF PMS

• PM focuses on results, rather than behaviors and activities

• Aligns organizational activities and processes to the goals of the organization

• Cultivates a system-wide, long-term view of the organization

• A clear understanding of job expectations
• feedback about performance
• Advice and steps for improving performance
• Rewards for good performance

SETTING UP A PMS
The goal of a performance management system is to help boost employee performance and,
ultimately, the productivity of the business. For it to be effective, a performance management
system should incorporate the following critical elements:

Updated job description

Job descriptions should clearly describe the employee's current duties and performance
expectations. Position descriptions should be specific, clearly defining the job function, required
skills, deadlines and goals, and should delineate expectations for the employee's relations with
peers and customers
Guidelines for Improvement

Institute basic policies to cope with employee weaknesses and poor performance. Decide if we
will provide training or mentoring for employees exhibiting subpar performance. Set guidelines
that outline how long it should it take an employee to improve and what steps will be taken if the
employee fails to show improvement

Employee Input

Solicit and evaluate staff suggestions for the performance management program. Incorporate
employee input into the program or system as needed

Compensation and Rewards

When the employees perform well they should be compensated. Rewards keep morale high,
generate loyalty and foster additional improvement. But closely linking pay hikes and
promotions to performance appraisals is a contested issue. Regardless of how and when you
choose to compensate your employees, an above-average appraisal deserves acknowledgment.
Make sure they should be consistently reward employees for their hard work.

PMS Process

Key Role Players

The PMS process is a participative process. All the participants play an important part in making
the process effective and meaningful. The roles of the various participants in this process are
described below:

Appraisee: The individual whose performance is being appraised.

Appraiser: The immediate reporting authority of the appraise.

Reviewing Manager: The reporting authority of the Appraiser, who will provide additional
inputs in the appraisal and also provide a check and feedback

Moderation Committee: A Cross Functional Team depending upon Levels that plays the role of
providing a check and feedback in appraisals across the organization and enables greater
consistency.

Functional head: Approval heads of the organization

HR: Facilitator for the entire process.

RATING METHOD FOR PMS

Graphic rating method

Graphic rating scales are one of the most common methods of performance appraisal. Graphic
rating scales require an evaluator to indicate on a scale the degree to which an employee
demonstrates a particular trait, behavior, or performance result. Rating forms are composed of a
number of scales, each relating to a certain job or performance-related dimension, such as job
knowledge, responsibility, or quality of work. Each scale is a continuum of scale points, or
anchors, which range from high to low, from good to poor, from most to least effective, and so
forth.

Rating scale : 1to 3

Where 1 being the least and 3 being the highest scale.

This scaling rates have following characteristics

• Performance dimensions are clearly defined.

• Scales are behaviorally based so that a rater is able to support all ratings with objective,
observable evidence
• Points, or anchors, on each scaled dimension are brief, unambiguous, and relevant to the
dimension being rated
Advantages to company

1.Standardization of content permitting comparison of employees.

2. Ease of development use and relatively low development and usage cost.
3. Reasonably high rater and ratee acceptance

BARS - Behaviorally Anchored Rating Scales

Behaviorally anchored rating scales (BARS) are rating scales whose scale points are defined by
statements of effective and ineffective behaviors.

They are said to be behaviorally anchored in that the scales represent a continuum of descriptive
statements of behaviors ranging from least to most effective. An evaluator must indicate which
behavior on each scale best describes an employee's performance.

The employee at paharpur 3- is evaluated on job specific behaviour which are associated with the
success in the position

The person is evaluated for each job specific behaviour on a scale of 3. With 3 being the
highest and 1 being the lowest)

Management by Objectives

Management by objectives (MBO) involves setting specific measurable goals with each
employee and then periodically discussing his/her progress toward these goals. The term MBO
almost always refers to a comprehensive organization-wide goal setting

It consist of six main steps:

Set the organization?s goals. Establish organization-wide plan for next year and set goals.

2. Set departmental goals. Here department heads and their superiors jointly set goals for their
departments

3. Discuss and allocate department goals. Department heads discuss the department's goals with
all subordinates in the department (often at a department-wide meeting) and ask them to develop
their own individual goals; in other words, how can each employee contribute to the department's
attaining its goals?

4. Define expected results (set individual goals). Here, department heads and their subordinates
set short-term performance targets.
5. Performance review and measure the results. Department heads compare actual performance
for each employee with expected results.

6. Provide feedback. Department heads hold periodic performance review meetings with
subordinates to discuss and evaluate progress in achieving expected results.

The employee is evaluated on goals and objectives associated with sucees in the position

“Goals or Objectives” are specific statements or requirements agreed upon.

“Measurement Method” reflects evaluation basis for expected results.
“Results achieved” are accomplishments during the evaluation period

The person is evaluated for each goal and objective on a scale of 3. With 3 being the
highest and 1 being the lowest)

ATTRIBUTES COVERED FOR EVALUATING AN EMPLOYEE

• Achievement Motivation: Inherent desire to exceed targets & stretch ability to the
fullest. High energy level. Assertive & result oriented.

• Developing People: Evaluates subordinate performance & potential. Mentors &

counsels.

• Leadership: Can control & motivate a team to achieve set objectives. Inspires pride in
the organization.

• Job Knowledge: On the job knowledge of the assessee, keeping in view his ability to
handle diverse job related situations

• Approach to New Business Development / Process Enhancement: Initiative towards

developing and improvising the existing business / systems and processes.

• Interpersonal Skills
• Communication
• Dependability / Punctuality
• Discipline

TIMING:

The appraisal is performed annually in the organisation

SELF APPRAISAL
Self appraisal is an important part of the Performance appraisal process where the employee
himself gives the feedback or his views and points regarding his performance. Usually this is
done with the help of a self appraisal form where the employee rates himself on various
parameters, tells about his training needs, if any, talks about his accomplishments, strengths,
weaknesses, problems faced

TIPS FOR SELF – APPRAISAL

 Be honest

Always be truthful and honest while telling your accomplishments or failures. Don’t exaggerate
your strengths and don’t hide your weaknesses. Don’t make personal judgments for anybody.

 Do the preparation

It’s always better to prepare yourself before the meeting. Get all the lists in place, prepare all the
evidences and references.

 Be objective

Objectivity is important in self – appraisal. Don’t exaggerate or downplay your achievements or

failures. Be specific and concise in your statements and if possible support them with examples
or references or evidences with dates. For example: "I responded to all queries within 48 hours"
is better than just saying "My customer service was good."

 Positive attitude

Have a positive attitude towards the whole appraisal process. Be co-operative. Don’t hesitate
from taking the responsibility of your failures as well as the achievements. Demonstrate
enthusiasm to improve in future and take all his suggestions calmly. Don’t complain or
demonstrate a negative attitude.

 Cover all the aspects

Apart from your strengths, weaknesses, accomplishments and failures, express the opportunities
you would like have for your development and improvement. Suggest ways to overcome the
problems faced. Assess your capabilities, behaviours and skills and competence.

The employee perform the self appraisal mentioning about his:

• Major Responsibilities: What are the major responsibilities in his current work profile.
 • What are the Key Result Areas i.e. what are the activities he does in order to
accomplish the tasks he is responsible for. Also, to give comprehensive details of the
various reports / MIS / Database being maintained by the employee.

PERFORMANCE MANAGEMENT-What, Why & How?

Historical Perspective :-

 Measuring and appraising performance is probably the most researched area within HRM,the
last hundred years have seen continuous evolution in approaches to Managing employee
performance.

 The earliest recorded instance of a formal evolution report was in 1813.

 The start of the industrial age in the 1800s saw trends of performance appraisal in industry.

 In the 1890s Frederick Taylor’s scientific approach and Fayal & Weber’s bureaucratic
theories suggested that financial inducements stimulated production performance.

 The Hawthorne studies in 1927 - 1932 emphasized the influence of supportive and caring
supervision.

 It was only after world war–I that appraisals in industry became accepted. The appraisal of
managers was not extensively practiced until after world war – II.

 The appraisal system that evolved over the period

 Narrative/Essay report: Used mainly by Armed forces , Civil service and
Large organization in public sector.
 Traits were the focus of performance Management in 1970s.
 MBO concept came into picture in 1980s.

WHAT COUNTS
GET MEASURED
WHAT GETS WHAT GETS
REWARDED MEASURED GETS
COUNTS DONE

WHAT GETS
DONE GETS
REWARDED

When we talk about the five dimensions of Human Resource Management (HRM), we list
down the following, namely,
• Performance Management,
• Career Management,
• Recruitment & Selection,
• Training & Development, and
• Compensation & Benefits Management.

These five dimensions, though equally important, often fail to secure equal attention from
Human Resource (HR) managers. The facts that performance management is not just an annual
performance appraisal and training is not the only solution to effective performance are forgotten
by the HR managers and the management team. As a result, successful organizations, happy with
their existing success status, is actually deprived of a potential growth that could have been
achieved should they have invested more attention to performance management than only
performance appraisal For instance, the total HR performance of a company is worth Rs 1000,
which means the employees’ performance is resulting revenue worth Rs 1000. Among this set of
employees, some are excellent performers, some are good, some moderate and some poor. This
difference in performance level are due to the fact that some are using 100% of their potentials,
some working below their full potentials and some working at zero or marginal potentials. The
challenge of equalizing the difference in performance level lies in an objective performance
management system.

What Performance Management Is Not:

• it’s not just an annual performance appraisal

• it’s not imposing targets/goals on an employee by his supervisor
• it’s not only evaluating individual job performance

What is Performance Management:

• it’s Management By Objectives (MBO)

• it’s about setting SMARTER goals
• it’s about planning to perform
• it’s about periodically reviewing progress in performance
• it’s about evaluating performance for further improvement
• it’s about delivering reinforcement for performance success and performance failure

What is the Performance Management Process/Cycle :

The steps of Performance Management Process are as follows:-

Individual Goal Setting & Performance Planning

• A goal setting session between the PMS administration and the employee.
• listing down the major goals to be achieved in a year in line with functional objectives.
• Reviewing goals to assess the feasibility of their accomplishments; making sure the goals
are SMARTER- Specific, Measurable, Actionable, Realistic, Time-framed, Extended &
Rewarding.
• finalizing goals for a year.
• planning about how to achieve the goals.
• identifying the possible barriers in achieving them.
• planning on ways to overcome those barriers.
Mid Year Performance Review

• A performance review session between the PMS administration and the employee
• discussing performance progress status.
• revising performance plan (if needed) with new deadlines for goals

Performance Appraisal

• A performance appraisal session between the PMS administration and the employee.
• measuring performance as against preset goals.
• measuring competencies required for current role.
• measuring potentials as against required competencies set for future role.
• chalking out Individual Development Plan outlining to fill skill gap, motivation &
aspiration gap and communication & cooperation gap.
• chalking out Reinforcement plan to reward/recognize for success and punish for
deliberate failure.

The beauty of this Performance Management process is that it has three dimensions only,
which give three major outputs that can be fed into other four dimensions of HRM and not to
mention Performance Management also. The beauty is illustrated as follows:

Performance Performance
Rating Scale Outputs
Assessment Measures
Performance
Preset Goals 5-points New goal setting
Evaluation
Required
Competency
competencies of 5-points Development Plan
Evaluation
current role
Potential Evaluation Required 5-points Career Development
competencies of Plan
 future role

PERFORMANCE MANAGEMENT SYSTEM

AT NTPC
 PMS AT NTPC

PMS is a five step process:-

Step 1 Step 2

Performance Mid – year

planning Review

PMS Process
Step 3

Feedback
Step 5 Annual
Assessment

Normalisation
Process
Step 4

Step 1

• Identifying KPAs, Constituents, Weightages, Measures and Targets.

• Identifying Functional and Managerial Competencies for the appraise.

Step 2
 • Joint review of performance
• Document Changes in KPAs if any
• Document mid year review discussion

Step 3

• Assessment of KPAs, Competencies, Values and potential by appraiser .

• Training and development plans.
• Review by reviewing officer

Step 5

• Communication of score
• Developmental feedback

KPA Setting Process:

Corporat Company Goals

e plan MOUs

Initiative Unit Goals

s
Functional
/Departmental Goals

Special Individual Goals

task

PMS COMPRISES ASSESSMENT ON FOUR PARAMETERS WITH DIFFERENT

WEIGHTAGES FOR VARIOUS LEVELS

S.NO. PMS PARAMETER WEIGHTAGES FOR DIFFERENT GRADES

 E1-E3 E4 E5 E6-E7 E7A-E8 E9
1 KPA 80 75 65 60 50 50

2 a. Functional competency 10 10 10 10 10 05
assessment
b. Managerial competency 05 05 10 10 15 15
assessment
3 Potential assessment Nil 05 10 10 10 10
4 Value assessment 05 05 05 10 15 20

Total 100 100 100 100 100 100

• For junior executives there is higher weightage on KPAs and functional competencies as
there is higher focus on achieving the immediate functional task.

• The weightage on Managerial competencies and values increases for an executive as the
grade increases because of importance of achieving business goals by managing work of
other employees through ethical means.

• At NTPC Online Performance Management System is being practiced for Executives.

For Non Executives it is still manual.

• Thre are three major challenges in effective implementation of PMS at NTPC

1. Involvement of big number of executives (approx 1200) in designing of KPAs

and Competency Directory.
2. Skill gap in feedback and performance counseling.
3. Transformation from legacy to transparent system.
PERFORMANCE LINKED PAY

EMPLOYEE
COMPENSATION

VARIABLE FIXED
COMPONENT COMPONENT

Proportion increases with seniority Proportion decreases with seniority

INDIVIDUAL
PERFORMANC
E

UNIT
PERFORMANC
COMPANY E
PERFORMANC
E

Relative Weightage for company Unit and Individual Performance.

PERFORMANCE WEIGHTAGE
TOP MGMT. MIDDLE MGMT. JUNIOR MGMT.
COMPANY’S 50% 35% 15%
UNIT’S 30% 25% 20%
INDIVIDUAL’S 20% 40% 65%

Conclusion

The aim of performance management system is ensuring the maximization of efforts by the
employees of the organization to realize the desired goals. More effective the performance
management of an organization more productive the organization would be. NTPC as a whole is
a big organization with vast number of employees working there, to manage the performance of
such a great number of people efficiently is a herculean task.

The survey and personal interviews conducted during the project work says that an
effective performance management system is on place but as we know everything in this world
keep evolving itself for betterment, the performance management system is not an exception.

NTPC can touch new heights in the field of energy management by managing its
manpower more efficiently, addressing there training needs, recognizing the high performances
and making them feel the freedom of expressing their points.

Suggestions

• PMS should be linked to Business strategy.

• Performance assessment should be objective and efficient.

• PMS should be an “open and participative system” with feedback loops where everyone
feels free to express their views with the appraiser.

• PMS should distinguish high performers from low performers. The recognition to high
performers should be done with more efficiency.

• PMS should have a “developmental focus” with appropriate training system to cater the
training need of employees.

• The process should be monitored efficiently addressing the doubts and queries of the
employees.

• The KPA setting process should ensure the active participation of executives.

• There should not be any communication gap between seniors and subordinates as it is of
utmost importance in performance management.

• Persuasive sessions should be organized to emphasize the need of performance

management and how the active participation of employees without any biases help in
improving performance management system.
CASE STUDY:

IMPLEMENTING THE BALANCED SCORECARD – LESSONS AND

INSIGHTS FROM A FINANCIAL SERVICES FIRMS.

INTRODUCTION:
This case study is of ARRAN LTD. Firm . Arran ltd is a multi – divisional retail financial
services firm based in UK.
BALANCED SCORECARD:
The balanced scorecard is a management system that enables organization to enhance the clarity
of their vision and strategy and enables them to translate the same into action. It is a management
methodology that uses a range of performance measures to define business goals and monitor
performance drivers to achieve strategic objectives.
This concept was first introduced to Arran ltd in the mid 1990’s by the general manager of the
retail division (the largest division in the organization).
It was initially developed as a performance management system for the retail division with the
objective of providing core management information on retail branch performance. The
performance measurement system was built in part around custom designed performance
management software system . and the design and implementation of the software system was
undertaken with the help of external consultancy.
After a time, they developed a corporate balanced scorecard and several other divisional
balanced scorecard using the retail division design and system as their basis. This case is
analysed by seven different view points in which Arran ltd used balanced scorecard.
1) Standard

2) Transparency

3) Simplification

4) Management information for the center

5) Growth and diversity

 6) Ownership and space

7) Software

STANDARD:
In this many organization use standard measures in the design of system of multi balanced
scorecard. The use of standardizing measures defining the components of BSC system i’e what
do mean by vision , objectives, measures, initiatives etc is good practices.
TRANSPARENCY:
Organizations typically use measurement system to control the business at either a strategic or
operational level. In this section considered that why BSC were developed by Arran ltd and how
they used. Basically BSC used to monitor and control the business for one of two purposes
- To communicate

- To monitor delivery of strategic goals or to manage and enforce compliance in

operational process.

SIMPLIFICATION:
Some organization implement BSC as an add on to existing system. Arran ltd used their BSC
and whether they simplified the whole management system or added to existing measurement
practices.
MANAGEMENT INFORMATION FOR THE CENTRE:
The main goal for any management system is to provide decision maker with correct , relevant
and timely data to aid/help them in the process of making decision about managing the
business.their should be two way communication.
GROWTH AND DIVERSITY:
The growth and high level target setting and strategic communication should be based on
ongoing interactive dialogue between management and support function.
OWNERSHIP AND SPACE:
ownership of the management system and subsequent results are key factors in the success. An
important part of BSC design process is to ensure that management team processes are modified
to allow the management team sufficient scheduled time to discuss outputs arising from the BSC
reports i’e change in behavior, routines connected with strategic and performance management
review process.
SOFTWARE:
This topic looks at the need to make software an enabler of effective strategy implementation
and how to avoid technology getting in the way of change.
BSC linked to three distinct types of software application:
- Software for data reporting

- Software for data analysis

- Software to promote improved management process.

CONCLUSION:
It is clear that, at least initially, the Balanced Scorecard systems at Arran Ltd. met the firm’s
expectations and the initiative was considered as a success; the need for a more organised
performance management system drove wider changes in management style and behaviour
that was generally and persistently beneficial to the organisation. they wanted ‘a system that
examined a number of different factors rather than focusing solely on financial data’. Arran
Ltd. believed that if they used the concept it would help them in the long run. In the initial
application of BSC was as a performance measurement tool for the retail division. It was
primiraaly an operational BSC used for management control purposes it was very useful for the
Arran ltd. It was also essential in all the points that were taken into consideration while
implementing the balanced scorecard in Aaran ltd.

SUGESSTIONS:
Remember that there are two types of Balanced Scorecard application, each requiring a
specific design and implementation methodology

Balanced Scorecards need to be dynamic and flexible, able to accommodate the changes
in organisational objectives, structure and markets that can be expected to occur during
their lifetime

Software systems have powerful benefits but if mismatched to the organisational needs
can also be a cause of problems.

CONCLUSION:

Some time it happens that the PMS is not effective in an organization because it is not specific .
some organization takes into in common consideration that’s why it is not too effective .So PMS
should be specific to each and every organization.

REFERENCES AND BIBLOGRAPHY:

www.proquest.com
www.emerald.com
www.scribd.com