PERFORMANCE

MANAGEMENT
 A Thought

The conventional definition of management is getting

work done through people, but real management is
developing people through work.

- Agha Hasan Abedi

2
 PERFORMANCE
MANAGEMENT

 It is the technique for beginning with the

end in mind.
 It involves analyzing the objectives &
goals for your Deptt. or work unit and
ensuring that they relate to the overall
goals of your company.
 Why Do Performance
Management?
Communicate goals, mission, values, purpose
Improve working relationships
Improve management
Identify and communicate strengths and
areas for improvement
Provide feedback
Develop
Monitor
Support

4
 Focus of Performance
Management

Progress and success

toward goal achievement

5
COMPONENTS OF PERFORMANCE
MANAGEMENT

KEY RESULT AREAS

KEY PERFORMANCE INDICATORS

GOALS
KEY RESULT AREAS
“Key Result Areas” or KRA's refer to
general areas of outcomes or outputs for
which the department's role is
responsible.
KRA's is the set of activities on which
performances are rated.
Key Result Areas or KRA's refer to
general areas of outcomes or outputs for
which a role is responsible.
KEY PERFORMANCE INDICATORS
KPIs serve as the gauges which are used to
evaluate how well you have achieved your key
results.
KPIs split into 2 types:-
a) Direct Key Performance Indicators – relate
directly to a key result area.
b) Indirect Key Performance Indicators – apply
where it is not possible to directly measure a
key result area.
GOALS

These are the tools to tell how to achieve

your Key Result as per the desired
standards.
Goals should be challenging, time-bound &
measurable.
Goals should be in line with Mission, Vision,
KRAs & KPIs.
WHY TO IDENTIFY KRAs?

Identifying KRAs helps individuals

Clarify their roles.
Set goals and objectives.
Focus on results rather than activities.
Align their roles to the organization’s
business or strategic plan.
Prioritize their activities, and therefore
improve their time/work management.
Communicate their role’s purposes to
others
Make value-added decisions.
EXAMPLES

 For Marketing Deptt. :-

a) If KRA is Sales then KPIs will be :-
 Revenue over a given time.
 Units sold.
b) If KRA is Profit then KPIs will be :-
 To achieve annual sales.
 Annual profit achieved.
 EXAMPLES

 KRAs of Finance & Accounting include :-

2. Credit referencing
3. Capital expenditure
4. Security
5. Financial analysis
6. Cost control
7. Internal audit
8. Regulatory reporting
9. Credit control
10. Financial records
11. Payroll
12. Cash flow forecasting
13. Budgeting
14. Costing
EXAMPLES

 KRAs of Manufacturing include :-

 elimination of wastages in production

 improving throughput efficiency
 process efficiency etc.

 KPI could be

 reducing back orders[ nil %]

 improving targeted delivery date [ 98%]
EXAMPLE

 KRAs of Quality include :-

Quality

KPIs could be :-
 Measure defects per million.
 Knowledge of quality principles demonstrated by team.
 Measure quantity of feedback from customers.
EXAMPLE

KRAs of Design include :-

Introduce new products

KPIs could be :-
 No. of new products introduced in a given period.
 Percent of revenues reinvested in R&D.
EXAMPLE

 Manufacturing
KRAs include

Stock control
Maintenance
Labour relations
Waste
Reworks
Productivity
Health and Safety
Quality control
Record keeping
CONCEPT OF PERFORMANCE
MANAGEMENT

 Performance management begins with goals.

Goals define the results that people should aim
to achieve. Goals are touchstones for
performance planning, appraisal, rewards, and
improvement.
 Goal setting should be a top down process that
begins in company strategy. If, for example,
the strategic goal is to become the market
share leader through rapid product
introductions, then unit goals should serve that
strategy. And individual goals should be
aligned with those of their units.
 GOALS VERSUS ACTIVITIES
GOALS ACTIVITIES
Increase sales by Writing weekly
10%. sales reports.
Handling customer
Reduce customer
complaints and
turnover by 15%.
other problems.
Meeting weekly to
Launch five new
products this year. discuss new
product
development.
Cut production waste
Participating in
by 20%.
quality-control
Characteristics of Effective
Goals
Recognized as important.
Clear
Written in specific terms
Measurable and framed in time
Aligned with organizational strategy.
Achievable and challenging
Supported by appropriate rewards
Three mistakes to avoid
Companies fail to create performance
metrics.
They fail to align rewards with company
and unit goals
Achievement bar is set too low
Get it on paper
The date of your meeting.
Key points brought up by both parties.
The goals the employee has agreed to
pursue.
What he or she will do to achieve them.
The date on which the employees
performance will be formally appraised.
Four Steps to accomplishing
goals
Break each goal down into specific tasks-
with clear outcomes.
Plan the execution of those tasks- with
timetables.
Gather the resources needed to fulfill each
task.
Execute the plan
MOTIVATION
THEORIES OF MOTIVATION
McGregor’s theory X and theory Y.
Maslow’s theory of hierarchy of needs.
Elton Mayo’s Hawthorne studies.
What about rewards?
Two categories of rewards are there;
Extrinsic (external tangible forms of
recognition such as pay hikes, promotions,
bonuses and sales prizes)
Intrinsic (produce non quantifiable personal
satisfaction)
Both type of rewards have a place in
performance management)
Intrinsic rewards generally motivate best.
Herzberg found that extrinsic incentives
such as bigger paychecks and plush offices
don’t necessarily make people work harder
or better. When such motivators do
succeed , the positive effects are short-
lived.
EXAMPLE
Southwest Airlines- at the entry level,
the carrier is one of the lowest-paying of
the major airlines, yet it enjoys
remarkable commitment from its
people. Here, real motivators such as
recognition and team spirit, when
combined with adequate pay, have
produced a committed workforce and
the lowest level of employee turnover in
the U.S. airline industry.
Aligning the incentive system
Incentive system should create
alignment between desired performance
and the rewards that employees value.
…. Perfect alignment is impossible!
This is because the two elements that
must be aligned- performance and
“what people value”- are seldom clear
and are often hard to measure.
-the uncontrollability problem
- the alignment problem
- the interdependency problem
Practical tips for motivating
 -make jobs complete
 - Introduce challenge
 - encourage some people to become experts
 - drive out fear
 - preserve your subordinates dignity
 -sack the slackers
 - Empower, Don’t micromanage
 - hire Self-motivated people
 - be a good boss
MONITORING PERFORMANCE
-A multistep process for understanding performance
relative to goals.
- The why and how of active listening.
- Common causes of poor performance.
What is performance?
 Performance means outcomes achieved, or
accomplishments at work- the actual
contribution of an individual or team to the
organization’s strategic goals, like stakeholder
satisfaction, clean image, and economic
sustainability. The role of any managee can be
seen in three parts: Being, Doing, and Relating.
 Being concerns the competencies of the
managee that are relevant to her performance.
Being means that the managee has prepared
her mind.
 Doing focuses on the managee activities that
are variably effective at different levels in the
organization: that affect performance of other
roles dependent on the managee output, and
the organizational performance as a whole.
 Relating emphasizes the nature of
 Organizational
Mission,Goals, Strategy
and Operational
Plans

Individual Role &its

Description
Indices for Monitoring Role-wise Plans
Performance, And Expectations
Performance Standards

Feedbac Stocktaki Monitoring &

k ng Mentoring
Activity
Performance-Managed Organization
(Hale & Whitlam, 1992)
 Performance Management organizations were likely
to express performance targets in terms of
measurable outputs, accountabilities and training
or learning targets.
 More success was likely in organizations stressing
the importance of ensuring human resource
development activities and relating these to the
needs of the organization rather than those where
the remuneration dimension dominated
performance management.
 The challenge for the personnel function is to
facilitate the ownership of performance
management by line management.
 Organizations implementing performance
management systems should consider extrinsic
needs of employees such as reward packages and
intrinsic needs in terms of personal growth.
 Training and development can be important
motivators, particularly if linked to career
In ANZ Grindlays Bank, the principal aim of
the performance management program
(PMP) was to help each one of the managee
achieve their own goals while at the same
time meeting the Bank’s immediate
business objectives and strategic goals.
Towards this aim the Bank’s PMP helped
each managee clarify for herself Why I am
doing what I am doing. According to the
bank, ‘ good business principles are the
foundation on which we build the business
of ANZ Grindlays and PMP should reinforce
this’. The bank presents its Performance
 Performa
nce
Planning

Performan
Performance ce
Assessment Coaching
 Competence vs. Competency
 Competence:  Competency:

An individual’s An individual’s actual

capacity to performance in a
perform his or her job particular situation.
functions.  The ability to
 Professional integrate
Competence knowledge and skill to
 The ability to function perform a task under
effectively in the tasks the varied
considered essential circumstances of the
within a given real world.
profession.
Skill
Knowledge
Motive
Trait
Self concept
Competency= Knowledge+ Skill
Knowledge: Skills:
- material knowledge cable - dismantle a cable
- Colour codes - strip a cable
- attach cable lugs
- connect a cable
- assemble a cable
COMPETENCY
=

To be able to connect an energy cable

Attitude: safety: equipment, tools, no tension, firm connections

40 WW – MT versie 18/12/2003
So…Now…What is a
competency?..How do we
define it?
There are various definitions given for the
term competency. Combining the basic
ideas embedded in all definitions,
competency can be defined as: 
“ A combination of knowledge, skills,
attitude and personality of an individual as
applied to a role or job in the context of the
present and future environment, that
accounts for sustained success within the
framework of Organizational Values.”  
Sometimes competencies are also defined
as “ cluster of successful behaviors.”
FIVE TYPES OF COMPETENCY
CHARACTERISTICS:
1. Motives: the things a person
consistently thinks about or wants that
cause action. Motives “ drive, direct, and
select” behavior toward certain actions or
goals and away from others.
E.g. Achievement-motivated people
consistently set challenging goals for
themselves and use feedback to do better.
2. Traits: physical characteristics and
consistent response to situation or
information.
E.g. reaction time and good eyesight are
physical trait competencies of combat
pilots.
…contd
 3. Self-concept: A person’s attitude, values,
or self-image.
E.g. Self-confidence, a person’s belief that he
can be effective in any situation is a part of
that person’s concept of self. 
 4. Knowledge: Information a person has in
specific content areas
E.g. A surgeon’s knowledge of nerves and
muscles in the human body. 
 5.Skill: The ability to perform a certain
physical or mental task.
E.g. A dentist’s physical skill to fill a tooth
without damaging the nerve.
The type or level of a competency has
practical implications for human resource
planning. Knowledge and skills tend to be
visible and relatively surface,
characteristics of people. But attitude, trait
and motive competencies are more hidden
“deeper” and central to personality.
Surface knowledge and skills are relatively
easy to develop. But core motive and trait
competencies are at the base of the
personality iceberg and are more difficult to
assess and develop as shown in the figure
on the next slide….
Iceberg model contd
Skills = a learned ability
Knowledge = acquiring information
in a particular field
Self-Image = attitudes and values
Traits = why and how we behave a
certain way
Motives = what drives us, i.e., the
need to seek achievement,
power/influence, affliliation
WHAT IS A COMPETENCY
MODEL?
A competency model is a set of success
factors (competencies) that include the key
behaviors required for excellent
performance in a particular role excellent
performers on the job demonstrate these
behaviors much more consistently than
average or poor performers.

A Competency model provides a “road

map” for the range of behaviors that
produce excellent performance.
BENEFITS OF
COMPETENCY MODELS
Competency models have strategic value
as performance improvement vehicles. 
Benefits include...
They make explicit the clusters of
knowledge, skills, and personal attributes
that lead to high performance in specific
jobs and roles.  This information can be
transmitted to employees.
 
They embody the core values of a business,
aiding in the communication of these
values throughout the organization and
helping to shape a business culture and
…contd
Competency models are behavior-based
performance standards against which
people and units can be measured. 
They provide a behavioral vision for the
kinds of performance necessary to
successfully implement worldwide
business strategies.
NEED FOR A COMPETENCY
MODEL
 Organizations are using competencies in
virtually every human resource domain.
 
 STAFFING ⇒ ASSESSMENT ⇒
PERFORMANCE DEVELOPMENT

 ⇒ TRAINING AND DEVELOPMENT ⇒

CAREER MANAGEMENT

 Competencies are used as the “key criteria”

for implementing each application. Therefore,
competencies can be used as a tool to produce
results in each of the above areas. All the
Integrated Human Resource Practices can be
based on competencies.
WHAT IS COMPETENCY
MAPPING?

Competency Mapping is a process

of identifying key competencies for
an organization and/or a job and
incorporating those competencies
throughout the various processes
(i.e. job evaluation, training,
recruitment) of the organization.
BUILDING COMPETENCY
BASED PEOPLE
PROCESSES
1.COMPETENCY BASED
SELECTION
Competency based selection can be a way
to gain competitive advantage. The market
for human talent is imperfect. A firm that
knows how to assess competencies can
effectively hire the best at a reasonable
price, for example hire under priced but
highly entrepreneurial MBA’s from lesser-
known business schools.
 The person employed performs poorly in a critical job for
he lacks the competencies required for that role.
 There is high turnover due to high failure rate among
new hires.
 The organization needs to identify new hires with the
potential to become future managers or leaders.
 A gap between the competencies needed and what the
organization can hire for indicates the training new hires
COMPETENCY BASED
PERFORMANCE
MANAGEMENT
Performance has two dimensions
Achieving business results
Developing individual competencies

 
These days performance appraisal is
seen by managers and employees as a
bureaucratic “paperwork” exercises that
they do not take seriously because it
has little impact on employee
development. Performance appraisals
do not address the employees’
questions about skill development or
 Competency based performance
management would
Focus on “HOW” of performance and not on
“WHAT” of performance i.e. not on results
but how the results are achieved
Link to development of the individual and
not just rewards 
Competency based PMS shift the emphasis of
appraisal from organization results to
employee behaviors and competencies
demonstrated and hence help identify
development gaps.
 
COMPETENCY BASED TRAINING AND
DEVELOPMENT
If the training programs can be aligned to
the development needs emerging out of
the appraisal system and to the market led
training needs they can contribute better to
both individual and business objectives.
 Firstly there is a need to determine the
competencies for a particular position
 Secondly identify the competencies of the
person holding that position
 By mapping the competencies, gaps can be
identified in terms of the competencies for that
role and the competencies of the person doing
that role to diagnose the training and
development needs.
 Identify the most appropriate training and
….contd
Accordingly, the person can be trained on
those competencies only. Competency
based training programs clearly tell what
should be the competency level of the
person entering the program. This would
drastically reduce the training cost for the
organization 
It is also helpful in career planning.
Employees can match their proficiency in
competencies with the competencies
requirements of various jobs. Based on the
match employees can apply for a job or
consider other job opportunities.
COMPETENCY BASED
COMPENSATION
Competency based compensation is
compensation for individual characteristics, for
skills and competencies over and above the
pay a job or organizational role commands.
Various elements are considered for arriving
at compensation increase. Enhancement in
competencies has to be one of them.
There is a need for competency based
compensation system
 To attract more competent than average
employees
 To reward for results and competencies developed
 To motivate employees to maintain and enhance
BENEFITS OF
IMPLEMENTING A
COMPETENCY-BASED
APPROACH
For the company

Establish expectations for performance

excellence
Improved job satisfaction and better
employee retention
Increase the effectiveness of training
and professional development programs
by linking them to success criteria
Provide a common understanding of
scope and requirements of a specific
role
Provide a common, organization wide
standards for career levels that enable
For Managers

Identify performance criteria to improve

the accuracy and ease of the selection
process
Provide more objective performance
standards
Easier communication of performance
expectations
Provide a clear foundation for dialogue to
occur between the managers and
employees and performance, development
and career-oriented issues
For employees

Identify the behavioral standards of

performance excellence
Provide a more specific and objective
assessment of their strengths and the tools
required to enhance their skills
More clear on career related issues
WIPRO CONSUMER CARE
AND LIGHTING (WCCLG),
BANGALORE
(to be distributed in
class)
Threshold competencies
The characteristics required by a jobholder
to perform a job effectively are called
threshold competencies.
For the position of a typist it is necessary to
have primary knowledge about typing,
which is a threshold competency.
Other examples?
Differentiating Competencies
The characteristics, which differentiate
superior performers from average
performers, come under this category; such
characteristics are not found in average
performers.
Knowledge of formatting is a competency
that makes a typist to superior to others in
performance, which is a differentiating
competency.
Generic or Key Competencies

Important non-technical abilities and skills

for employment.
•Abilities and skills that are transferable –
that people could learn and develop in
different ways and a wide variety of
learning environments.
•Abilities and skills that would be
transferable to new situations.
Key Generic
Competencies:•Leadership:To direct a
team to work towardsa common goal
and to motivate teammates.•
Teamwork:To cooperate effectively
with teammates and to share team
responsibilities.•
Interpersonal Effectiveness:To fit in
with different social situations and to
develop relationships with different
people.
•Communication:To apply oral and
writing skills to communicate
 Since the early 1990s, generic competencies –
transferable, multifunctional knowledge, skills
and attitudes that people could learn and
develop in different ways and learning
environments, and apply across a variety of job
and life contexts, have been capturing growing
attention all over the world. The urgency in
developing generic competencies in recent
years are mainly fueled by employers from the
industry, as fast changes in technology and
global competition prompt employers alike to
look for allround employees who demonstrate
teamwork, problem-solving, flexibility,
initiative, and the capacity to undertake many
different tasks and information (NCVER, 2003).
Technical Functional
Specific competencies which are
considered essential to perform any job in
the Organization within a defined technical
or functional area of work, i.e.
analysis and decision-making,
 team leadership,change management, etc.
communication, programme execution,
processing tools, linguistic, etc.
environmental
management, industrial process sectors,
investment
management, finance and administration,
Managerial Competencies
Managerial Competencies - Sets of
knowledge, skill, behaviors, and attitudes
that a person needs to be effective in a
wide range of managerial jobs and various
types of organizations
 A Model of Managerial
Competencies
(adapted from Figure 1.1)

Communication
Competency
Planning and
Teamwork
Administration
Competency
Competency

Global Strategic
Awareness Action
Competency Self-Management Competency
Competency

Copyright © 2005 by South-

Western, a division of
71 Thomson Learnig
All rights reserved
 A Model of Managerial
Competencies
(adapted from Figure 1.1)

Communication
Competency
Planning and
Teamwork
Administration
Competency
Managerial Competency
Effectiveness
Global Strategic
Awareness Action
Competency Self-Management Competency
Competency

Copyright © 2005 by South-

Western, a division of
72
Thomson Learning
All rights reserved