Meaning of performance
The action or process of carrying out or
accomplishing an action, task, or function can
be termed as performance.
Performance management includes the
processes used to manage corporate
performance, the methodologies that drive
some of the processes and the metrics used
to measure performance against strategic
and operational performance goals.
What are Performance
Performance Standards are the benchmark
against which performance is measured.
Definition of PM
“It is a continuous process of identifying,
measuring and developing the performance
of individuals and teams and aligning
performance with the strategic goals of the
Performance management focuses on the
performance of an organization, a
department, employee, or even the
processes to build a product or service or any
other areas in an organization.
History of PM
In the 3rd century AD, the Chinese were using performance appraisal systems for
their evaluations of their employees
Industrial Revolution of the 18th century made factory managers aware of the
importance of their employees’ performance on their production outputs.
American researchers and philosophers contributed in the areas of performance
evaluation by developing ideas of management by objectives (MBOs) and employee
Spreigel reported in 1962 that by the early 1960s more than 60% of American
organizations had a performance appraisal system.The system’s popularity stemmed
from the Army’s implementation of a performance management system for its
The origin of PM can be traced in early 1960's
when performance appraisal systems were in
During this period, Annual Confidential Reports
(ACR’s) was also known as Employee service
Records were maintained for controlling the
behaviors of the employees and these reports
provided substantial information on the
performance of the employees.
In next phase around 1980's, whatever adverse
remarks were incorporated in the performance
reports were communicated to the employees so
that they could take corrective actions for
overcoming such deficiencies
Performance appraisals, also called performance
evaluations, are tools used to measure the effectiveness
of an employee; most organizations conduct
performance appraisals once a year during an annual
evaluation process. A performance management
system, however, is much more dynamic. It can use the
performance evaluation tool but also incorporates other
elements into the performance management cycle.
Purpose of PM system
It serves the strategic purpose of the org.
Provide information for reward system
Facilitates HR decisions
Enabling employees to learn about their
performance as against org expectations
It serves as a developmental purpose
Serves org maintenance purpose
Support HR decision to meet legal
Phase 1 - Plan
The planning phase is a collaborative effort involving both
managers and employees during which they will:
Review the employee’s job description
Develop a work plan that outlines the tasks to be
Setting expected results and standards that will be used
to evaluate performance (Specific Measurable Attainable
Identify training objectives that will help the employee grow
his or her skills and knowledge
Phase 2- Monitor
For a effective performance management system
employee progress and performance must be
Assess progress towards meeting performance
Identify any barriers and help overcome them.
Share feedback on progress relative to the goals.
Identify any changes that may be required to the work
The main purpose of constructive feedback is to help
people understand where they stand in relation to
expected and/or productive job and workplace
State the facts
Agree on an action plan
Phase 3- Review
An opportunity to review, summarize and highlight the
employee’s performance over the course of the review
Summarize the work accomplished during the
Document challenges encountered during the year
and identify areas for training and/or development
Identify and discuss any unforeseen barriers to the
achievement of the objectives
360-degree feedback, also known as 'multi-rater
feedback', is employee development feedback that
comes from colleagues, peers and managers in the
organization, as well as self-assessment, and
sometimes sources such as clients, volunteers or
Senior managers are responsible for assessing the
performance of other employees but often do not
receive adequate feedback themselves. 360-degree
feedback allows the individual to understand how his
or her effectiveness as an employee, manager, or
coworker is viewed by others.
Advantages of PM
1. Direct financial gain
Reduce costs in the organization
Stop project overruns
Aligns the organization directly behind the CEO's goals
Decreases the time it takes to create strategic or operational
changes by communicating the changes through a new set of
Advantages of PM
2. Motivated workforce
Optimizes incentive plans to specific goals for over achievement
Improves employee participation
Create transparency in achievement of goals
High confidence in bonus payment process
Professional development programs are better aligned directly to
achieving business level goals
Advantages of PM
3. Improved management control
Flexible, responsive to management needs
Displays data relationships
Helps audit / comply with legislative requirement
Simplifies communication of strategic goals planning
Provides well documented and communicated process
Problems In Implementation of
1.Decreased Performance of individuals and organisations
Lack of training of the individuals and managers
Lack of addressing the change in the culture of the
Subjectivity level to high during evaluations
Performance reviews used as a stick to get back at employees
Problems In Implementation of
Lack of addressing the fears of employees and clarification of
the whole process and advantages to the employees
Lack of conformity regarding Performance Management in the
Lack of management commitment
Problems In Implementation of
2. Degrading of Communication
3. Lack of Management commitment
5. Lack of Rewards
6. Negative Attitudes Development
STRATEGY, VISION, MISSION & BUDGET
DEPARTMENTAL / FUNCTIONAL OBJECTIVES
ROLE / INDIVIDUAL OBJECTIVES
KEY RESULT AREA (KRAs)
The PMS process starts with setting of
business goals & organisation’s
objectives. In M&M Ltd., organizational
goals are set in the month of March every
year. After this step, departmental and
individual goals are set. Here, in M&M Ltd.,
Top Down approach is followed for goal
For departmental goal setting, Balanced Score Card
approach is adopted.
In 1992, Robert S. Kalpan and David P. Norton’s concept of
the Balanced Score Card revolutionised conventional
thinking about performance metrics. The balanced
scorecard measured performance on four perspectives:
c.Learning & Development
The balanced scorecard allows managers to look at the
business from these four important perspectives. The
scorecard wasn’t a replacement for financial measures; it
was their complement.
It provides answers to four basic questions:
Departmental Goal Setting
a.How do customers see us? (Customer
b.What must we excel at? (Internal processes
c.Can we continue to improve and create value?
(Learning and Development perspective)
d.How well do we look to our stakeholders?
In M&M Ltd., weightages are assigned to all four
perspectives. The weightages may vary according
to the department. Balanced Score Card also
depends upon business plans for the particular
Individual Goal Setting:
After setting Departmental goals, Individual goals are set.
Following diagram shows various steps in the process of
individual goal setting:
KRA SettingFeedback &
Step 1: Communication Workshop:
Communication workshop is conducted in months of
May or June every year.
It is compulsory for all employees, right from
operational level to strategic level. This workshop is
conducted for two days.
KRA setting and How to conduct appraisal are the
topics which are covered on first and second day
It is useful to both appraisers as well as appraisees.
It helps appraisers for KRA setting and review
Step 2: KRA (key result areas) setting:
Measurable goals for every individual, linked with the
business goals are set before the beginning of the
Each individual has 3 to 5 KRAs. Each KRA set has a
weightage and the total of weightages is 100%.
All the targets i.e. KRAs are set after discussion between
superior i.e. appraiser and subordinate i.e. appraisee.
Performance with respect of KRAs forms a basis for the
calculation of Performance payout amount for an
Step 3: Mid – Term Review:
Mid – term reviews are conducted in the month of October.
Mid – term reviews are done with a view to know how much goals the
appraisee has achieved.
If the appraisee has failed to achieve the targeted level then the superior
can have a discussion with the appraisee regarding this and the reason for
not achieving the desired level of performance is found out.
Step 4: Performance
Performance appraisal or reviews are done in the month of May. Appraisees
are reviewed on the basis of achievement of KRAs .
Performance appraisal is a one to one discussion between the appraiser &
the appraisee about
*Performance based on goals set & results achieved
*Training and the developmental needs for the employee
Step 5: Feedback and Counseling:
In M&M Ltd., superior gives the feedback to the subordinate
immediately after the final performance appraisal.
Following points explain the very purpose of Performance
•The appraiser and the appraisee together review overall
performance of an individual against agreed targets.
• Helps in identifying Areas for Improvement.
• Provides development opportunities for the growth of people.
• Agree / Generate Data for actions relating to Increments,
PM focuses on results, rather than behaviors and activities.
Aligns organizational activities and processes to the goals of the organization
Supports ongoing communication, feedback and dialogue about organizational
goals. Also supports communication between employee and supervisor.