The document discusses transforming employee performance management from a traditional appraisal system to a KPI-based system. It proposes implementing the new system in stages, starting with manager and specialist positions. The summary includes: 1. It outlines a proposed performance management cycle that involves continuous feedback, mid-year reviews, and final appraisals to set objectives, provide coaching, and evaluate performance. 2. Objectives and KPIs would be set based on cascading department and organizational goals. Performance would be evaluated based on achieving objectives and competencies. 3. The new system aims to link individual performance more closely to organizational strategy and goals through setting measurable objectives and KPIs at all levels.

1. TRANSFORMING THE EMPLOYEE
PERFORMANCE MANAGEMENT
FROM TRADITIONAL APPRAISAL TO KPI BASED PERFORMANCE
MANAGEMENT
HAIDAR ALI, GPHR, PHRI,SHRM -CP,CAPM

2. Proposed PMS Implementation Stages
To Start with Manager & Specialist
positions
Stage
1 100% Integration
Stage
3
Enhance to Supervisors &
Officers Level Positions
Stage
2

3. Understand the PMS
Literature Review

4. Performance Management ?
“Performance management (PM) is the
combination of formal and informal
processes and practices that help drive and
focus employees on outcomes, goals,
activities, decisions and behaviors that will
produce positive short, medium and long-
term results for the organization”
Source: HAY Group

5. Performance Management Philosophy
What PM is What PM is Not
A focus on both results and means and business
performance.
A focus only on results.
Two-way communication and Participation.
One-way communication.
Focus both on "how" and “what.” Focus on "who.”
Individual goals and behavior focused on organizational
objectives.
Performance not clearly directed and not
focused on organizational goals.
Working "smarter" (knowledge-based).
Working "harder (reward and punishment
structure).”
How can we overcome barriers to success? Who failed?
Motivating. De-motivating.
A Line management accountability. An HR management accountability.
A continuous process. A once-a-year review.
Emphasis on planning and achieving. Emphasis on appraisal/review.
Source: SHRM

6. What are KRAs (Objectives)
 Typically important tasks
 Key activities or projects the function needs to achieve
over the performance period
 They focus on doing something better, making
improvements, doing something new
 Examples:
◦ Increase customer satisfaction ratings by 10% by the
end of 3rd quarter”
◦ Ensure number of complaints are reduced by 15% by
the end of 4th quarter
Source: HAY Group

7. What are KPIs?
 KPIs are key parts of a measurable objective, which is
made up of a direction, benchmark, Target and
timeframe.
 For example: "Increase Average Profitability per Project
from 20% to 30% by 2016".
Source: HAY Group

8. Key Performance Indicators, KPIs
 KPIs are written, expected Performance Outcomes
 KPIs need to be S.M.A.R.T.
S.M.A.R.T
S-Specific State Exactly What Will Be Accomplished
M-Measurable Milestones Events and Dates
A-Achievable Goal Can Be Achieved Within Constraints
R- Result Goal Should Always Focus on Actions
T-Time-Bound Time Allowed Is Fair & Reasonable
Source: HAY Group

9. December`
Effective Performance Management
Cycle – HAY Group
Finalizing of Business Plan
(Long Term)
Cascading Corporate and
Department Budget and Targets
Performance Planning for
Individuals
(Setting Goals & Competencies)
Midterm/Quarterly
Assessment
Annual Appraisal / Review
Performance Recognition
and reward
January
Ongoing
Feedback and
Coaching /
Managing
Source: HAY Group

10. Effective Performance Management
Cycle - SHRM
Source: SHRM

11. Effective Yearly PMS Activity
• Communicating expectations
on a regular basis.
• Providing feedback in real
time whenever exceptional or
poor performance is
observed.
• Helping employees develop
expertise that maximizes their
potential.
Source: SHRM

12. PMS Strategies & Benefits
Source: SHRM

13. Linking Org. Goals to Individuals
Source: HAY Group

14. Cascading Departmental KPIs to Individuals -
Example
Retain, grow, and
diversify current
client portfolio
Retain and grow
business with
recurring clients
Generate business
from new clients
1. % of Market Share
2. Sales Amount
3. % of Customer
satisfaction with high rating
1. % revenue from new
clients out of total
revenue
2. % of projects from new
client relative to total
pipeline
3. Number of New explored
markets
4. % of revenue referred
from one segment to
another (focused on up-
sell and cross sell)
Departmental Objectives
Strategic
Direction
Departmental KPIs KPI Targets
80% Market Share
Sales 40,000 (SR)
Opening of 4 New
stores
75% Customer
Satisfaction
Tagged Job Title
Country
Sales
Manager

15. Proposed Layout
KPI Based Performance
Management System

16. Proposed Yearly Performance Management Cycle
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Objectives
Setting Continuous Feedback
Mid-Year
Review Continuous Feedback
Final
Appraisa
l
Proposed Yearly Cycle
Full Scyle
To Make the PMS more flexible, Mid year Review is proposed to:
• Review the employee Progress
• Revise & Add Objectives & KPIs (If Required) with approval of 2nd
level Manager.
• Identify Training Needs
• Provide the Coaching & Guidance

17. Objectives Criteria & Weightage
Grades Objectives Core Competencies
Performance
Standards
Senior Managers 70% 30%
Managers & Specialists 70% 30%
Other Positions 50% 50%
Level Number of Objectives
Senior Managers BSC
Managers & Specialists 4 - 6
Other Positions
Appraisal on Performance
Standards
*Note: Grades 6 to 10 consists of 50% of total workforce. Gradually, these
employees also would be evaluated on KPIs.

18. 1. Objectives Setting
1
2
3
4
5
6
100%Total Weight Should be equal to 100%
No. Objectives / KRAs Weight
KPIs Targets(Key
Performance Indicator)
Measurement
Frequency

19. 3. Employee Development
Strength and Development Activities
Highlight the areas of strengths of the employees and how these strengths can be used to better do one’s job. Suggest areas in which the Job Holder will
need development in order to meet his personal objectives, knowledge / skills and competency requirements relating to his current role. Development
can be through formal programs or informal activities (e.g. on the job training).
Employee’s Strengths
Training Recommendations
Other Recommendations (If Any)
Training Target Level
Training Course List (Drop Down Box) Training Level (Drop Down Box)

20. 4. Comments & Sign-Offs
Annual Review Comments
Assessor's Comments
(Immediate Manager)
Employee's Comments
Reviewing Manager's
Comments
Sign-Offs
Goal Setting Meeting:
Employee Appraiser Reviewing Manager
Date Date Date
Mid-Term Review Meeting:
Employee Appraiser Reviewing Manager
Date Date Date
Annual Review Meeting:
Employee Appraiser Reviewing Manager
Date Date Date
Source: HAY Group

21. Setting Individual Objectives
1
• Cascade Departmental KPIs to
Individuals
2
• Identify KRAs* from Job Descriptions
Following are Two important points to keep in mind when setting
Individual Objectives:
*Key Result areas represents 20/80 rule. This is because 80% of the value of
what we do is determined by 20% of our activities. So Supervisors should
identify that which job activities are critical for the departmental success.
A key result area must be clear, specific and measurable, it must be an
essential business activity, and it must be within employee’s control.

22. END