BK SCHOOL OF BUSINESS MANAGEMENT

PERFORMANCE MANAGEMENT

A Short History of Performance Management

By: Mohammad SalimRoll #: 11294

Outline of the Presentation:

• Antecedent• Performance Management According to Religions• Schools of Management• Human Resource Development• Merit-rating and performance appraisal (earlier version)• Attack on merit-rating and performance appraisal• Management by objectives

Outline of the Presentation…

• Critical-incident technique• Behaviorally anchored rating scales• Performance appraisal (1970)• Enter performance management • Why performance management • Exam Questions

Literature Review• Performance Management Systems and Strategies(By Dipak Bhattacharyya 2011)• Performance Management A Strategic and Integrated Approach to

Achieve Success (Michael Armstrong and Angela Baron 2010) • http://www.forbes.com• Management 6th Edition 2011: James A. F. Stoner, R. Edward Freeman,

Daniel R. Gilbert• http://www.kuzhalmannamagraharam.info/articles/bhagavadgita-and-

management-1.html• Qur'an or Koran (a) (Al-Quran: Surah (46) Al-Ahqaf Ayah 19)

(B) (Surah (49) Al-Hujaraat, Ayah 13)

Literature Review…• Strategic Human Resource Management

Tanuja Agarwal (2010)Reader, Faculty of Management Studies University of Delhi

• Management 6th EditionJames A. F. StonerR. Edward FreemanDaniel R. Gilbert

• Industrial Relations: C.S. Venkata Ratnam 2011• Human Resource Development

•Randy Desimone, John Werner and David Harris• HRD Score Card 2500 by Dr. T. V. Rao

•(Published by: Response Books, Sage Publications, 2008)

History of Performance Management• No one knows precisely when formal methods of reviewing

performance were first introduced. • Somewhere or other, everyone had the experience of performance

appraisal in some context. • As old as mankind itself.

Performance Management According to Religions• History of Performance Management According Sri Krishna: Work

culture • Sri Krishna elaborates on two types of work culture -• Daivi sampat " or divine work culture and • Asuri sampat " or demonic work culture.

Performance Management According to Religions…History of Performance Management According to Quran and Hadith•And to all are assigned degrees according to the deeds, no injustice be done to them. (Quran: Surah (46) Al-Ahqaf Ayah 19)

•Verily the most honoured of you in the sight of Allah is the most righteous of you. (Surah (49) Al-Hujaraat, Ayah 13)

•“Pay the worker before his sweat dries.” (Al-Hadith: Ibn Majah 2443)

Performance Management According to Religions…History of Performance Management According to the Bible •“The Lord has filled him (Bezalel) with the spirit of God, in wisdom and understanding,” (Exodus, 35, pp. 31-3). Moses selected men who were known to be most skilled craftsmen

PM Antecedents Human Resource Development

Schools of Management

-AD 221-265: “Imperial Rater”

-1491-1556 : Ignatius Loyola, society of Jesus.

-1st formal monitoring system out of work of Taylor before world war I.

-1920: Rating of officers in US armed service spread to UK also

-Early Apprenticeship Training Programs (eighteenth century)

-Early Vocational Education Programs (1809)

-Early Factory Schools (late 1800s)

-Early Training Programs for Skilled and Unskilled Workers (1913)

- Scientific Management 1890-1930 - Classical Organization Theory School - Human Relations Movement (Hawthorne effect)

PM Antecedents Human Resource Development

Schools of Management

-1920: Rating of officers in US armed service spread to UK also

-1950-1960: Merit-rating USA and UK

-1960 and 1970s: MBO and simultaneously critical incident technique and BARS

- 1980s: Performance Management and why

-The Human Relations Movement (1938)

-The Establishment of the Training Profession (World War II)

- Emergence of Human Resource - Development (1980s)

- The Behavioral School - The Management Science School (World War II)- The systems Approach-The Contingency Approach

PROCESS OF DEVELOPMENT IN INDIA• Not very old, The Royal Commission on Labour in 1931 for • appointment of labour officers to deal with the recruitment and to

settle their grievances. • The Factories Act, 1948, and labour welfare officers. • Today personnel management function in India encompasses welfare,

industrial relations, personnel administration, HRD, etc.

Performance Management Systems and Appraisal Practices in India• PA is varied in India from no appraisal to sophisticated • It is conducted for personnel decisions • Some organizations have annual confidential reports, considering

certain trait only• Some organization considering semi confidential format• Most of Government department fall in the 1st category• Private and public sector in the second• Some organization in between having sophisticated PA system of

confidential and semi confidential

Survey of 45 Organizations by Rao 1982• Including 34 private and 11 public• 50% regulating HR behavior and developing capabilities• 30% only for controlling and regulating employees behavior • 10% only for development purpose • ….• A high percentage of the organizations use the components of

appraisal discussed in the book

Appraisal Systems in Banks

• Great degree of attention is given to PA in banking sector• Several have changed or are in process of change their PAS• SBI is in the process of adopting an open system of PA and • Associate banks may also follow the same • Till that time they may follow the traditional one

Experience of last decade (1990s)

• Round table conference in by the Academy of HRD in 1995• The experiences published in Redesigning PA Systems by Rao and

Pareek (1996), some experiences: • L&T one of the pioneers in HRD• The appraisal system in TELCO is MBO• Rashtriya Nigam Ltd. Introduced development oriented appraisal system• Modi Xerox: its PM linked with career development, succession planning and

management of motivation by rewards

Another Survey by Rao in 1978

• 588 officers surveyed • 98% felt appraisal should to know about their stregths and

weaknesses • 60% felt it is very difficult to have objective appraisal• 50 to 60% said that even in confidential format their supervisor

communicate their perception• 88% wanted to know more from their bosses

General Trends

• Series of workshop training by author at IIM in 1979• More than 100 executives from private and public sector• Presenting their perception of merit and demerit of these systems• Following conclusion could be drawn:

Impact of Labour laws on PM

• Followings are some of the labour laws which left changed the way and working conditions for workers:• The Trade Unions Act, 1926 • The Industrial Employment (Standing Orders) Act, 1946 • The Industrial Disputes Act, 1947• The Factories Act, 1948• The Unroganized Workers Social Security Act 2008 ……..

Impact of Industrial Relations to PM• Followings are the theoretical aspects of Industrial Relations which

left significant impact on the relationships between employers and workers: • Unitary • Pluralist• Radical• Trusteeship

Merit-rating and performance appraisal • WD Scott before world war I, influenced by Taylor, man to man

comparison• Even today’s works are influenced by Taylor• Scott’s scale was modified and used to rate efficiency of US army• In 1920s and 1930s Scott’s efforts were developed into graphic rating• Used for repots on workers and for rating managers and supervisors:

Inspiring-favourable-indifferent-unfavourable-repellent• Subordinates were periodically analyzed in terms of traits in subjective

way.

Attacks on merit-rating and performance appraisal • Strong attack by McGregor :appraisal to analysis.• Not only weaknesses, But also Strengths and potentials• More future focused than the past• Analysis of behavior to achieve agreed results not assessment of

personality• Rowe concluded :• Appraisers were reluctant to appraise• The follow-up was inadequate• Difficulty of achieving standards

History of T-Group

Kurt Lewin, founder of modern social psychology facilitated group dialogue in Training Groups (or T-Groups) that advocates open-minded appreciation and inclusion of differences which is the beginning of HRD profession according to (Dipak Bhattacharyya PMS 2011)

Management by objectives

• By Peter Drucker: An effective management must direct the vision and efforts of all managers towards a common goal. • McGroger 1960: Theory Y:

• John Humble: MBO : • Reviewing critically and restating company’s strategic and

tactical plan• Each manager key results and performance standards and

commitment individually and as a team member• Providing conditions for achieving the key results • Developing management training plan• Strengthening the motivation of managers

Criticism of MBO

• Levinson 1970: • failure might be because of a partner, supervisor, subordinate or colleague, • Emphasis on quantification and quality will be sacrificed• MBO leaves out the individual’s needs and objectives

• Much time is spent on developing goals for the year• MBO often became a top-down• MBO is intended to concentrated on mangers • leaving the rest to be dealt with in old-fashioned merit-rating

Criticism of MBO…• Fowler (1990) criticized MBO because: • Not right for all organizations• emphasis was on mangers roles limited recognition of corporate

goals• Line mangers perceived it as centrally imposed administrative task• Formal once-a-year and little relationship with day-to-day

activities• Overemphasis on quantifiable objectives• Administratively top-heavy – form –filling became an end in itself

Critical-incident technique

• 1954: Developed by Flangan. On the basis of his research he came to a conclusion that to avoid trait assessment. • Evidence of actual performance are recorded in “black book”• It did not gain much acceptance perhaps because the ‘black book’

accusation stuck, but also it seemed to be time consuming

Behaviorally anchored rating scales• Designed to reduce the rating errors. performance dimensions are

rated such as: • Continually contributes new ideas• Takes a full part in grout meetings• Delivers opinions and suggestions • Tendency to comply passively • Tendency to go own way• Generally uncooperative

• But it is more time consuming • room for making subjective judgments

Performance appraisal (1970)

• 1970s: revised approach under the influence of MBO sometimes called result oriented appraisal• Trait ratings were also used • recently replaced by competency rating • Popular during 1980s because of performance based pay• Appraisal defined by ACAS 1988: regularly records an assessment of

an employee’s performance, potential and development needs. It is to take an overall view of work content, loads and volume, to look back at what has been achieved during the reporting period and agree objectives for the next

• Levinson 1976: he wrote that there were many things wrong with most of PA systems such as: • Usually subjective• Delays in feedback occur •Managers generally have sense of inadequacy• individual objectives were seldom related to the

objectives of business• There is no such a perfect performance review.

• Lazer and Wikstrom 1977 as follows: • A good performance appraisal scheme must be job

related, reliable, valid for the purpose for which it is being used, standardized in its procedures, practical in its administration and suited to the organization’s culture.

•

• PA was perceived as the property of personal department• The worst feature of PA in 1970s and 1980s: not a normal process of

management, somehow isolated even the same is true today• Line mangers often criticized it. • rate first in accordance pay increase • Fletcher (1993a) stated: what we are seeing is the diminishing of the

traditional appraisal system instead new processes are evolving according to the needs however the term appraisal has outlived its usefulness in some ways.

History of 360-degree feedback

• The German military first began gathering feedback from multiple sources in order to evaluate performanceduring World War II. • One of the earliest recorded uses 1950s at Esso Research and

Engineering Company.

• The idea of 360-degree feedback gained momentum

HR Scorecard- Rao, 1999

• HR Scorecard to measure the maturity level of HR in an organization was developed in India by Rao (1999), HR is audited as following:

1. Maturity of any HR system2. Competencies of HR staff, line managers and top management3. HRD culture and values 4. HR’s impact on business or organizational goals

• HRD Score Card 2500: gives pointes each of the above as following: (1) 1000 points (2) 500 points (3) 500 points (4) 500 points

Enter performance management

• The first use of the term ‘performance management’ is in Beer and Ruh (1976). • The aim of PMS is described at Corning Glass Work as following: • Emphasis on both development and evaluation • Use of a profile defining the individual’s strengths and development needs• Integration of the results achieved with the means by which they have been

achieved • Separation of development review from salary review

Enter performance management…• In the UK the first published reference to PM: • meeting of the IPM Compensation Forum in 1987 by Don Beattie

• By 1990 PM had entered the vocabulary of HRM in the UK as well as in the USA. • Fowler (1990) defines what has become the accepted concept of PM. • Management has always been about getting things done, and good managers

are concerned to get the right things done well. That in essence is the PM.

Enter performance management…• PM established: Full recognition of the existence of PM was

provided by the research project conducted by the IPM (1992) and following definition was produced: • A strategy which relates to every activity of organization set in the context of

its HR policies, culture, style and communication systems. The nature of strategy depends on the context of organization and can very from organization to organization.

Enter performance management…• IPM researchers Bevan and Thompson 1991: • Reward-driven integration: role of performance pay in changing

organizational behavior . It is appeared to be dominant mode of integration • Development driven integration: which stress the importance of HRD.

Performance pay is perceived to be complementary to HRD activities not dominating it.

Enter performance management…• Conclusion of Bevan and Thompson research: • No evidence that PM is associated with improvement of performance• Psychological research makes it clear that setting targets enhance

performance• Process most often relying on subjective • based on incomplete evidence and spiced with bias.• There is little consistency of viewpoint on the motivating power of money.• The focus has been on improving the bottom line

Why performance management

• Negative aspects of merit-rating and MBO• Trait assessment• PM simply replaced PA just as HRM and Personal Management.• PM may often be no more than new wine in old bottles.• The rise of HRM also contributed to emergence of PM

Exam Questions

• What is management by objective? Merit and demerit of MBO?

References

• Bhattacharyya, D. (2011). Performance management systems and strategies. Pearson Education India.• Armstrong, M. (2006). Performance management: Key strategies and

practical guidelines.• http://www.forbes.com• Stoner, J. A., Freeman, R. E., & Gilbert Jr, D. R. (1995). Management (6th

edn).• http://www.kuzhalmannamagraharam.info/articles/bhagavadgita-and-

management-1.html• Qur'an or Koran (a) (Al-Quran: Surah (46) Al-Ahqaf Ayah 19)

(B) (Surah (49) Al-Hujaraat, Ayah 13)

References…

• Tanuja Agarwal (2010). Strategic Human Resource Management: Reader, Faculty of Management Studies. University of Delhi

• J A. F. Stoner R. E Freeman, R. Gilbert Management 6th Edition

• C.S. Venkata Ratnam (2011) Industrial Relations• Werner, J., & DeSimone, R. (2011). Human resource development.

Cengage Learning.• HRD Score Card 2500 by Dr. T. V. Rao•(Published by: Response Books, Sage Publications, 2008)

THANKS