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Business Impact of Performance Management

Mr Biswajit RoyDy. General Manager, Incharge HR/ER (HRD),

IndianOil Corp. Ltd.

Presented at Oil & Gas HR Round Table, August 2011organized by ISPe & UPES Dehradun

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Business Impact

• Performance management is the foundation of any organization that has a vision and knows where they want to be in the near and long term future

• Performance management is the gauge to know whether or not strategic goals are being reached and which areas could be improved

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Business Impact

• Performance management System (PMS) relates to

and impacts major functions within an organization.

– Strategic Planning– Organizational Development– Change Management– Project Management– Customer Satisfaction

– Knowledge Management – Quality Management– Process Improvement– Pay and performance

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Strategic Planning

• Strategic planning is the process of determining a company's long-term goals and then identifying the best approach for achieving them.

• Performance measurements allow executive management to gauge the effectiveness of the organizational strategic plan and determine how the budget and business plans will be setup in future.

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Organizational Development

• Organizational development(OD) is the process for developing internal capacity to be the most efficient towards its mission work and to sustain itself over long term.

• PMS directly relates to OD, since it is primarily focused on improving the performance of organizations and its people.

• PMS helps get a clear and objective view of the organization's performance abilities necessary for sound management decision making.

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Change Management

• Change management is a systematic approach to dealing with change within every perspective of an organization, from systems to personnel, to projects and to functions.

• Every system, personnel, and procedural change within an organization is implemented to achieve an improvement in performance. The actual improvement is compared to the predicted improvement to assess the effectiveness of the change.

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Project Management

• Project management is the discipline of organizing and managing resources (e.g. people) in such a way that the project is completed within defined scope, quality, time and cost constraints.

• Cost, schedule and scope performance are measured and monitored throughout each phase of the project lifecycle from target setting to final evaluation stage.Project performance reporting is the process of collecting project baseline data and distributing performance information to stakeholders throughout the project.

• Implementing project performance measurement ensures resources are used to obtain the objectives of the project keeping cross functional balance and interdependence in view.

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Customer Satisfaction

• Customer satisfaction is the measurement or determination that a product or service meets a customer's expectations, based on predetermined quality and service requirements.

• Customer satisfaction feedback, can provide information and insight for achieving breakthrough increases in organizational performance and effectiveness.

• When measuring customer satisfaction, organizations review their objectives and ensure that the customer service strategy is linked to those objectives. PMS ensures that the organizational objectives are linked to the customer service strategy.

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Workforce Performance Management

• Workforce performance management is the strategic alignment of an organization's human capital with its business activities.

• Functions within workforce performance management include recruitment and hiring, compensation, incentives, learning & development, competencies and performance measurement

• Performance management is the process of aligning employee performance to organizational objectives and goals.

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Knowledge Management

• Knowledge management refers to the guidelines, policies, and practices that an organization uses to create and transfer information to support the performance of the people in the organization.

• PMS drives knowledge management by linking knowledge to critical functions which impact business and putting the supports in place to ensure knowledge is leveraged across people and circumstances.

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Quality Management

• Quality management is a method for ensuring that all the activities necessary to design, develop and implement a product or service are effective and efficient with respect to the system and its performance.

• Processes are monitored and quality audits monitor compliance with the quality system requirements.

• Performance measurement is a necessary instrument for quality management as it captures performance expectations and standards.

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Process Improvement

• Process improvement is a series of actions taken to identify, analyze and improve existing processes within an organization to meet new goals and objectives.

• Performance improvement is the concept of measuring the output of processes or procedures, followed by their modification to increase output, efficiency, or their effectiveness.

• Often times, the most critical processes that impact business success are those that require support from multiple functional groups. Identifying and managing cross-functional processes and removing the functional silos that inhibit business culture are discussed in great detail in the planning and execution phases in PMS.

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Pay and performance

• Most companies link pay and performance management through merit systems and sometimes through incentives. Leading businesses are building 360-degree or multi perspective feedback into their systems. These include self-assessment and assessments from peers and subordinates, and customers are increasingly brought into the assessment process.

• A robust performance management system enables performance differentiation on well defined measures and bases incentivisation on individual basis. This also helps incentivisation on a ‘Bell Curve Approach’ and has better acceptability.

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IndianOil Experience ...

• Changed Incentive scheme ideology To reward according to individual/ small team performance, suitably differentiating higher performance, based on well defined performance measures.”

• Implemented robust online performance management system in 2005-06

• Six performance assessment cycles completed.• Officer incentive scheme based on performance

differentiation• Departmental promotion based on performance bell

curve approach

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IndianOil Experience ...

• Adherence of a new performance culture of planning and target Setting

• Individual incentives to officers to drive performance

• Better control on the work flow stages of performance management

• Competency mapping for all roles

• Alignment with other HR systems.

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IndianOil Experience ...

• Objective, transparent and consistent assessment

• Focused approach through target setting for all

• Corporate targets part of performance plans

• Performance planning and appraisal process integrated with MoU

• Inter-se comparison and sharper differentiation possible

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Business Impact

• The success of performance management and its effect on business and cultural strategies depend heavily on senior-level support.

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“If you want it, measure it. If you can’t measure it, forget it”

– Peter Drucker

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Performance Management: Business Impact

• Effective performance management is a crucial element in identifying the critical talent."

Anne-Marie Malley

Deloitte Talent Management Partner

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Performance Management: Business Impact

• Performance management touches on so many other talent management initiatives, the ripple effect of effective performance management can be substantial. "

Matthew Parker

StepStone's,Group MD, Solutions