Webinar – Designing an Effective Performance Management System
18th January, 2012
All materials are Copyrighted 2010 by Strategic Human Resources Management India, Pvt. Ltd. or Society for
Human Resource Management unless otherwise expressly noted. All rights expressly reserved.
Structure
1. Aniruddha Limaye
– Performance Management Design Principles
1. Vijayan Pankajakshan
– Structuring the Performance Design and
Implementation as a Change Initiative
– Key Design Challenges and Solutions
3. Question and Answer
Slide 2
Key Performance Management Design Principles
When to institute a new Performance Management System?
Elements of current PMS. What is missing?
How to design PMS to achieve results?
Slide 3
When to institute a new Performance Management System ?
– Key indicators to look at:
Employee related issues
Performance related issues
Slide 4
…When to institute a new Performance Management System?
Employee indicators
1. Unfavorable feedback from employees on PMS Goal setting
Performance Assessment
Reward and consequences
2. Increase in employee attrition linked to appraisal
cycle
Slide 5
…When to Institute a new Performance Management System?
Performance indicators:
1. Low line ownership, tremendous follow up by HR
2. Organization consistently struggles or fails to achieve
goals
3. Considerable finger pointing when goals are not
achieved
1. Low mutual trust, turf mentality
2. Lack of teamwork – within and across teams
4. Severe difficulty in implementing any new decisions,
initiatives or changes
Slide 6
Elements of current PMS. What is missing?
1. Goal Setting
Annual Goal Setting Process at the Apex Level.
Goal Cascading Process.
Some organizations create a “Balanced Scorecard”
2. Sometimes there are monthly or quarterly “Business Reviews”
3. Appraisal and rewards guidelines are arrived at by HR Semi-annual
and/or annual individual appraisals are carried out
4. Some have employee self-assessment
5. Ratings are submitted to HR and “normalization discussions” to
decide on final ratings and rewards/consequences
6. Process is guided by budgets, rewards philosophy, results of a
compensation survey, and the process of forced ranking and
application of “bell curve”
Slide 7
…Current PMS. What is missing ?
7. The final ratings and rewards are communicated to line managers,
who in turn (are supposed to) communicate these to their respective
team members
8. Some amount of grievance redressal may happen
9. New Goal Setting Process begins
Slide 8
…Current PMS. What is missing?
1. Most current appraisal systems are not really Performance
Management Systems or Performance Enabling Systems,
Are end of the period Performance Assessment/Appraisal Systems –
an administrative or HR process
Don‟t guide individual employee to do what to achieve results, and
Don‟t help individual employees to make mid-course corrections
Don‟t take into account the behavioral basis of enabling Performance
- disregard this element
2. Goals most often set and measured are “challenging stretch goals”
that lead to always falling short
3. Intermediate goals or essential milestones are rarely defined,
measured and tracked
4. Little inputs from ground up
Slide 9
…Current PMS. What is missing ?
5. Goals not arrived at through rigorous, open, data based discussions
and deeper understanding
6. Goals represent top leaders‟ ambitions or the organization‟s grand
aspirations
7. Critical assumptions are rarely discussed and captured
8. Goals not clearly linked to specific initiatives, actions and
behaviours that actually drive the desired outcomes
9. Lack of clarity and ownership at managerial and employee level
about critical actions and behaviours needed to achieve the desired
results
10. No base-lining of past individual performance
11. Goals don‟t take into account past base line performance and
existing capabilities of each individual employee
Slide 10
How to design PMS to achieve results?
– Key design principles
Behavioral basis for enabling performance
Making PMS an effective core business process
Slide11
Design Principles – Behavioral basis for enabling performance
1. Each employee to have line of sight goals
2. Identify specific actions and behaviors that will help
them achieve the goals
“Causal link” between actions & behaviors and achieving the
desired results
3. Goals are in line with the employee‟s strengths and
current level of capabilities
4. Actions, behaviors and intermediate results
(milestones) are concurrently measured and are
analyzed and graphically represented
Slide 12
…Design Principles – Behavioral basis for enabling performance
5. Specific and immediate feedback provided about the
behaviors and results achieved
6. Feedback given as quickly actions/ behaviors and
resultant outcomes occur (Best that employees can get
automatic feedback)
7. Feedback is information in a form that can help the
employee understand what to persist with, do more and
what to stop or change, and how
8. Feedback is non-judgmental, factual and without
“negative emotional content”
9. The employee himself can understand where he stands
10.May need help to figure out what needs to be done to
improve results
Slide 13
…Design Principles – Behavioral basis for enabling performance
11.The desired actions and behaviors are “positively
reinforced” by the manager very frequently and
regularly
By definition, “positive reinforcement,” is actions
that lead to frequent and consistent recurrence of
the desired actions and behaviors
If this does not occur, it means the “intended
reinforcement action” is not working for that person
Some trial & error and iterations are required -
deeper understanding of individual employee helps
Manager can provide “different strokes for different
folks”
Slide 14
…Design Principles – Making PMS an effective core business process
1. Ensure Organizational Strategy is formulated out of “rigorous
thinking and debate and questioning assumptions,” not result of
high ambition
2. Set goals focus on building capabilities – organizational and
people – and serve different stakeholders to achieve sustainable
results (Balanced Scorecard approach)
3. Understand fundamental process of value creation in the
organization to ensure that
Individual Contributors - functional specialists/technical
experts – also get their due importance and rewards
Differentiated rewards really reflect differential contribution
and rewards are equitable
Organizational, departmental/team and individual goals are
all given due weightage – not one at the cost of other
Enable senior leaders and line managers to see the causal
link between right actions & behaviors that achieve end
results – not just focus on results
Slide 15
…Design Principles – Making PMS an effective core business process
4. Measure initiatives, actions and behaviors that drive results
5. Underscore importance of concurrent measurement, review, effective
and immediate feedback and reinforcement to each individual to
enable performance
Create non-judgmental feedback mechanism
6. Resolve inherent conflict between goals of different organizational
entities to ensure all pull together
7. Recognize interdependencies between different entities and ensure
effective “collaboration and support” to each other
8. Don‟t blindly follow “forced ranking/bell curve distribution
Consider whether it would be better to set “absolute
performance norms” for each entity and
Reward all those who achieve or exceed targets/norms in
place of forced ranking/bell curve distribution
Use past achievements and reinforcement to raise the bar
Slide 16
Structure
1. Aniruddha Limaye
– Performance Management Design Principles
1. Vijayan Pankajakshan
– Structuring the Performance Design and
Implementation as a Change Initiative
– Key Design Challenges and Solutions
3. Question and Answer
Slide 17
Performance Design & Implementation
IMPACTS…
Fought for/ contentious
outcomes -
Red flags get captured first
Value perception of a
group /set of employees
– shifts up or down
Engagement with
customers / clients /
consumers
Performance benchmarks & other key
elements of org culture - entitlement viz
a viz having to sweat
longer/harder/faster viz a viz having to
stay longer
Expected behaviour -
resist, fear, resigned
acceptance ,
acceptance
with conviction
Slide 18
“Lens of
Change
Management”
Leadership
Agenda -Top Management/Board
Is the timing right?
Executive Sponsor(s)
Cross functional, level Design Team- not to be led
by HR
Brief and Boundary Management- Sponsor and CFT
Communication by Sponsor(s)- other Leaders
and rank and file - Why at all, Why now, Scope,
Timelines, high level expected outcomes
Slide 19
Current State Analysis & Diagnosis
• Communicate to Team Leaders, People Managers …
simultaneous … orchestration . . . across time zones …
• Communicating ongoing progress- How much, What level,
How frequent
• Written briefs, FAQ‟s…
• TF- engage with various groups (multi level)- to listen to „ground
dynamics‟– Modify response, „seed „ thoughts / trial balloons . .
• Gate approvals/Engagement with Sponsor(s) at regular
intervals
Slide 20
… analysis & diagnosis (Contd…)
• Project Scoping, Leaders, Facilitator, deadlines
• Tasks/Process/Steps- parallel, sequential
• Obtaining alignment- progress and process
• Do a Pilot – If likely change is „significant‟ in scale and/or
impact
• Buy in- What is in it for everyone?
• If significant change contemplated- Stagger the impact
Slide 21
Structure
1. Aniruddha Limaye
– Performance Management Design Principles
1. Vijayan Pankajakshan
– Structuring the Performance Design and
Implementation as a Change Initiative
– Key Design Challenges and Solutions
3. Question and Answer
Slide 22
Communicating & Aligning Business Strategy And Goals
- To SBU / Unit / Team / Individual objectives
How much to communicate, when, whom :
- Organization Culture being the determinant
Integration of Organization Performance
Planning and Review Process/Systems with the
PMS :
- Extent of integration- Global /Regional Goals
Context and setting of Goals :
- Openness and Transparency
- Balance - top down, bottom up and across - conversations
One on one conversations :
- Group Goal Setting
Slide 23
Encouraging Managers
• Philosophy, Assumptions, Nomenclature :
• Performance Appraisal, Performance Assessment/
Review, Performance Assessment & Development?
• Expectations from Team Leader(s)-
• Performance levels, Performance Improvement &
Development, Potential Unlocking - releasing Talent
• Focus/Importance on Team Leaders’ Competency
• Development in inspiring „extraordinary‟ performance
outcomes form „ordinary‟ talent
- To have meaningful performance coaching & review dialogues
Slide 24
Aligning Performance Assessment with Reward
• Obliterating focus on Reward – outcome of Performance Assessment
Processes- Deadens the core intent
• „Highly paid‟ employees of a Company - Most often not reflected in
superior Business/Market Performance – Compared to other „lesser
paying‟ ones
• Good to Great: Jim Collins and Porras: Research
• Over focus on Reward linkage- insight - Employer Brand is weak
• Rarely in History- has monumental/path breaking Performance
outcomes - Happened due to a ‘pot of gold’ as the prime driver
Slide 25
Ensuring Objectivity & Uniformity of Evaluations across units/functions
• There is a limit to Objectivity…at best quality and trend of „judgment calls‟ improve over time
• Variability is inherent in all processes – Inherent to life, agriculture • (the quality of a Mango fruit this year, will be different from the one last year- even if grown
under same soil and other conditions)
• Markets, Functions, Professions - Market ascribe different value at different times
• Bell Curve led Normalization - Popular methodology to ‘cut the suit according to the cloth available’
• Line Results first measured - Then support functions
• Finance- sign off ‘claimed results’- When tied to significant Bonus/Variable Pay outcomes
Slide 26
Designing a PMS for Virtual Organization
• Project duration is the foot print to be planned, coached and assessed- not calendar year
• Assessment of the employee’s Performance must seamlessly flow into and
out of Business led Project Performance Assessment and signing off
• Employee’s Performance- to also focus on how he/she supported others and also sought support
• Cultural nuances – built into Project Planning and kickoff stage itself
Slide 27
… PMS for Virtual Organization (Contd…)
• Employee‟s contribution – Investing in the Knowledge Management Process-
part of signing off
• Face to Face assessment - at least once a year- - subject to other Business
compulsions
• Project to be kicked off- incorporating the linkages (including consequences of
compliance/non compliance) with Performance Management Processes
Slide 28
thanks!
Questions ?
Slide 29
