NMDC Limited

Presentation on

Performance Management System

Welcome

Performance Related Pay, being an important component of Executives’ compensation, developing a Robust and Transparent PMS has assumed significance. When a CPSE has to bring in/strengthen ‘Performance Oriented Culture’, it is essential to correctly evaluate the performance of executives for appropriately rewarding the different levels of performers.

Congratulations and sincere thanks to Secretary, DPE for conducting this Workshop on Performance Management System. Learning from this workshop would surely help in fine tuning the PMS already in vogue in CPSEs.

In this context, recent initiative of DPE in revising the procedure and guidelines for recording of Performance Appraisal Report of Chief Executives, Functional Directors, Executive Directors (E9) and General Managers (E8) of CPSEs, is comprehensive and timely;

NMDC has, by and large, already been following the spirit of these revised guidelines even for other levels of Executives;

DPE’s Initiative contd……………

The Existing Performance Appraisal System in NMDC

It is in vogue since 1998-99;

It is on an annual basis;

It has a mid-year review mechanism;

It is divided into three categories: Category-I - Jr Officers, Executives of E0 & E1 Category-II - Executives of E2, E3 & E4 Category-III - Executives of E5, E6 & E7

For Sr Management (GMs & above) the Performance Appraisal System as prescribed by DPE is followed.

Performance Appraisal System in NMDC

Performance dimensions are categorized into five Sections viz

– Purpose of Job & Objectives for the year

– Assessment of the Appraisee on behavioural dimensions

– Overall assessment based on achievements of objectives & behavioural dimensions

– Identification of strengths, areas needing improvement & Development Plan

– Potential appraisal

Existing System contd…………

Procedure followed for appraisal

– Based on Key Performance Areas Objectives are set at the beginning of the year keeping in view the organizational objectives;

– Objectives are reviewed & modified according to changing situation during middle of appraisal period, if needed;

– At the end of the appraisal period, self appraisal is recorded by the Appraisee indicating his achievements, performance areas on which he could have done better, constraining and facilitating factors, training & development needs etc.

– Achievements are then analysed by both the Appraiser and the Appraisee together and performance rating arrived at.

– Appraiser follows critical Incident Method to decide the performance

rating; records critical incidents about the performance of the

Appraisee while arriving at the rating; takes into account job performed as recorded in the diary

maintained by individual executive;

Existing System contd…………

Existing System contd…………

Performance rating is reviewed by Reviewer -

– Reviewer looks for objectivity in assessment in over- all performance and can modify the rating of the Appraiser.

In order to ensure that PAS is administered fairly & without any individual biases/prejudices the PARs are further reviewed by Review Committees;

– PARs of Executives upto E4 & JOs are reviewed by Project Level Review Committee.

– PARs of E5 and above executives are reviewed by Corporate Level Review Committee.

Existing System contd…………

Corporate level Review Committee also monitors: - Trends; Process of appraisal; Objectivity; Standards; Acts as a conscience keeper for the process, with focus on

the end objectives; Counsels the various Project Heads/GMs to ensure the

success of the process both in letter and spirit;

Existing System contd…………

Performance Factors/Basis for Evaluating Performance

Outstanding Performance

– Has exhibited thorough performance, complete mastery of the present job

– Is a resource to the organisation beyond his present assignment particularly in the building of people and systems

– A high level contributor to organisational results and displaying outstanding leadership qualities

Very Good Performance

– Performance which is over and above the allotted responsibilities and expected standards

– Something extra in the form of a higher output or efforts, better quality or insight and improvement in systems

Existing System contd…………

Good Performance

– Exhibits a good amount of self-reliance and can be depended on for results without any supervision

Satisfactory Performance

– This implies full performance of allotted responsibilities and achievements of expected standards

Barely Adequate Performance

– Has only partially achieved objectives and not with effective utilization of resources

– Needs to be pushed

– Can improve substantially

Existing System contd…………

Transparent System System is transparent since –

– deciding KPAs clearly spelling out objectives, analysis of achievements, discussion of the overall rating including recording of differences in perception with reasons thereof are done mutually by the Appraiser and Appraisee;

Communication to the “under performers” is invariably made and representation, if any, received is considered for appropriate decision.

Transparent System

RobustnessThe behavioural related parameters do not allow different

interpretation in view of clear-cut guidelines and hence the task of obtaining true and objective assessment of the Appraisee has become easy. Hence, the present system is rational and Robust.

Robustness

Ownership

The activity of appraisal starts at the beginning of the year with mid-course review of the objectives if necessary and concluded with due process at the end of the year.

The existing system is self defined and assessed using personality traits achievements, at the end of the year.

Appraiser, if necessary, counsels the Appraisee when shortcomings are noticed in personality traits, efforts made to achieve objectives set etc.

Such counseling and discussions ensure performance on specific parameters towards which there is an effort by the Appraisee during the year.

Thus, it is owned by the Appraiser and the Appraisee.

“Bell Curve” distribution

PMS followed has the capability of giving “Bell Curve” in performance rating of executives;

“Bell Curve” - Distribution

ANALYSIS OF RATING FOR LAST 3 YEARS

27%

2%1%

60%

10%

-10

0

10

20

30

40

50

60

70

BARELY ADEQUATE SATISFACTORY GOOD VERY GOOD OUTSTANDING

RATING

% A

GE

Bell Curve Distribution - Issues

Paying lesser PRP to bottom 10%, especially when it includes good executives who have performed adequately, not only acts as a demotivator but it also may create feeling of survivor guilt in the remaining high performers;

Forced ranking may also encourage Executives to work against other Executives in an effort to supplant them in rankings;

***

These and such other issues also need to be addressed for finding solutions in the interest of effective working of the

Performance Management System

Conclusions

Existing Performance Appraisal System in NMDC meets the requirements for payment of PRP to the Executives & JOs;

“Remuneration Committee” headed by an Independent Director has been formed to decide policy for payment of PRP it is under its consideration;

Thank You