Basic Concepts in Performance

Management and Appraisal

Performance Appraisal:Setting work standards, assessing

performance, and providing

feedback to employees to

motivate, correct, and continue

their performance.

Performance Management:An integrated approach to

ensuring that an employee’s

performance supports and

contributes to the organization’s

strategic aims.

Comparing

Performance Appraisal

and

Performance Management

2

Components

Goal Setting and

Expectations

1

Talent Development

Opportunities

2

Review Cycle3

Descriptions

Alignment of individual and

organizational goals in consideration

of individual capabilities, career goals,

business function and level

Formal and informal learning and

development opportunities that support

an individual in achieving his or her

goals

A clear and transparent process for

evaluating employees against

individual goals and expectations

Performance management is a strategic and integrated process of setting, tracking and

measuring individual performance objectives against organizational goals and

competencies to develop the capabilities of individuals and teams to help deliver

sustained success to organizations.

Objectives

Key Components of Performance Management

Reinforce organizational priorities

Communicate clear measures and

performance targets

Connect jobs to business strategy

Improve performance through

continuous feedback &development

Train managers to be people

developers and engage employees

Inform decisions about raises,

promotions, and transfers

Recognize staff accomplishments

Career Development

Definition of Performance Management

3

Objectives of the

Performance Appraisal System (PAS)

• Help Individuals

– Develop Role Clarity

– Plan their Work

– Understand their Strengths and Weaknesses

– Follow Methods to Overcome Weaknesses

• Improve Mutuality between Reporting Manager and

Reportee

• Identify Training and Developmental Needs of an

Individual

• Provide basis for merit increase and incentives

4

5

Components of your Performance objectives

Performance Area

KPI

KPI Measure

Target Achievement

Relative Weightage

•Financial

•Customer

•Process

•People

• These should highlight what is expected from “On Target” performance

• Set by manager and agreed by employee

•Based on the criticality of the KPI’s to your role as well as the effort required

•Allocated in discussion with your manager

• Specific performance goals

• Role based

• No more than 6-8 performance

objectives should be identified

• These should measure success against

the KPI

• should be as objective & measurable

as possible

The KPI’s should be as objective and measurable as possible and will be created based

on a KPI Dictionary available for your reference.

6

How does it help a Manager?

Drive performance of individual by focusing on results

Provide meaningful measurement

Effective feedback

Design development goals

7

What does it mean for an employee?

Feedback: An employee is interested to know their performance for the year, this is the most important thing for him/her

Motivation: Let the employee know what his/her strengths are and help them in reinforcing positive behaviors

Trust: Create an environment of trust and openness.

Career Planning

Performance Appraisal Roles

• Supervisors

Usually do the actual

appraising.

Must be familiar with

basic appraisal

techniques.

Must understand and

avoid problems that can

cripple appraisals.

Must know how to

conduct appraisals fairly.

Performance Appraisal Roles (cont’d)

• The HR Department

Serves a policy-making and advisory role.

Provides advice and assistance regarding the appraisal tool to use.

Trains supervisors to improve their appraisal skills.

Monitors the appraisal system effectiveness and compliance with

relevant laws and guidelines.

Designing the Appraisal Tool

• What to Measure?

Work output (quality and quantity)

Personal competencies

Goal (objective) achievement

• How to Measure?

Generic dimensions

Actual job duties

Behavioral competencies

Appraisal Tools

Tool Advantages Disadvantages

Graphic rating

scale

Simple to use; provides a

quantitative rating for each

employee.

Standards may be unclear; halo

effect, central tendency, leniency,

bias can also be problems.

BARS Provides behavioral “anchors.”

BARS is very accurate.

Difficult to develop.

Alternation ranking Simple to use (but not as simple as

graphic rating scales). Avoids central

tendency and other problems of

rating scales.

Can cause disagreements among

employees and may be unfair if all

employees are, in fact, excellent.

Forced distribution

method

End up with a predetermined number

or % of people in each group.

Employees’ appraisal results depend

on your choice of cutoff points.

Critical incident

method

Helps specify what is “right” and

“wrong” about the employee’s

performance; forces supervisor to

evaluate subordinates on an ongoing

basis.

Difficult to rate or rank employees

relative to one another.

MBO Tied to jointly agreed-upon

performance objectives.

Time-consuming.

Management by Objectives (MBO)

• A comprehensive and formal organizationwide goal-setting and

appraisal program requiring:

1. Setting of organization’s goals.

2. Setting of departmental goals.

3. Discussion of departmental goals.

4. Defining expected results (setting individual goals).

5. Conducting periodic performance reviews.

6. Providing performance feedback.

15

DRAFT DOCUMENT – FOR DISCUSSION PURPOSES ONLY

Performance Rating Scale

The State rating scale includes five performance ratings:

PoorFails to meet requirements consistently and/or by a wide margin

Frequently fails to meet requirements; much room for improvement

SatisfactoryUsually meets requirements; Completes requirements as expected

Very GoodConsistently meets and sometimes exceeds requirements

OutstandingExceeds requirements consistently and/or by a wide margin; nearly ideal

Needs Improvement

Manage

Review

Plan

TIP: The rating should support the comments and examples that demonstrate proficiency, accuracy, and effort in each area. Start by filling out the comments and THEN assign the rating that best reflects the description above.

Rating Scales

16

DRAFT DOCUMENT – FOR DISCUSSION PURPOSES ONLY

Common Rating Pitfalls

Letting a good or bad rating on one performance area influence scores in other areas

Halo Effect

Rating all subordinates’ performance at a similar, average score, regardless of differentiating performance or behavior

Central Tendency

Scoring a subordinate generously to make the employee feel good or to make the manager look good to leadership

Leniency

Scoring a subordinate’s performance relative to teammates rather than individually

Comparative Rating

Scoring a subordinate poorly because the manager has extra strict standards or wants to appear tough

Strictness

Manage

Review

Plan

Evaluating based on personal feelings toward the employee rather than on professional performance

Relationship Bias

Rating performance primarily on most recent tasks rather than across the complete time period

Recent Work Focus

Rating performance based on his/her physical appearance. If appearance affects work, still focus on the performance.

Appearance Bias

Rating a subordinate based on the effort put into the job rather than actual results and performance

Effort Rating

Who Should Do the Appraising?

Self-Rating

Subordinates

360-Degree

Feedback

Potential

Appraisers

Immediate

Supervisor

Peers

Rating

Committee

Matching Talent to Reward

1. High potential –Individuals who deliver differential value as evidenced by past performance and have the potential (the ability, engagement, and aspiration) to rise to and succeed in more senior, critical positions

*Good Managers Focus on Employees' Strengths, Not Weaknesses: Knowledge@Wharton

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1223)

2. Critical workforce segments –highly-skilled, highly-trained individuals who drive the highest proportion of revenue growth

3. Natural strengths of all employees – employeesare unique individuals who naturally think, feel, and behave in different ways, resulting in divergent strengths and weaknesses. “A great manager is brilliant at spotting the unique differences that separate each person and then capitalising on them”*

Value creation of high potential employeesSpecialists

Critical Workforce Segments

Critical Workforce Segments

Core WorkforceFlexible Labour

531 2 4

5

3

1

4

2

Value ( £s)

Sca

rcit

y o

f s

kills

SpecialistsCritical Workforce

Segments

Critical Workforce Segments

Core WorkforceFlexible Labour

531 2 4

5

3

1

4

2

Value (

Sca

rcit

y o

f s

kills

Average performers

Top performers

Fast food restaurant

Average

performers

Top

performers

Investment banker

2X

8X

100

800

Software developer

Average

performers

Top

performers

Low complexity jobs

Medium complexity jobs

High complexity jobs

– ‘

Productivity increase

Pro

fita

bili

ty i

ncr

eas

e

12.5%

8.9%

Sample size = 90,000 employees

Before strength-based intervention

After strength-based intervention

Source: 2008 Gallup Organization, Princeton, NJ. Gallup Management Journal http://gmj.gallup.com /

After identifying the critical employee groups that support strategy and drive business success, their values in the workplace environment and how that impacts commitment and Performance, we identify the appropriate Total Reward levers and principles that apply to these

workforce segments and thereby support business strategy and help drive value.

19

DRAFT DOCUMENT – FOR DISCUSSION PURPOSES ONLY

Tips for the Performance Review Conversation

Managers play a critical role in this process, and their approach can have a significant positive or negative impact on results. To ensure successful Performance Review dialogues, managers should:

Give Specific and Targeted Feedback

Remain Positive about Opportunity Areas

• Research has shown that focusing on performance strengths during the Performance Review can have a positive impact of more than 36 percent on performance

TIP: Don’t confuse performance strengths with personality strengths. Both are important components of the Performance, but try to keep your feedback separate and specific to each component.

Focus on Strengths

• By providing specific feedback regarding the outcomes of the formal review, managers can positively impact performance by 6.6 percent

TIP: Ensure the feedback you provide is specific and actionable

• Addressing performance gaps is critical to managing performance; however, do not over-emphasize. Findings indicate that an emphasis on performance weaknesses during the review can actually reduce employee performance.

TIP: When discussing a performance weakness, be sure to provide specific suggestions for improving performance and balance the dialogue with both strengths and weaknesses

Manage

Review

Plan

Open and closed questions

• Closed – ‘yes’ or ‘no’

answers

• Open - respondents

open up

– What?

– Why?

– How?

– Where?

– When?

– Who?

Silent Steve

• Ask open questions

• Don’t butt in

• Give them time to talk

Non-stick Nigel

• Pin him to his performance

• Focus on the future

• Get him to agree a target

Bored Betty

• Forms – a starting box, not a finishing line

• Talk to the person behind the employee

• Discuss long term development, not just short term targets

Defensive Dennis

• Leave out the character analysis

• Create an informal set-up

• Stick to the evidence

Weepy Wendy

• No surprises

• Start with something good

• Be sympathetic but stick to your guns