How effective is your Performance Management System?

In the last few Quarters the Economy has become tougher and every Company is struggling to find Growth of Top line and Bottom lines are disappearing or thinning out for many companies. In this situation, the Companies need to operate with good efficiency. Without this they would waste the resources and perform sub-optimally. No Company can tolerate Sub-optimal performance. The Current condition of the Economy adds to this need. Going forward the Competitive situation will become tougher and tougher for companies. World over the Manufacturing Companies are going to go forward aggressively in terms of improving their productivities with the use of Industry 4.0 elements. Indian Companies will have to rise their performance levels. For this there is a need to install a good Performance Management System in a Company. I am always surprised to see the absence of this in many Companies. The focus on Performance is missing and therefore the Employees keep getting rewarded for Sub-optimal performance. If a Company does not attend to this, this can become the biggest drain on the energy of the Company. 

From my experience, I would suggest certain elements in a good Performance Management System. 

01.  Performance Planning: The Performance of a Company and its’ employees has to be Planned well. Normally this is done with a System of KPIs for all the Employees. A concept of Deploying Goals from Senior level to Junior level has to be used. This will ensure the alignment of Goals from top to Bottom in the Organization. The Company has to ensure:

a.     Diagnosing the Performance of the Last year to learn from mistakes. 

b.     Appropriate KPIs to all employees.

c.     Targets for all KPIs in line with the Company Goals.

d.     Deploying the Targets and means to achieve the Goals to the team members.

e.     Detailed Action Plans to achieve the Targets in the year. This will ensure that the Employees pays attention to the Resources needed and also the ways and means to achieve the Targets. 

02.  On Going feedback: There should be a System of Regular Formal Business Reviews at all levels in a Company. I have seen that in many Companies the Senior Level reviews regularly and they are involved in all types of Reviews. There is no ownership of middle level for their teams. This is not acceptable. The Review meetings at all levels are one way to push the responsibility to appropriate levels. When they review the performance of their Teams and take responsibility to their performance, the feedback will happen regularly and at all levels. 

03.  Employee input: The Formal Business Reviews should give a chance for the Employees to put in their point of view in a formal manner. A good process has to be put for this. The Employees should work out their performance with respect to their KPIs. They should bring in their Point of view in the form of structured ‘Corrective Action and Preventive Action’ (CAPA). When an Employee writes the CAPA and presents to the Boss, he/she is putting in their point of view. The Boss can encourage this and help them to improve it from time to time. Many companies take the input from more junior employees with the help of a Town Hall type of meeting once every few months. Having good avenues to take the input from Employees is critical to the effectiveness of a Performance Management System. 

04.  Performance Appraisal. While throughout the year the Employees voice will be heard and they will be given feedback, formal Performance appraisal is needed. Employees have to be appraised on the basis of the various criteria that are agreed with them. A Good Performance appraisal system will have following elements:

a)     What has to be achieved: The Employees will have KPIs and Targets to each of the KPIs. They will have to show the results for these KPIs.

b)    How it has to be achieved: Usually a Company would define the process using which the employees have to achieve these targets. This will comprise of:

i)      Preparing Detailed action plans, 

ii)   Monitoring the Performance in a visual manner. 

iii)  Regular Formal Business Reviews.

iv)  Writing effective Corrective action and Preventive Action.

v) Using a Proper Problem-Solving methodology for Problem solving.

And so on. 

c)     What is required to achieve it: What Skills and Competencies are required for Employees to achieve these Targets. Functional and Behavioral Competencies are identified that the Employees need to learn. There should be a good system of developing these Competencies in the Company. 

Usually the Performance appraisal system would give weightage to all the above. Normally the weightage for the section (a) may be 50% and other two sections together will have balance 50% weightage. 

Some Companies may introduce more elements in the PAS as follows:

-       Cross functional Team working to solve some big problems for the Company.

-       Developing their team. 

Rating: The Employees are classified into different categories like a) Excellent b) Good c) Satisfactory d) Below Satisfactory. The number of ratings may be 3-5 depending on preference of the Company. 

05.  Performance Appraisal Interview: Companies should promote a formal Performance appraisal interview that will have some of the following Best practices:

a.     A formal Meeting is needed between the Boss and Subordinate. 

b.     HR representative must join.

c.     Prepare elaborately for the meeting.

d.     How to handle a defensive subordinate

e.     Recognize that defensive behavior is normal.

f.      Never attack a person’s defenses.

g.     Postpone action.

h.     Recognize your own limitations.

i.      Maintain notes throughout the year. 

j.      How to give tough feedback to a subordinate

          i.     Do it in a manner that lets the person maintain his or her dignity and sense of worth.

         ii.     Criticize in private and do it constructively. 

         iii.     Avoid once-a-year “Yearend lectures” by giving feedback on a daily basis, so that the formal review contains no surprises. 

         iv.     Give Plus first and then give Development areas.

          v.     Criticism should be objective and free of any personal biases on your part.

06.  Training and Development: The T&D agenda is worked out right at the beginning of the year. This may happen after the review of the last year’s performance of the employee. Using Technology, you can now totally re-engineer the Training & Development. You can work out the Training agenda for employees on the basis of their agenda in terms of KPIs and Targets. This Training agenda is worked out in terms of Micro Skills that the employees need to achieve the KPI Targets for that year. These Micro Skills are addressed with Micro Training modules using E-Learning technology. The training happens thru out the year and it is done at a Micro level that the employee can use to straight away perform better. Typically, every Employee would spend 2 hours per week for Learning. This makes it 12 Working days per employee which is even better than the World class standard.

07.  Rewards: The reward system can address the following:

a.     Recognition of employees’ performance. Employees would get increments / incentives based on the rating that they receive. 

b.     Employees would be recognized as ‘Best Employees’ based on certain transparent criteria. 

c.     Recognizing every drop. Some companies recognize the small contributions of the employees 

d.     Kaizen / Suggestion schemes: Many companies encourage the employee participation.

It is important to have different ways of recognizing the performance of an employee. If there is only one way and that is given at the end of the year in terms of increment, then the Employees would build too much expectations from the Appraisal and all of them will never be happy with whatever rewards that you may give. 

This way the Performance Management System should be a well-Engineered system in a Company. This System has to be continuously improved to suit the changing Business scenario! 

How do you manage Performance of your Team?