A discussion in CiteHR http://www.citehr.com/283151-how-build-performance-mgt-system-new-startup-venture.html
“It is an immutable law in business that words are words, explanations are explanations, promises are promises—but only performance is reality.”- Harold S. Geneen 1910-1997
Talent is the core to every organization . Hence developing them holds the key to better performance. This process of hiring and grooming employees is clubbed under Performance Management System. It may be aligned to business cycles. In order to coordinate and manage, it is processed on an annual basis. The primary process to PMS may remain the same, but the complexity depends on the number of levels of actions required to develop a performance. The logic is directly connected to the organization’s culture. It’s either development based i.e. towards the improvement of the performance or error based including the mistakes made hence would be followed by rebuking. The ideal system includes both with different combinations as required .The mistakes based system can be redefined as opportunity based where every weakness is developed and turned into an opportunity.
The steps required to build the Performance Management System are as follows :
- Understanding the business : The first step to build a system start with understanding the business and setting the parameters. For e.g.: A firm delivering IT Maintenance projects will have a charter of serving the client on certain Service level agreement. The parameters to performance measure would be at the enterprise level. While designing a scorecard this same structure needs to be kept in mind and drilled down to the individual level for performance measurement. Suppose the firm is required to solve every technical snag in 12 hours time and further have requirement to answer the complaint logs within 15 minutes. This would drill down to the performance criteria for the technical helpdesk engineers.
- Performance definition – Firstly, define the job including the entire task lists which requires to be delivered. This should include key result area with key performance indicators and key skills required to deliver each of them.
- Performance measure – Parameters used in measuring every task needs to be defined. The levels used in the measurements needs to be clearly stated. Such as if the customer complaint was logged and replied within 3 mins, it gets the employee 5 points. Incase it was answered in 10th minutes, it gets 3 points. Similarly if the answer was sent in the 15th minute, the employee gets 1 point. The complete scoring happens only when the customer complaint gets totally resolved. The weight to different areas such as productivity, behavioural components, attendance and leave planning needs to be freezed . Generally the productivity contributes to 70%, Behavioural areas 20% and Attendance 10%. The productivity score is a final summation of Efficiency and quality score. Certain other areas can be considered including number of initiatives taken, any extra projects handled and other areas, as required by the business.
- Process Flow – The process needs to be aligned to the business cycle with reference to the best practices in the industry. The process begins with setting of the goals and objective of an individual. Scorecard including every area of the performance measures needs to be explained. This is followed by the quarterly feedback session where in the employee is told about the development areas and achievements. An improvement plan as required is drawn with training and on-the-job knowledge transfer may take place .The annual appraisal cycle happens at the end of business cycle i.e. in the month of March / April. The annual appraisal forms are distributed to the managers, who fill in the productivity data along with their feedback. The forms are collected and the data is analysed to arrive at a ranking. A rating is provided as a reference to others in the group. This may lead to a bell curve formation, provided that the salary hikes are attached to the performance rating. Incase the salary hikes are given on the basis of business performance and market competitiveness then the appraisal data is not considered.
- Wrap up – Once the ratings are derived, the results are shared with the reporting managers and the performance appraisal interviews are held with the employee. The main point of arranging the interview is to share the feedback, understand the employee’s expectation, and explain where the employee stands and building consensus. Finally, draw up a development plan for the employee to be followed in the next year. The development plan includes training and allocation different responsibilities which will strengthen the employee’s professional knowledge and help them proceed ahead in career.
- Areas of concern – The process requires documentation right from goals discussion to the final performance interview. Every productivity score requires to be recorded with comments in the score card .The feedback needs to be factual and free from baises . The forms needs to be processed in time in order to maintain that the deadline to the PMS . The feedback meetings starting from quarterly to biannually to finally annual needs to be development oriented. Corrective actions can be taken, only when the employee falls below the acceptable performance level
The Performance Management System holds the soul to the company’s performance, echoing the words of Jack Welch, former CEO of GE ,”The essence of competitiveness is liberated when we make people believe that what they think and do is important – and then get out of their way while they do it.”