Performance Management And Potential Appraisal

Published Date: 02 Nov 2017

INTRODUCTION

CONCEPT OF PERFORMANCE MANAGEMENT

Principles of Performance Management

Importance of Performance Management

Benefits of Performance Management

Performance Appraisal vs Performance Management

POTENTIAL APPRAISALS

Purposes of Potential Appraisal

Techniques of Potential Appraisal

Characterstics of Potential Appraisal

PERFORMANCE COUNSELLING

Conditions for effective counselling

Performance Counselling Phases

Processes in Performance Counselling

PERFORMANCE METRICS

EFFECTIVE PERFORMANCE MODELLING

SUMMARY

REVIEW QUESTIONS

INTRODUCTION

In a developing economy like INDIA, there is a need as well as challenge for organisations in commercial, industrial and social services and all other sectors to be dynamic and competitive. Dynamic and forward looking organisations can only grow fast and contribute to the nation’s economic development. While growing, very organisations need to plan for their growth in order to avert the danger breakup. Planning for the human resources of an organisation is a significant aspect of corporate planning. Growing organisations continue to add new structures that create new roles and it essentially necessitates the right people to be deployed in those roles. Unless the right people are available to perform these roles at the time of need, organisations’ growth will be at stake. In this context, human resources planning become important in order to make sure that, the right types of people are available to perform various tasks at a time when the organizations require it.

Human resource planning takes into consideration of the existing human resources of an organisation, their promot ability and the possibility of their development. In this process crucial promotion decisions have to be made. To make these decisions prudent and ensure a healthy climate in an organisation, performance appraisal, performance management and potential appraisal has become important.

PERFORMANCE APPRAISAL

CONCEPT AND DEFINITION OF PERFORMANCE MANAGEMENT

Performance management is a source of income justification. It is a tool used to determine an employee’s wage based on his performance. Organisations use Performance management to drive the employees’ behaviour to get specific outcomes. In today’s business world, the human resource management has been introduced as an integrated approach to the management and development of employees. It is posited as a strategic driver and has changed the process of managing people to a very formalised and specialised one. Many of the conventional performance appraisal methods have been absorbed into the concept of performance management, that aims at a more extensive and comprehensive process of management. Some of the recent developments in the field of Human Resource Management, that have shaped performance management are the talent management, differentiation of employees or management by objectives and constant monitoring and review. Though the process is not easy, rather is much complicated, now-days performance management has been given a lot of importance, as more and more companies incorporate these as effective management strategies.

Performance Management (PM) is a term coined by Dr. Aubrey Daniels in the late 1970s to describe a science imbedded technology in applications methods for managing behaviour and results. It includes all the activities that ensure consistent achievement of goals in an effective and efficient manner. Performance management can focus on the performance of an organization as a whole, a department or an individual employee. Even, it can also focus on the processes to build a product or service, as well as many other areas. Generally, a performance management system includes the following actions.

Developing a clear job description

Selecting right people with proper selection process

Negotiating requirements and accomplishment-based performance standards, outcomes, and measures

Making provisions for effective orientation, education, and training

Providing on-going coaching and feedback

Conducting quarterly performance development discussions

Designing reinforced compensation and recognition systems that reward people for their contributions

Providing promotional avenue and career development opportunities for staff

Assisting with exit interviews to understand the reason for which valued employees leave the organization.

Principles of performance management

It helps to clarify corporate goals and translates it into individual, team, department and divisional goals.

It is a continuous and evolutionary process, in which performance improves over time.

It relies on consensus and co-operation rather than control or coercion.

It creates a shared understanding of what is needed to improve performance and how it will be achieved.

It encourages self-management of individual performance.

It requires a management approach that is open and honest and encourages two-way communication between superiors and subordinates.

It requires continuous feedback that enables the individuals to gain on the job experiences and knowledge to modify corporate objectives.

It measures and assesses performance against jointly agreed goals.

It applies to all employees and is not primarily concerned with linking performance to financial reward.

Importance of Performance Management

Help working towards common goals

People at workplaces are usually caught up with daily routine work. As a result of which the purpose of an organization is forgotten many times. Performance management make the people understand and remember that, Individual performance drives organizational performance. It ensures that, everyone understands organisations’ vision and goals. It helps them to understand how their work fits into and contribute to organisations’ mission accomplishment. This practices increases employee engagement and improves delivery.

A clear understanding of job expectations

Performance management set clearly defined specific job duties for all the employees. When the employees and supervisors have a clear understanding of it, ambiguities in the workplaces are reduced or may be eliminated. Each and every individual remain accountable for their own duties and responsibilities. Performance management empowers an individual to think about and clarify his own role in the organization by setting clear goals and expectations. A balanced credible employee performance plans must be designed to get the desired result. While measuring expected results, the performance plans measures quality, quantity, timeliness, and cost effectiveness. To be credible, performance expectations must be based on proper job analysis. It must be very clear, specific, and understandable, reasonable and attainable, measurable, observable or verifiable, and results oriented. More importantly, it must be communicated to the concerned employees in timely manner and foster continual improvement in productivity.

3. Regular performance feedback

Regular feedback facilitates better and clear communication in the workplace. Performance management helps people to identify their strengths and weaknesses. It provides opportunities to be heard and exchange views and opinions. Most importantly, performance management gives a better understanding of how an individuals’ performance is being assessed and monitored. This builds employees’ confidence and adds to their contribution in the workplace. Performance management can be a motivational tool by fostering an individual’s job satisfaction to perform at his peak level. Performance feedback process facilitates the exchange of dialogues between supervisors, managers and employees. Performance management is a continuous and ever changing process. It reflects and measures the work performed by the employees.

4. Helps in improving performance

Performance Management can help in identifying ways to improve performance and provides the opportunity to discuss career direction and prospects. It presents the opportunity to plan for and set objectives to further develop one’s career. Performance Management helps in gaining any additional training or mentoring which can act as a basis for developing future succession plans.

5. Rewards for good performance

Outstanding efforts should not go unnoticed. Performance Management offers a variety of awards such as time off, and bonuses etc that show gratitude for a job well done. Fully Successful performance appraisal provides incentives to the employees to perform well and may open the door to career advancements in the future. Moreover, performance management is about increasing performance.

Benefits of Performance Management

Linked to Organisational Performance

If Performance management is implemented correctly with specific objectives and linked to the strategic and operational plan, organisational performance outcome is supposed to increase. For example, increase in profit objective would be cascaded down to every department, team and individual. People who are successful in achieving this objective will get a favourable review. Those could not able to achieve get an unfavourable review. Therefore, the process of Performance Management drives organisational performance outcomes. Employees who achieve the organisational goals are rewarded with favourable reviews and bonuses in line with their performance and contribution to the organisation.

Lower Stress

The employees and managers of an organisation communicate more frequently and agree on changed objectives to suit continuing changes in conditions and priorities. This ensures an inclusive and collaborative process and entails that the employee has his own input and work to specific and relevant objectives lowering the level of stress.

Increases levels of confidence

Where there is a structured performance management system that is communicated well in advance, employees and managers enter into the process with high degree of confidence. Employees are assessed on the basis of achievement of objectives that have been clearly spelled out and agreed to. Managers have a better framework to assess employees’ performance as they know well the criteria on which employees are to be assessed. The outcome is that both individuals have an informed discussion that raises confidence and reduces stress and both parties know they can have a content rich and factual discussion about performance and focus on achievement of both personal and business objectives, not on issues that are not relevant.

Focus on performance

Performance management reviews performance more frequently, the discussion focus on performance of objectives rather than being dominated by the employees’ needs. Emotionally charged discussions tend to be displaced by business focused discussions on achievement of objective outcomes.

Aligned to the corporate plan

As expectations are modified with the introduction of performance management system, most organisations switch to defined performance periods. The strategic and operational objectives are set at the beginning of the performance period. Formal performance reviews are then conducted quarterly or half yearly that enable management to direct and fine tune efforts in relation to the objectives.

High Visibility

By performing frequent Performance Reviews, visibility is increased dramatically. Areas of non performance receive much more focus and attention and problems can be acted upon much quicker. Most Performance Management systems provide reporting as to which departments and individuals have or have not achieved their objectives.

Planning

By reviewing more frequently, all managers and staff plan and execute well thought out objectives which results in better resource management, less fire fighting and enables managers to work on the business.

Human Capital Development

As performance management systems require that managers and employees commit to a development Plan, employees experience real personal development and become more engaged with the organisation. They feel part of the organisation and start to understand that they and the organisation are interdependent. The organisation is developing the employees and the employees are working towards developing the organisation by achieving its goals.

Compliance

Moreover, since the objectives setting and development plan for employees is well thought-out. Employees see real planning, are involved in setting meaningful objectives and have input into personal development plans which benefit both themselves and the organisation as well. In all, this result in more engaged workforces committed to achieving real outcomes for the organisation.

Performance appraisal VS Performance management

The terms 'performance management' and 'performance appraisal' are sometimes used synonymously, but they are different. Performance management is a comprehensive, continuous and flexible approach to the management of organisations, teams and individuals which involves the maximum amount of dialogue between those concerned. Performance appraisal is a more limited approach which involves managers making top-down assessments and rating the performance of their subordinates at an annual performance appraisal meeting.

Potential Appraisals—

Potential appraisal is a powerful tool of employee development. Potential Appraisal is the process of tracking unrevealed talent, skills and abilities in a person which even he/she is unaware of. It is a future oriented appraisal, whose main objective is to identify and evaluate the potential of the employees to rise up in the organisational structure. Managers use it as predictors to determine whether the employee has the potential to execute added responsibilities in the future, therefore is a potent device for employee advancement. It is a future – oriented appraisal. Potential appraisal helps to identify what can happen in future so that it can be guided and directed towards the achievement of individual and organizational growth and goals. Many organisations consider and use potential appraisal as a part of the performance appraisal processes. Potential appraisal data is extremely useful for career panning, as the latent abilities of an individual can be captured and linked with the future role and responsibilities. Potential appraisal may thus be defined as a process of determining an employee’s strengths and weaknesses with a view to use this as a predictor of his future performance. This would help in determining the promotability of an individual to a higher position and chalk out his career plan. Most organisations incorporate potential appraisal in their appraisal processes for identifying and developing suitable employee base for succession planning.

The fundamental difference between reviewing performance and assessing potential is in the criteria used. In reviewing performance, the criteria used is what goals the employee achieved and what skills he or she currently possesses that could be indicators of his or her ability to assume different or more advanced responsibilities.

Purposes of Potential appraisal:

To advise employees about their overall career development and future prospects

Help the organisation to chalk out succession plans

Motivate the employees to further develop their skills and competencies.

To identify the training needs

Techniques of potential appraisal:

Self – appraisals

Peer appraisals

Superior appraisals

MBO

Psychological and psychometric tests

Management games like role playing

Leadership exercises etc

Characterstics of potential appraisal

Reviewing performance forms the basis of potential appraisal -- Performance review of employees are assessed on the basis of the targets accomplished and the skills possessed and utilized . The results act as indicators on the candidates’ aptitude to manage extra functions. However, this is not a fool proof way of knowing whether added responsibilities will be handled successfully in future. This makes potential appraisal important.

Potential Appraisal cannot be applied to all in the same level —

There are people in the organization who have potential but who do not perform due to attitudinal problem. If they are promoted to higher designations then it becomes a problem for the employees as well as for the company. Dealing with workhorses too could be tricky. They can perform very well on routine tasks but have limited potential. Hence, if promoted, they are unable to perform higher level jobs. To conclude ‘stars’ are ideal people to have in organisations. But retaining these stars could be difficult. They have high potential backed by high levels of performance and could be always on the lookout for greener pastures. Thus, as we see, potential appraisal is more intricate and complex vis-à-vis performance appraisal.

The time for a potential appraisal is not fixed—

It is under the discretion of the manager to hold the assessment activity. Unlike performance review, it does not happen at a particular period in every organization. The managers generally exercise it when an employee achieves a certain milestone, or completes a year or is planning to change jobs for whatever reasons. Usually it is recommended to take place within 6 months.

Potential appraisals commence and end with a meeting between the two parties.

In the first meeting the manager can list the abilities required to deliver additional tasks. He/she can recommend various ways to attain them – in-house training programmes, external workshops, etc. The latter meeting usually happens after six months and can be a review to test whether the skills have been rightly acquired or not. During the observation time the manager is supposed to note the various abilities adopted and used by the candidate in work and the improvement areas. They can then chalk out a plan to chase the potential and taste growth in the organization.

Potential appraisal does not ensure promotion.

Normally, companies do it to facilitate the growth of an individual. The companies can use the results of such an assessment for –

Recommending a growth plan that shows a bigger picture to the employees.

Infusing enthusiasm in the employees to sharpen their abilities.

Depicting about the training requirements of the employees.

Drawing a succession plan for future.

PERFORMANCE COUNSELLING

The performance counselling can be defined as the process of helping an employee to analyse his job related performance and performance outcomes over a predetermined period. It identifies the ways and extent to which he and factors other than him are responsible for the performance outcomes. Such an analysis results in identifying ways and means of improving the effectiveness of the counsellee for the next performance period. Performance counselling is a dynamic process that focuses and aims at strengthening the "counsellor- counsellee" relationships and helping the counsellee to improve his effectiveness. Primarily, the counselling techniques are primarily used to help employees deal with personal problems that may interfere with the achievement of these goals. It may encompass issues such as substance abuse, stress management, smoking cessation, or fitness, nutrition and weight control. A survey conducted by the centre for HRD at XLRI, Jamshedpur, reveals that out of 53 organisations 41 require their executives to counsel their subordinates. 27 of these 41 require their executives to counsel their subordinates as often as they need. 32 percent of 41 required their executives to counsel their subordinates once a year. This survey entails that there is a demand of performance counselling as part of corporate life. However, counselling is becoming a part of the executive life more on paper than in practice except few organisations like Larsen and Toubro Ltd, and State Bank of India, where executives are continuously trained to have a performance review and counselling skills and required to have discussions with their subordinates.

Performance counselling can be defined as the help provided by a manager to his subordinates in analysing their performance and other job behaviours in order to increase their job effectiveness. Essentially, it focuses on the analysis of performance on the job and helps in identifying training needs for further improvement. Performance Counselling is a crucial activity that helps employees to know themselves, their strength and weaknesses and their bosses better. Performance counselling helps the counsellor and the counsellee to understand themselves, each other and their environment better and thereby contribute to their individual and joint effectiveness. Since providing performance related feed back is an important component of performance counselling, it accelerate:

Improvement in performance

Acquisition of skills

Changes in behaviour

Overcoming personal shortcomings

Conditions for effective counselling

Climate of openness and trust: A climate of reasonable degree of trust, confidence and openness is inevitably essential for effective counselling. Counselling cannot be effective if the subordinate does not trust his supervisor.

Empathetic attitude of Management: Effective counselling encompasses with a general helpful a d empathetic attitude of counsellor towards counselllee.

Uninhibited Participation by subordinates: It is necessary that the subordinate should feel free to participate without fear or inhibition as it is a dialogue between supervisor and subordinate and hence should be a two way communication eventually strengthening dyadic relationship.

Mutual goal setting: performance counselling focuses on the counsellee’s achievement of the performance goals that have been set both by the employee and his reporting officer. Without Joint participation and collaboration in goal setting as well as in performance review, counselling does not achieve its purpose.

Focus on work oriented behaviour: performance counselling is helpful, if the focus is kept on work related behaviour and preventing the attention into various other personal and personality problems.

Focus on work related problems and difficulties: performance counselling is not related only to the achievement of goals, but also the contextual problems in achieving or not achieving the goals. Analysis of performance ought to be the basis of counselling.

Avoidance of discussion of salary and other rewards: performance counselling may not serve its purpose if its includes discussion about salary raise, rewards, etc.

Performance counselling must be periodic, comprehensive and planned.

The basic purpose of counselling is employee development. It is an educative process that should lead to the development of counsellee as well as the counseller.

Performance counselling is to be taken seriously and must be followed up during post-performance counselling period.

Performance Counselling Phases

Rapport Building: This step is very necessary as it generates the necessary confidence in the subordinate and assures him of his superior’s genuine interest in helping him. In the rapport building phase, a good counsellor attempts to establish a climate of acceptance, warmth, support, openness and mutuality that facilitate the employees to open up frankly, share his perceptions, problems, concerns, feelings etc. The subordinate must be made to feel wanted and that his superior is genuinely interested in his development.

Exploration: During this stage the counsellor puts to the subordinates various questions, which may elicit elaborate information on the latter’s achievement, strengths, failures and short comings. The object is to make the subordinate himself to introspect and define his strengths and weaknesses. Questions are asked that help the employees focus on his problem since problem identification is a critical step in planning for improvement. To help the employee make a correct diagnosis of the problem, open-ended questions may be asked. For example, if an employee’s problem is that others do not co-operate with him, the counsellor may narrow down the problem to the employees’ interpersonal relationship with other individuals then help the employee understand what he does or says to his colleagues which is making it difficult for him to win their co-operations.

Action Planning: Counselling interviews should end with specific plans of action for development of the employee. The main contribution of the superior in this phase is in helping the employee think of alternative ways of dealing with a problem. For example, in case of an employee whose relationships with colleagues are poor, the superior may suggest "What three things could he do in the coming week in order to improve his relationship with X?" After helping the employee brainstorm, the superior may also add more alternatives to the solutions already generated. Finally the superior may render some assistance in helping the employee implement the agreed upon action plan. Often good counselling sessions fail to produce effective results due to lack of follow up.

Processes in Performance Counselling

Feedback: It is extremely important that the feedback is communicated in a manner that produces a constructive response in the subordinate. Feedback should be descriptive and non- evaluative. It must focus on the behaviour of the person rather than on the person himself. The intent should be clear to the employee so that, some specific behaviour is being rejected or criticized not the employee as an individual. To convey feedback, it is generally desirable to back it up with few examples of actual events. Care must be exercised so that subordinate will not misinterpret it that the superior is systematically building up a well-documented case against him. Feedback should be given at the first opportunity when the employee is in the receptive mood and most importantly feedback should be given continuously so that the subordinate develops an ability to accept and act upon the feedback and moreover feedback should be checked and verified.

Pre-Interview Preparation: In the context of mutually agreed upon job responsibilities, the employee’s background, education, training and experiences is reviewed during pre-interview preparation phase. The strengths and development areas of employees that need to be discussed with the employee as well as the areas that need attention during the next review period are identified. The employees must have sufficient advance notice for the interview so that they can have enough time for their preparation.

Interview

It must be informal and friendly. The purpose of the discussion should be communicated with utmost clarity. The employee too must be encouraged to appraise his own performance and tell his own plans so that suggestions for his development can be provided easily with a follow-up action.

Performance Metrics

A performance metric is a measure of an organization's activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees. A metric is nothing more than a standard measure to assess one’s performance in a particular area. Metrics are at the heart of a good, customer-focused process management system and any program directed at continuous improvement. The focus on customers and performance standards show up in the form of metrics that assess one’s ability to meet customers’ needs and business objectives. Traditional performance measures, such as profit performance, return on investment or earnings per share, provide reasonable estimates of whether a company achieves its ultimate goals of making profits, but do not reveal how the business achieves this position. However, performance metrics professionals choose measures that have little value, which is referred as the "measurement inversion". For example, metrics seem to emphasize what organizations find immediately measurable even if those are low value and tend to ignore high value measurements simply because they seem harder to measure whether they are or not. To correct for the measurement inversion, "value of information analysis" needs to be introduced in the process so that metrics can focus on high-value measures.

Effective Performance Modelling

An effective performance model is one which allows senior management to be confident that the end results are not guess work but a summation of all the different activities and process, given an attainable standard of performance. The requirements of such model are as follows:

Relevant relationships: Process and activity metrics must form a chain of co-relations leading to the ultimate end results of enhancing profits, brand equity and market valuation.

Measurability: Data for the Metrics can be accurately collected in a timely manner without undue cost.

Comprehensible: It must be easy to understand and impact on the effectiveness of other process and the end results.

Actionable: It must be actionable with a set of corrective actions.

Motivating: It must be motivating, make people to act positively.

Automation complaint: Data collection and analysis should be automated so that employees do not have to be diverted from their main activity into Data collection and analysis.

Summary

Performance appraisal, potential appraisal and performance management reinforces HRP in an organisation. In this era of technological change, global competitiveness, organisations are constantly required to renew and update skills of their people or else they are likely to encounter the problems of manpower obsolescence, which among others, will call for downsizing or rightsizing. While performance appraisal address the skill gap.

Discussion & Questions