Summer Project

Comparison of Performance Management between

Schlumberger & IFFCO

By: Saad SubboohBBA General

2008-2011

Faculty: Mrs. Kushi Sharma

Date…

Acknowledgement

I would like to express my gratitude to all those who gave me the possibility to complete this project. I would like to thank Mrs. Suphia Ahmad for providing me her valuable time

as well as great deal of information. I have further more to thank Mr. Masood Naik for his time as well as his valuable advice regarding my way forward.

I am deeply indebted to my faculty guide Mrs. Kushi Sharma Ma’am whose help, suggestions and encouragement helped me in the time of research and writing of this

project.

My Parents, I want to thank them for all their help, support, interest and valuable hints.

Abstract

The objective of the project is to understand performance management and its effect on today’s corporate scenario, also understanding performance management in different organizations. In this project we have gone deep into the concept of performance management and its impact, we have also looked into various performance appraisal methods followed by organizations today and also looked into the performance management system and processes in 2 large private sector companies known world over: Schlumberger & IFFCO group. I interviewed the HR representatives of both the companies and received a deep insight into how their processes work; both the companies are of different origin, nature and type, both offering different products to the consumers. We found how the perception of both the HR representative varies along with the PMS followed in both the organizations.

Based on personal interviews with both the HR representatives and a visit to both the organizations I drew my results and conclusions.

The interviews were taken based on a questionnaire designed to cover all aspects of performance management to get deeper insight on individual and organizational thoughts in the subject.

Contents

1. Introduction Background Limitations Company Profiles: Schlumberger & IFFCO

2. Methodology

3. Results Benefits Types Process Concerns Performance Appraisal Comparisons between Schlumberger and IFFCO

4. Conclusion

5. Appendices

6. Reference

Introduction

Fully realized, performance management is a holistic process, bringing together many of the elements which go to make up the successful practice of people management, including in particular learning and development. But for this very reason, it is complex and capable of being misunderstood. 

Performance management is defined as 'a process which contributes to the effective management of individuals and teams in order to achieve high levels of organizational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved'.

It is a strategy which relates to every activity of the organization set in the context of its human resource policies, culture, and style and communications systems. The nature of the strategy depends on the organizational context and can vary from organization to organization.

The keys to the successful introduction and application of performance management are: being clear about what is meant by performance understanding what the organization is and needs to be in its performance culture being very focused on how individual employees will benefit and play their part

in the process Understanding that it is a tool for line managers and its success will depend on

their ability to use it effectively.

Performance management is the process of assessing progress toward achieving predetermined goals. It involves building on that process, adding the relevant communication and action on the progress achieved against these predetermined goals helping organizations achieve their strategic goals. The main purpose of performance management is to link individual objectives and organizational objectives. Additionally, performance management tries to develop skills of people to achieve their capability to satisfy their ambitiousness and also increase profit of a firm.

They go on to stress that it is 'a strategy which relates to every activity of the organization set in the context of its human resource policies, culture, style and communications systems. The nature of the strategy depends on the organizational context and can vary from organization to organization.'

BackgroundPerformance Management began around 60 years ago as a source of income justification and was used to determine an employees wage based on performance. Organizations used Performance Management to drive behaviors from the employees to get specific outcomes. In practice this worked well for certain employees who were solely driven by financial rewards. However, where employees were driven by learning and development of their skills, it failed miserably. The gap between justification of pay and the development of skills and knowledge became a huge problem in the use of Performance Management. This became evident in the late 1980s; the realization that a more comprehensive approach to manage and reward performance was needed. This approach of managing performance was developed in the United Kingdom and the United States much earlier than it was developed in other countries.In recent decades, however, the process of managing people has become more formalized and specialized. Many of the old appraisal methods have been absorbed into the concept of Performance Management, which aims to be a more extensive and comprehensive process of management. Some of the developments that have shaped Performance in recent years are the differentiation of employees or talent management, management by objectives and constant monitoring and review. Its development was accelerated by the following factors:

The introduction of human resource management as a strategic driver and integrated approach to the management and development of employees; and

The understanding that the process of Performance Management is something that’s completed by line managers throughout the year – it is not a once off annual event coordinated by the personnel department.

Limitations

The sample sizes collected were not large Managers were reluctant in giving out too many details fearing exposure of company

secrets Was not able to get adequate time with the Mr. Masood Naik of IFFCO Was unable to get feedback from employees of the respective companies regarding

their PMS

Company Profile: Schlumberger

Schlumberger Limited is the world's largest oilfield services corporation operating in approximately 80 countries, with about 87,000 employees (March 2009. Schlumberger supplies products and services such as seismic acquisition and processing, formation evaluation, well testing and directional drilling, well cementing and stimulation, artificial lift, well completions and consulting, and software and information management. Schlumberger also provides similar products and services for the groundwater industry.

Operating revenue in 2008 was US$27.16 billion with a market capitalization as of 5 May 2009, of US$63.77 billion.

In this project, we will look into the performance management system of Schlumberger. Looking at the large scale of operations and the size of the company one can conclude that the company is bound to have a large & complex performance management system.

Company Profile: IFFCO

IFFCO is a United Arab Emirates based business house, which manufactures and markets a well integrated range of mass-market consumer products. Their business segments are: Food and Beverage, Personal Care and Cleaning, Packaging & Industrial Products, Logistics, Insurance, Advertising & Real Estate.

IFFCO also manufactures related derivatives and intermediates associated with these business segments.

Since its inception in 1975, IFFCO's history has been one of consistent and successful growth. This period has seen their transformation from a trading company to a highly successful, responsive and dynamic group of companies, which invest in building winning brands that continuously seek to create value for the consumer. IFFCO brands now enjoy the confidence and preference of consumers in over seventy country markets all over the world

Their product lines cater to the whole spectrum of consumers’ daily needs.

In today's highly competitive business environment where advantages tend to be short lived, maintaining a responsive, reliable and cost efficient product and material supply chain is often a decisive success factor. With this in mind, IFFCO has structured logistics as a distinct business segment, offering ship chartering, shipping agencies, freight forwarding, transportation services, warehousing, road transportation and cold store warehousing services.

It is a private sector organization employing over 12,000 people.

In this project, we will also look into various performance management systems, how performance management works, its tools and techniques, also the impact of performance management techniques on the working of organizations as well as its benefits & performance appraisal and its methods. We will also analyze and draw comparisons between 2 companies regarding the same.

Methodology

Information on both companies was done through primary & secondary collection of data. 1. Interviewing a key HR person to understand the performance management system of a company.2. Reviewing the policies and procedures manual to understand the same.

The 1st respondent to my interview was Mrs. Sufia Ahmad who has been working with Schlumberger Limited Dubai, for over 6 years now and currently holds the designation of HR Information System Support Analyst.

The 2nd respondent to my interview was Mr. Masood Naik who has been working with IFFCO Group UAE, for over 6 years now and currently holds the designation of HR Manager in the organization

Details on performance management, how performance appraisal works, its tools and techniques, also the impact of performance management techniques on the working of organizations as well as its benefits were collected though secondary data over the net and articles.

The data samples were collected through a questionnaire designed to cover various aspects of PMS.

According to me, primary data is far better than collecting secondary data especially when it comes to company data because one cannot obtain detailed data on processes and systems about a company from their public portals or publications. Secondly, personal interaction with company professionals gives far better understanding and insight on their companies as well as a great learning and professional experience personally. However, getting through to company personnel and asking for their time is a little tough on top of that the information provided might be biased or too brief to draw detail analysis. But despite the drawbacks I think personal interview is a better option than going for another form of data collection.

Initially, I thought of interviewing the employees as well and getting their feedback on their PMS but I was unable to do so hence I only interviewed the HR representatives of the organizations.

The Performance Management Study - Interview (Sample)

Section – A: General Profile of Respondents:

1. Sex: Male Female

2. Age group: 25 – 35 36-45 46+

3. Designation : _______________________4. Experience

a. Less than 1 year b. 2-4years c. 5-7 years d. More than 7 years5. Which of the following economic sectors best describes your organization? a) Public Sector b) Private Sector- manufacturing c) Private Sector – Service d) others (pls. specify)6. Approximately how many people are employed in your organization? a) Less than 100 b) 101-500 c) 501-1000 d) More than 1001

Section B: Nature of current performance management systems:

1. Does your organization operate a formal performance management system? a) Yes b) No

2. If yes, which of the following groups of employees do these processes apply to? Senior Managers Other Managers/team leaders

Technical/ Clerical Professionals

Manual/ Blue Collar

3. How do the performance management processes you operate differ between the above groups?

a) Adoption of different methods of appraisal for different groups b) Extensive use of self-appraisal for certain bands of employees c) Adopting different time spans of appraisal for the different groups

4. What are the techniques that are used in your organization for assessing Performance? a) Observation b) Assessment and Development Centers d) Checklists e) Others pls. specify ___________________________________

5. Please indicate which of the following methods of performance appraisal Form a part of your system? a) Written Essay method f) Critical Incident assessment

b) Graphic rating scales g) Behavioral Assessment (BARS) c) Ranking method h) Paired Comparison Method d) 360 degree appraisal i) Forced distribution method e) Self appraisal j) Balance Score card k) Any other pls. specify_______________

6. Are the following processes a part of your performance management systems? a) Coaching b) Training and development c) Career management & development d) Succession planning Plans7. Who sets the performance goals/requirements for individuals? a) Senior Managers b) Line managers/Team leaders c) HR professionals d) Appraisee e) Appraiser & Appraisee e) others (pls. specify)

8. Why do you have performance management systems in your Organization? (Please tick as many boxes as appropriate)

Retention strategy Reward allocation

Identification of training and development needs Facilitates

Promotions & Transfers & Termination decisions To clarify an employee’s

job requirements Identifying barriers to performance

Motivational Strategy.

9. How are individual, team and organizational objectives linked? a. Cascading of goals(Top – down approach)b. By enabling employees to see how their job contributes to the overall objectives of the organization through frequent interactions.c. Comparing employee performance with work groupsd. Other.___________________________________________

10. What are the determinants for job performance in your organization? Organizational Culture Technology

Competency of the employee Intelligence

Attitude Aptitude

Section – C: Perceptions of HR Professionals about Performance Management Systems:

1) What according to you is the most challenging aspect of performance management?a) Determining the evaluation criteria b) Creating a rating instrumentc) Lack of competenced) Errors in rating and evaluatione) Resistancef) Other._____________________________________________

2) What is the difference between performance appraisal and performance management?a) They are the same b) Performance management has a wider scope.

3) The quality management guru Edward Deming had called performance management as a “deadly disease”. Do you agree with him? a) Yes b) No

4) Success of performance management systems depend on:a) Alignment of individual goals to organizational goalsb) Choosing the right method of appraisal

5) How is performance -linked pay related to performance management in your organization?a) Performance – Linked incentivesb) Promotions coupled with salary increasec) Provision of Fringe Benefitsd) Providing ESOP’s

6) Who should own the performance management system?a) Line managersb) HR Managersc) Employees

7) Do performance appraisals get done because the system requires it in your organization? ( i.e. is it a bureaucratic chore)?a) Yes b) No

8) Does performance management distract people from more important activities? a) Yes b) No9) According to you performance management involves:

a) Looking backwardsb) Filling formsc) Focuses on development and fostering communicationd) Any other, pls. specify______________

10) What is the relevance of human judgment in a Performance Management System?a) Highly relevant b) Has no place in competency – based performance management

Section – D: Process of Performance Management

1. Do you give an overall rating for performance?a) Yes b) No

2. If yes, what sort of feedback do you give?a) Numerical/alphabetical b) Verbal (all positive)

c) Verbal (positive and negative) d) Combination of the above e) Others (pls. specify)

3. Documentation of performance reviews is the function of:a) HR department b) Line Manager/ Project Manager

c) Individual d) others (pls. specify)4. Do you have a separate appraisal system for evaluating teams?

a) Yes b) No5. Do you undertake performance planning? a) Yes b) No6. If yes, when is performance planning carried out? a) Hiring or transferring employees

b) Business plans are newly developed.

c) Annual performance and

Development reviews have been completed

7. How many meetings are scheduled in a year to discuss employee Performance?

a) 1 b) 2 c) 3 or more 8. Did the following people receive training in performance management Techniques? (Please tick as many boxes as appropriate)

All Employees Other Managers/team leaders

Heads of departments Appraisers

HR Team None

9. Are there trade unions operating in your organization? a) Yes b) No

10. If yes, were the current performance management arrangements agreed with the union? a) Yes b) No 11. What was the attitude of the union(s)? a) Positive b) Neutral c) Negative

Section E: Analysis on Issues in Performance Management:1. What in your opinion are the causes for failure of performance appraisal

System? a) Lack of role clarity b) Interval of appraisals c) Lack of Communication by superiors d) any other pls. specify______________________________

2. What are the stages of performance management during which you communicate with your employees?

a. Goal-setting stageb. Data-gathering stagec. Mid – term reviewsd. Annual Reviews

3. Do you use any of the following to reduce subjectivity and bias in the performance appraisal system? a) Multiple raters b) Critical Incidents

c) Continuous Observation d) Peer review outcomes e) Selective evaluation f) Training evaluators 4. What do you do when you identify poor performers post your review

Session? a) Training b) Improvement coaching d) Relocation e) Dismissal/discharge

5. As an appraiser which role do you think you perform better? a) Judge b) Helper c) Both

6. Do you believe that the entire process can be carried out objectively? a) Yes b) No7. Your opinion on employee self-appraisal? a) Highly beneficial b) Beneficial to a certain degree c) Tends to be inflated d) Not beneficial at all

8 .In which of the following situations do you find yourself uncomfortable in: (Pls. tick as many options as appropriate) a) Appraising distant subordinate

b) Appraising technically superior subordinate c) The older, highly experienced subordinates d) The highly compensated individual e) Dealing with unrealistic expectations f) Coping with employee defensiveness 9. What according to you would constitute psychological barriers to effective Performance appraisal?

a) Feelings of insecurityb) Being too skeptical or modestc) Worrying that performance appraisal might cause resentment to subordinates.

10. Do you believe that linking rewards to performance would: a) Motivate employees b) compound problems

Section F: Effectiveness of Performance Management Systems and methods used in evaluation:

1. Is there a formal system for evaluation of performance management practices of the organization?

a) Yes b) No2. If yes, please specify the process you use, to evaluate.

a) Opinion/ attitude surveys b) Informal feedback (verbal) c) Formal Feedback (written) d) Others (pls. specify)3. What strategies of your organization have been linked to the performance management systems to make it more effective? a) Reward Strategy b) Culture Strategy c) Team work strategy d) Leadership strategy

4. Is attrition rate computed in your organization after the performance appraisal? a) Yes b) No 5. If yes, what do the trends suggest with regard to attrition during the post appraisal phase? a) Increase in employee turnover b) Decrease in employee turnover 6. In general, how effective has your organization’s performance management processes proved in improving overall performance? a) Effective b) Moderately effective c) Ineffective d) Don’t Know 7. Which according to you would improve effectiveness of an organization’s performance management process? a) Bureaucratic approach b) Participative approach 8. Are you going to make any changes to your performance-management systems in the next 12 months?

a) Yes b) No c) Don’t Know 9. If yes, in what aspect of performance management would you introduce the Change? ____________________________________________________________________________________________________________________________

10. Are there any other comments you would like to make about your performance management arrangements not covered in the questions above?

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Results

Performance management is the process of assessing progress toward achieving predetermined goals. It involves building on that process, adding the relevant communication and action on the progress achieved against these predetermined goals helping organizations achieve their strategic goals. The main purpose of performance management is to link individual objectives and organizational objectives. Additionally, performance management tries to develop skills of people to achieve their capability to satisfy their ambitiousness and also increase profit of a firm.Performance management is closely connected to Performance measurement. They are sometimes mistaken for each other. In careful usage, Performance Management is the larger domain and includes Performance Measurement as a component.Performance management can also be defined as 'a process which contributes to the effective management of individuals and teams in order to achieve high levels of organizational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved'.

Benefits

1. PM focuses on results, rather than behaviors and activitiesA common misconception among supervisors is that behaviors and activities are the same as results. Thus, an employee may appear extremely busy, but not be contributing at all toward the goals of the organization. An example is the employee who manually reviews completion of every form and procedure, rather than supporting automation of the review. The supervisor may conclude the employee is very committed to the organization and works very hard, thus, deserving a very high performance rating.

2. Aligns organizational activities and processes to the goals of the organizationPM identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. This chain of measurements is examined to ensure alignment with overall results of the organization.

3. Cultivates a system-wide, long-term view of the organization. An effective performance improvement process must follow a systems-based approach

while looking at outcomes and drivers. Otherwise, the effort produces a flawed picture. For example, laying off people will likely produce short-term profits. However, the organization may eventually experience reduced productivity, resulting in long-term profit loss.

4. Produces meaningful measurementsThese measurements have a wide variety of useful applications. They are useful in benchmarking, or setting standards for comparison with best practices in other organizations. They provide consistent basis for comparison during internal change efforts. They indicate results during improvement efforts, such as employee training, management development, quality programs, etc. They help ensure equitable and fair treatment to employees based on performance.

Types

In network performance management,(a) a set of functions that evaluate and report the behavior of telecommunications

equipment and the effectiveness of the network or network element (b)a set of various sub functions, such as gathering statistical information, maintaining

and examining historical logs, determining system performance under natural and artificial conditions, and altering system modes of operation.

In organizational development (OD), performance can be thought of as Actual Results vs. Desired Results. Any discrepancy, where Actual is less than Desired, could constitute the performance improvement zone. Performance management and improvement can be thought of as a cycle:

1. Performance planning where goals and objectives are established2. Performance coaching where a manager intervenes to give feedback and adjust

performance3. Performance appraisal where individual performance is formally documented

and feedback deliveredA performance problem is any gap between Desired Results and Actual Results. Performance improvement is any effort targeted at closing the gap between Actual Results and Desired Results.

Application Performance Management (APM) refers to the discipline within systems management that focuses on monitoring and managing the performance and availability of software applications. APM can be defined as workflow and related IT tools deployed to detect, diagnose, remedy and report on application performance issues to ensure that application performance meets or exceeds end-users, and businesses, expectations.

Business performance management (BPM) is a set of processes that help businesses discover efficient use of their business units, financial, human and material resources.

Operational performance management (OPM) focus is on creating methodical and predictable ways to improve business results, or performance, across organizations.

Integrated business planning (IBP) refers to the technologies, applications and processes of connecting the planning function across the enterprise to improve organizational alignment and financial performance.

Project Performance Management is a sub-discipline of Project Management that seeks to establish measurements of project performance, such as performance of project scope, performance according to a time schedule and/or performance according to a project budget. It seeks to use such measurements to inform project stakeholders, lead the project team and improve project performance. 

Business Transaction Management (BTM) refers to the discipline within systems management that monitors business transactions across the datacenter in order to manage IT performance

Customer Performance Management (CPM) refers to the practice of managing the effectiveness of all the business activities and processes related to handling customer relationships, to a common set of financial and customer focused goals and objectives. This includes all aspects of creating and maintaining a master source of customer related data.

Process

Performance Management involves the following (illustrated by a call centre example):

Measurement You establish performance measures 

(e.g.: sales turnover) You establish measurable behavioral goals that will improve performance 

(e.g.: making 30 prospective phone calls a day) You measure current behaviors 

(e.g.: logging actual phone calls)

Appraisal You compare the current behaviors with the behavioral goals and identify the main

differences (eg: on average, 20 phone calls are actually being made, giving a shortfall of 10 phone calls).

Action For each difference, you plan how to bring actual behaviors in line with the goals, in

order to improve the performance (eg: introduce a revised telephone script that qualifies the prospect more quickly, shortening each phone call and enabling more calls to be made in the time available)

You implement the plan (eg: issue the revised script to all telesales people, perhaps with some training to support its use)

Monitoring Check that the new plans are being followed (e.g.: review a sample of phone call

recordings to determine whether the new script is being used and check that it is 'workable').

At an appropriate time, you return to the appraisal stage to assess the impact of the changes on the behavioral and performance measures (eg: review the average number of calls made per day and sales achieved).

Concerns

Typical concerns expressed about performance management are that it seems extraordinarily difficult and often unreliable to measure phenomena as complex as performance. People point out that today's organizations are rapidly changing, thus results and measures quickly become obsolete. They add that translating human desires and interactions to measurements is impersonal and even heavy handed.

Performance Appraisal

In some cases, the performance appraisal processes are structured and formally sanctioned while in other cases they are an informal and essential part of daily activities. Performance refers to the extent of completion of the tasks that make up an individual's job. One type of performance appraisal is to evaluate employees against standards of personal qualities and work profile. A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates and customers while also performing a self assessment. Certain techniques in performance appraisal have been thoroughly investigated, and some have been found to yield better results than others. 

Performance Appraisal also known as employee appraisal, is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost and time). Performance appraisal is a part of career development.Performance appraisals are regular reviews of employee performance within organizations In order to make a comparison one has to know what methods of appraisal are in use in today’s scenario

Figure: Performance Appraisal Methods

Individual Evaluation Methods

 Under the individual evaluation methods of merit rating, employees are evaluated one at a time without comparing them with other employees in the organization. (a)      Confidential report: It is mostly used in government organizations. It is a descriptive report prepared, generally at the end of every year, by the employee’s immediate superior. The report highlights the strengths and weaknesses of the subordinate. The report is not data based. The impressions of the superior about the subordinate are merely recorded there. It does not offer any feedback to the appraisee. The appraisee is not very sure about why his ratings have fallen despite his best efforts, why others are rated high when compared to him, how to rectify his mistakes, if any; on what basis he is going to be evaluated next year, etc. Since the report is generally not made public and hence no feedback is available, the subjective analysis of the superior is likely to be hotly contested.

(b)      Essay evaluation: Under this method, the rater is asked to express the strong as well as weak points of the employee’s behavior. This technique is normally used with a combination of the graphic rating scale because the rater can elaborately present the scale by substantiating an explanation for his rating. While preparing the essay on the employee, the rater considers the following factors: (i) Job knowledge and potential of the employee; (ii) Employee’s understanding of the company’s programs, policies, objectives, etc.; (iii) The employee’s relations with co-workers and superiors; (iv) The employee’s general planning, organizing and controlling ability; (v) The attitudes and perceptions of the employee, in general.

Essay evaluation is a non-quantitative technique. This method is advantageous in at least one sense, i.e., the essay provides a good deal of information about the employee and also reveals more about the evaluator.

(c)       Critical incident technique: Under this method, the manager prepares lists of statements of very effective and ineffective behavior of an employee. These critical incidents or events represent the outstanding or poor behavior of employees on the job. The manager maintains logs on each employee, whereby he periodically records critical

incidents of the workers behavior. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers’ performance. An example of a good critical incident of a sales assistant is the following: July 20 – The sales clerk patiently attended to the customer’s complaint. He is polite, prompt, and enthusiastic in solving the customers’ problem. On the other hand the bad critical incident may appear as under:July 20 – The sales assistant stayed 45 minutes over on his break during the busiest part of the day. He failed to answer the store manager’s call thrice. He is lazy, negligent, stubborn and uninterested in work. This method provides an objective basis for conducting a thorough discussion of an employee’s performance. This method avoids bias (most recent incidents get too much emphasis).However, Negative incidents may be more noticeable than positive incident; this might go against the employee. Most frequently, the critical incidents technique of evaluation is applied to evaluate the performance of superiors rather than of peers of subordinates.

d)      Checklists and weighted checklists: Another simple type of individual evaluation method is the checklist. A checklist represents, in its simplest form, a set of objectives or descriptive statements about the employee and his behavior. If the rater believes strongly that the employee possesses a particular listed trait, he checks the item; otherwise, he leaves the item blank. A more recent variation of the checklist method is the weighted list. Under this, the value of each question may be weighted equally or certain questions may be weighted more heavily than others. The following are some of the sample questions in the checklist.l       Is the employee really interested in the task assigned?    Yes/Nol       Is he respected by his colleagues (co-workers)              Yes/Nol       Does he give respect to his superiors?                          Yes/Nol       Does he follow instructions properly?                            Yes/Nol       Does he make mistakes frequently?                              Yes/No 

A rating score from the checklist helps the manager in evaluation of the performance of the employee. The checklist method is most frequently used in the employee’s performance evaluation.

(e)      Graphic rating scale: Perhaps the most commonly used method of performance evaluation is the graphic rating scale. Of course, it is also one of the oldest methods of evaluation in use. Under this method, a printed form, as shown below, is used to evaluate the performance of an employee. A variety of traits may be used in these types of rating devices, the most common being the quantity and quality of work. The rating scales can also be adapted by including traits that the company considers important for effectiveness on the job. A model of a graphic rating scale is given below.

Table: Typical Graphic Rating ScaleEmployee Name...................        Job title.................Department.........................       Rate...............Data.................................. 

 Quantity of work: Volume of work under normal working conditions

Unsatisfactory          Fair Satisfactory Good Outstanding

Quality of work: Neatness, thoroughness and accuracy of work Knowledge of job

         

A clear understanding of the factors connected with the job

         

Attitude: Exhibits enthusiasm and cooperativeness on the job

         

Dependability: Conscientious, thorough, reliable, accurate, with respect to attendance, reliefs, lunch breaks, etc.

         

Cooperation: Willingness and ability to work with others to produce desired goals.

 

From the graphic rating scales, excerpts can be obtained about the performance standards of employees

(f)       Behaviorally anchored rating scales: Also known as the behavioral expectations scale, this method represents the latest innovation in performance appraisal.  It is a combination of the rating scale and critical incident techniques of employee performance evaluation. The critical incidents serve as anchor statements on a scale and the rating form usually contains six to eight specifically defined performance dimensions. The following chart represents an example of a sales trainee’s competence and a behaviorally anchored rating scale.Table: An Example of Behaviorally Anchored Rating Scale (BARS)

         Performance Points Behavior

Extremely good 7 Can expect trainee to make valuable suggestions for increased sales and to have positive relationships with customers all over the country.

Good 6 Can expect to initiate creative ideas for improved sales.Above average 5 Can expect to keep in touch with the customers throughout

the year.Average 4 Can manage, with difficulty, to deliver the goods in time.Below average 3 Can expect to unload the trucks when asked by the

supervisor.Poor 2 Can expect to inform only a part of the customers.Extremely poor 1 Can expect to take extended coffee breaks and roam

around purposelessly.

(g)      Forced choice method: This method was developed to eliminate bias and the preponderance of high ratings that might occur in some organizations. The primary purpose of the forced choice method is to correct the tendency of a rater to give consistently high or low ratings to all the employees. This method makes use of several sets of pair phrases, two of which may be positive and two negative and the rater is asked to indicate which of the four phrases is the most and least descriptive of a particular worker. Actually, the statement items are grounded in such a way that the rater cannot easily judge which statements applies to the most effective employee. The following box is a classic illustration of the forced choice items in organizations. Table: Forced Choice Items1.       Least                                                             Most          A        Does not anticipate difficulties                 A          B        Grasps explanations easily and quickly    B          C        Does not waste time                               C          D        Very easy to talk to                                D2.       Least                                                             Most          A        Can be a leader                                      A          B        Wastes time on unproductive things        B          C        At all times, cool and calm                       C          D        Smart worker                                         D The favorable qualities earn a plus credit and the unfavorable ones earn the reverse. The worker gets over plus when the positive factors override the negative ones or when one of the negative phrases is checked as being insignificantly rated.

(h)      Management by Objectives (MBO):  MBO represents a modern method of evaluating the performance of personnel. Thoughtful managers have become increasingly aware that the traditional performance evaluation systems are characterized by somewhat opposing judgments on the part of the rater. There is a growing feeling nowadays that it is better to make the superior work with subordinates in fixing goals. This would inevitably enable subordinates to exercise self-control over their performance behaviors.

(i) Balanced Scorecard

The balanced scorecard method of Kaplan and Norton is a strategic approach and performance management system that enables organizations to translate a company's vision and strategy into implementation, working from 4 perspectives: 1. Financial perspective,2. Customer perspective,3. Business process perspective,4. Learning and growth perspective.

It is a strategic performance management tool for measuring whether the smaller-scale operational activities of a company are aligned with its larger-scale objectives in terms of vision and strategy. By focusing not only on financial outcomes but also on the operational, marketing and developmental inputs, the Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps organizations act in their best long-term interests..

Organizations are encouraged to measure, in addition to financial outputs, those factors which influenced the financial outputs. For example, process performance, market share / penetration, long term learning and skills development, and so on.

The underlying excuse is that organizations cannot directly influence financial outcomes, as these are dry measures, and that the use of financial measures alone to inform the strategic control of the firm is unwise. Organizations instead also measure those areas where direct management intervention is possible. In so doing, the early versions of the Balanced Scorecard helped organizations achieve a degree of balance in selection of performance measures. In practice, early Scorecards achieved this balance.

Implementing Balanced Scorecards typically includes four processes:

1. Translating the vision into operational goals;2. Communicating the vision and link it to individual performance;3. Business planning; index setting4. Feedback and learning, and adjusting the strategy accordingly.

The Balanced Scorecard is a framework, or that claims to incorporate all quantitative and abstract measures of true importance to the enterprise. According to Kaplan and Norton, “The Balanced Scorecard provides managers with the instrumentation they need to navigate to future competitive success”.

Multiple person Evaluation Techniques

 The above-discussed methods are used to evaluate employees one at a time. Now, let us discuss some techniques of evaluating one employee in comparison to another. Three such frequently used methods in organization are – ranking, paired comparison and forced distribution.

Ranking method

 This is a relatively easy method of performance evaluation. Under this method, the ranking of an employee in a work group is done against that of another employee. The relative position of each employee is tested in terms of his numerical rank. It may also be done by ranking a person on his job performance against another member of the competitive group.

While using this method, the evaluator is asked to rate employees from highest to lowest on some overall criterion. Though it is relatively easier to rank the best and the worst employees, it is very difficult to rank the average employees. Generally, evaluators pick the top and bottom employees first and then select the next highest and next lowest and move towards the average (middle) employees.

Paired comparison method

Ranking becomes more reliable and easier under the paired comparison method. Each worker is compared with all other employees in the group; for every trait the worker is compared with all other employees. For instance, when there are five employees to be compared, then A’s performance is compared with that of B’s and decision is arrived at as to whose is the better or worse. Next, B is also compared with all others. Since A is already compared with B, this time B is to be compared with only C, D and E. By this method when there are five employees, fifteen decisions are made (comparisons).For several individual traits, paired comparisons are made, tabulated and then rank is assigned to each worker. Though this method seems to be logical, it is not applicable when a group is large. When the group becomes too large, the number of comparisons to be made may become frighteningly excessive. For instance, when n=100, comparisons to be made are 100 (100-2) = 100 (98) = 9800. Trait: ‘Quantity of work’

Table: Employee Rated          As compared to        A        B        C        D        E                   A                           +        –        +        –                   B                  –                  +        –        +                   C                 +        –                  +        –                   D                 –        +        –                  –                   E                  +        –        +        + 

Forced distribution method

 Under this system, the rater is asked to appraise the employee according to a predetermined distribution scale. The rater’s bias is sought to be eliminated here because workers are not placed at a higher or lower end of the scale. Normally, the two criteria used here for rating are the job performance and promotability. Further, a five point performance scale is used without any mention of descriptive statements. Workers are placed between the two extremes of ‘good’ and ‘bad’ performances. For instance, the workers of outstanding merit may be placed at the top 10% of the scale. The rest may be placed as – 20% —good, 40% —outstanding, 20% —fair and 10% —fair. To be specific, the forced distribution method assumes that all top grade workers should go to the highest 10% grade; 20% employees should go to the next highest grade and so on. Job performance as the criterion apart, another equally important factor in this method is promotability. Employees may be classified according to their promotional merits. The scale for this purpose may consist of three points – namely, quite likely promotional material, may/may not be promotional material and quite unlikely promotional material. One strong positive point in favor of the forced distribution method is that by forcing the distribution according to predetermined percentages, the problem of making use of different raters with different scales is avoided. Further, this method is appreciated on the ground that it tends to eliminate rater bias.

Group appraisal

 In this method, an employee is appraised by a group of appraisers. This group consists of the immediate supervisor of the employee, other supervisors who have close contact with the employee’s work, manager or head of the department and consultants. The head of the department or manager may be the Chairman of the group and the immediate supervisor may act as the Coordinator for the group activities. This group uses any one of multiple techniques discussed earlier. The immediate supervisor enlightens other members about the job characteristics, demands, standards or performance, etc. Then the group appraises the performance of the employee, compares the actual performance with standards, finds out the deviations, discusses the reasons therefore, suggests ways for improvement of performance, prepares an action plan, studies the need for change in the job analysis and standards and recommends changes, if necessary. This method eliminates ‘personal bias’ to a large extent, as performance is evaluated by multiple rates. But it is a very time consuming process.

Field Review Method

 Where subjective performance measures are used, there is scope for rater’s biases influencing the evaluation process. To avoid this, some employees use the field review method. In this method a trained, skilled representative of the HR department goes into the ‘field’ and assists line supervisors with their ratings of their respective subordinates. The HR specialist requests from the immediate supervisor specific information about the employees performance. Based on this information, the expert prepares a report which is sent to the supervisor for review, changes, approval and discussion with the employee who is being rated. The ratings are done on standardized forms. Since an expert is handling the appraisal process, in consultation with the supervisor, the ratings are more reliable. However, the use of HR experts makes this approach costly and impractical for many organizations.

Comparison between PMS of Schlumberger and IFFCO

Schlumberger

Nature of Current Performance Management System

The organization operates a formal performance management system whose processes apply to most of the working groups in the organization like Senior Managers, Technical staff and Professionals and Team Leaders.

The PM processes that are operated differ between these groups as the management adopts different time spans of appraisal for different groups and through Management by Objectives of each employee in the group.

Management by Objectives (MBO) and Key Performance Indicator (KPI) are the techniques used in the organization for assessing performance.

The methods that form a part of the performance appraisal system in Schlumberger:

a) Written Essay Methodb) Ranking Methodc) Self Appraisal d) MBOe) Forced Distribution Method

Coaching, Training and development & Career management & development plans are processes that are a part of the PMS of Schlumberger.

The performance goals or requirements for individuals are set by the Appraiser and Appraisee.

According to Mrs. Sophia the need for PMS arises due to the following factors:

a) Reward allocationb) Identification of training and development

needsc) Facilitates promotions, transfers and

termination decisionsd) To clarify an employee’s job requirementse) Identifying barriers to performance

IFFCO

Nature of Current Performance Management System

The organization operates a formal performance management system whose processes apply to all managers and professionals including the senior management

The performance management processes for different groups differs with the KRAs (Key Result Areas) allotted to them.

Assessment, Checklists methods and KRAs are the techniques that are used in the organization for assessing performance

Methods of Appraisal that form a part of the system are,1. Self-Appraisal2. Graphic Rating Scales3. Ranking Method4. Bell Graph

Career Management & development processes are a part of their PMS

Senior Managers and HR Professional set he goals/KRAs for the individuals

According to Mr.Masood Naik, the need to have a PMS in the organization is as follows:1. PMS is used as a form of retention

strategy2. Reward Allocation3. To facilitate promotions, transfers and

termination decisions4. Identifying barriers to performance 5. To be used as a motivation tool

f) Motivational strategy

Individual, team and organizational objectives are linked,

a) By cascading approach (Top-Down Approach)

b) By enabling employees to see hw their job contributes to the overall objectives of the organization through frequent interactions

c) By comparing employee performance with work groups

The determinants of job performance in the organization are the competency of the employees, their attitude and aptitude for the job.

Perceptions of HR Professional (Sufia Ahmad) about PMS

According to her, the most challenging aspect of PM is “Determining the evaluation criteria and fairly rating the employee on these criterion, one has to distinguish between qualitative and quantitative criterion. In trying to make the numbers you tend to compromise on quality.”

She believes the success of performance management system depends on alignment of individual goals to organizational goals rather than choosing the method of appraisal

Performance-linked incentives and promotions coupled with salary increase are the performance-linked pay methods relating to PM in the organization

In Schlumberger performance appraisal is not bureaucratic chore

According to her, PM does not distract people from more important activities

According to her, PM involves looking backwards and focusing on development and fostering effective communication within the

In Iffco individual, team and organizational objectives are linked by enabling employees to see how their job contributes to the overall objectives of the organization through frequent interactions between them

The determinants for job performance in the organization are competency, attitude and aptitude of the employee in that job

Perception of HR Professional (Masood Naik) about PMS

According to Mr Masood, creating a rating instrument and lack of competence is the most challenging aspect of performance management.

The success of performance management system depends on alignment of individual goals to organizational goals

Performance-linked pay related to performance management is given through performance-linked incentives

Performance appraisal within the organization is at times done just because the system requires it to within the organization.

According to him, performance management does not distract people from more important activities

He believes performance management primarily involves looking backwards

organization.

She believes that human judgment in a PMS is highly relevant

Process of Performance Management

The management gives an overall rating for performance, where the feedback is given back both in written and verbal forms.

Documentation of performance reviews is the function of the direct manager & his employee

They do not have a separate performance system appraisal for evaluating teams

Performance planning is undertaken by the organization when annual performance and development reviews have been completed.

Within a year over 3 meeting are undertaken to discuss employee performance.

All the employees receive training in PM techniques

Analysis on Issues in Performance Management

According to her, the causes for failure of performance appraisal system are lack of role clarity and lack of communication by superiors

Stages of PM during which the management communicates with their employees :

a) Goal setting Stageb) Mid-term reviewsc) Annual reviews

Multiple raters are used by the organization to reduce subjectivity and bias in the performance appraisal system

The poor performers who are identified post the review session are sent for training or

In his eyes, human judgment is highly relevant in performance management

Process of Performance Management

There is an overall rating of performance where feedback is give both verbally and written.

Documentation of performance review is the function of the HR Manager

There is no separate appraisal system to evaluate teams in Iffco

The organization undertakes performance planning when business plans are carried out and when annual performance and development reviews have been completed

There are officially 2 meetings scheduled during a year to evaluate employee performance

None of the employees are given any training in performance management techniques

Analysis on Issues in Performance Management

According to Mr. Masood, lack of role clarity and lack of communication are the causes for failure of performance appraisal system

Stages of PM during which the management communicates with their employees :1. Mid-term Reviews2. Annual Reviews

Multiple raters and selective evaluation is done to reduce subjectivity and bias in the performance appraisal system

When poor performers are recognized post review sessions they are given improvement

improvement coaching

Her opinion on self-appraisal is that it is beneficial to a certain degree

She finds herself uncomfortable in these situations :

a) Appraising a distant subordinateb) Dealing with unrealistic expectationsc) Coping with employee defensiveness

Worrying that performance appraisal might cause resentment to subordinates constitutes the psychological barrier to effective performance appraisal

She believes linking rewards to performance leads to motivation of employees

Effectiveness of Performance Management Systems

Schlumberger has a formal system for evaluation of PM practices of the organization, the process used for this is formal feedback (written)

Reward strategy and team work strategy of the organization have been linked to the performance management system to make it more effective

The organization’s performance management processes has proved to be effective in improving overall performance

According to her, participative approach would improve effectiveness of an organization’s performance management process

No changes will be made to the PMS as of now

coaching and counseling

He believes self-appraisal is beneficial to a certain degree

Mr. Masood does not find himself to be uncomfortable in any situations regarding performance management or appraisal as he enjoys working as a HR professional and feels he is very thorough at what he does hence he feels that performance management comes naturally to him especially if the organizational objectives are clear

Being to modest or skeptical constitutes psychological barriers to effective performance appraisal

According to him, linking rewards to performance motivates employees

Effectiveness of Performance Management Systems

There is a formal system for evaluation of PMS in Iffco. The processes used for evaluation are opinion surveys and informal feedback

Reward strategy and culture strategy have been linked to the performance management systems to make it more effective

The current performance management processes have been moderately effective in improving overall performance

A participative approach would improve effectiveness of an organizations performance management process

Iffco is going to bring changes to their PMS from this year onwards, they are going to

introduce balance score card method of performance appraisal along with their current PMS

Conclusions

Performance Management is a term used to improve team performance, based on the principles of measurement, appraisal, and action and monitoring. However, it can be manifest in very different forms depending on whether the aim is to further improve good performers, or deal with underperformance

Typically, we think of performance in organizations, we think on the performance of employees. However, performance management should also be focused on: 1. The organization2. Departments (computer support, administration, sales, etc.)3. processes (billing, budgeting, product development, financial management, etc.)4. Programs (implementing new policies and procedures to ensure a safe workplace; or, for a nonprofit, ongoing delivery of services to a community) 5. Products or services to internal or external customers6. Projects (automating the billing process, moving to a new building, etc.)7. Teams or groups organized to accomplish a result for internal or external customers

Performance management is not easy to implement. It should be ‘owned’ by everyone in the organization, and especially line managers – it is emphatically not about guardianship by personnel departments. In its most positive form, performance management will help individuals not only to understand what is expected of them but also how they contribute to achieving organizational goals.  Performance appraisals can be an effective measurement tool or they can produce wrong answers. If subordinate attributes are separated from system attributes, performance appraisals are more likely to be accurate. If managers fail to recognize what variables are controlled by subordinates, true and accurate performance reports cannot be made. In order to have effective performance appraisals, the raters must distinguish between system and employee factors of production. Merely focusing on the bottom line, raters will not be able to give effective and accurate readings.

Schlumberger Limited has a very comprehensive and effective performance management system. It covers all its employees and the entire organization is linked through an

internet network system. The PMS is mostly net based where each employee has an account in the company network. The employee receives his objectives from his direct manager for each quarter, these

main objectives then have secondary smaller objectives to be completed on time basis and priority of the objectives are also set so that the employee can choose how he can go about accomplishing them

Secondly, Based on the objectives of the employee performance factors are set by their manager to help in performance evaluation

Thirdly, routinely the employee fills up his data on his account stating the status of his objectives and his comments and these are viewed by his manager on the net

The performance of the employee is reviewed quarterly and then an annual review is done where the manager gives his comments about the employees performance

The manager is assisted by a reviewing manager who gives his comments on the performance of the employee based on his achievement in completing the objectives and comments of his manager

Based on the performance of the employee the manager then deduces the development needs of the employee if required

Before the final evaluation is done the employee gives his comments or a self-appraisal.

Finally, overall rating of the employee is given by the year end, the rating is given as follows :

a) A - Outstanding (12% - 15% of the employees fall in this category)b) B - Exceeds Expectations (30% - 35% of the employees fall in this category)c) C – Meeting Expectations (30% - 35% of the employees fall in this category)d) D – Development needed (10% - 15% of the employees fall in this category)

Based on these rankings the employees performance rewards are decided and poor performers are provided with more training and improvement coaching where they can discover what went wrong

People need to know what is expected out of them. Expectations from them are usually communicated verbally in one to one meetings or team meetings in the organization. However, as soon as they are back their day to day activities these expectations loose visibility. It helps to document performance expectations or Key Result Areas (KRA). In Iffco the entire PMS revolves around these KRAs. Their entire performance management process includes 3 main steps – evaluating the employee, knowing his potential & rewarding. Let us look into their performance management process. Before we start I would like to highlight that Iffco is a family-owned company.

Firstly, business plans are set by the senior managers along with the owners these plans are aligned with the corporate, business and individual objectives of the organization. These plans are then moved down to the H.O.Ds of the various departments.

These plans are given to the employees in the form of KRAs. This process takes place in July every year followed by a mid term review and in-

between discussions. Now, as and when these KRA are achieved the employee then ranks himself, based on

the effectiveness and efficiency of how the task was completed the employee marks himself out of 4 grades.

Simultaneously, when the tasks of achieving the KRAs are being carried out the manager also makes his evaluation at fills up the grades of the employee as and when these goals are completed.

After this, the HR managers carry out the Bell Graph evaluation based on this graph each employee is put into the category of Excellent-15%-20%, Good-30%-40%, Average-25%-30%, Poor-5%-10%.

e.g. Bell Graph

Based on this assessment the rewards are then decided for each employee usually incentives and bonuses are given to the good performers.

The company does not usually have an action plan for poor performers at it tries to keep most of its employees above the poor level but in that scenario they undertake discussion meetings and counseling for these employees.

The self appraisal and the manager’s evaluation are both done online by the respective person and the results of the evaluation and feedback is given to the employees both in written and verbal form.

Summary

An effective performance management system sets the foundation for rewarding excellence.

By linking individual employee work efforts with the organization’s mission and objectives, the employee and the organization understand how that job contributes to the organization.

By focusing attention on setting clear performance expectations (results + actions & behaviors), it helps the employee know what needs to be done to be successful on the job. 

Through the use of objectives, standards, performance dimensions, and other measures it focuses effort. This helps the organization get done what needs to be done and provides a solid excuse for eliminating work that is no longer useful.

By defining job-mastery and career development goals as part of the process, it makes it very clear how the current position supports employee growth and the additional opportunities the employee needs to explore. 

Through regular check-in discussions, which include status updates, coaching, and feedback, it promotes flexibility, allowing you and the employee to identify problems early and change the course of a project or work assignment.

By emphasizing that an annual appraisal should simply be a summary of the conversations held between employer and the employee during the entire cycle, it

shifts the focus away from performance as an “annual event” to performance as an on-going process.

An effective performance management system, while requiring time to plan and implement, can save the management and the employee time and energy. Most importantly, it can be a very effective motivator; since it can help the management and the employee achieve the best possible performance.

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Appendices

References

http://ezinearticles.com/http://en.wikipedia.org/wiki/Performance_managementhttp://managementhelp.org/perf_mng/perf_mng.htmwww.cipd.co.uk/subjects/perfmangmt/general/perfman.htmhttp://www.citehr.comARMSTRONG, M. and BARON, A. (2004) Managing performance: performance management in actionhttp://www.degree-essays.com/coursework/management-essays/http://www.openlearningworld.com/http://en.wikipedia.org/Understanding performance appraisal By Kevin R. Murphyhttp://maaw.info/www.slb.comwww.wikipedia.comInterview with Mrs. Sufia Ahmad, HR Information Systems Support Analystwww.iffco.comInterview with Mr. Masood Naik, HR Manager, IFFCO.