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It is about thirty three years ago Larsen and Toubro asked two of us from IIMA (Dr. Udai Pareek and T. V. Rao) to examine their performance appraisal system. We interviewed several managers at different level. Mr. A. M. Naik Current Chairman of L&T was one of those days whom we interviewed to ask their suggestions for improvements in their system. L&T managers gave us a number of suggestions which latter turned out to be the base for our designing an Integrated HRD System for L&T . A few years after that we were associated with the State Bank of India, BEML, Crompton Greaves and a number of other organizations reviewed and redesigned their systems on similar lines with a development focus. 

When I look back from my experiences of the last thirty years I realize that we are still struggling in our country with the implementation of appraisal systems. I have realized that one of the most significant mistakes we have made is in naming the performance appraisal system. We continued to use the term “Performance Appraisal”. After s serious reflection of this issue I have come to the conclusion that it is high time we abandon the term “Performance Appraisals”.

One may ask what is there in the name? This is what I kept asking and did not push for change for several years. I now realize that there is a lot in the name. The title stresses that the purpose of the system is “ appraisal”. The term appraisal indicates that the main purpose of the system is ‘Appraisal”, which means evaluation. It is n form  for reducing the entire year’s or six months work of an individual in to a number. Numbers have some great properties. They are intended to render the so called objectivity and comparability. Unfortunately it this comparability and objectivity that has played havoc in the lives of many employees. It caused a few people to get promoted and some of them undeservingly, a few others to leave their jobs, and yet a few others to walk into office every day with low interest and satisfaction and carry on with their jobs.

No two numbers are comparable in appraisals. We cannot say with confidence a rating of  four assigned on a five point scale by a Production Chief is indicative of the same performance level as a rating of four assigned by the Marketing Chief. Or for that matter two marketing Chiefs operating in two regions for their juniors. The ratings depend on so many factors: the supervisor or rater, his previous background, his personality, expectations, the performer (assessee) and  his own background, the way the goals are set, the level of the goals, expectations of the assessor from the performer, the chemistry with which they started setting goals, the culture of the organization, etc. No two numbers are comparable. We cannot say the a person who gets a 68 rating on a 100 point system is definitely superior to another who gets a rating of 64 and specially the 64 is from a setting where the performer had a lot of odds to face (including that of his supervisor himself perhaps?). Yet we treat them as sacred and use them to fit into normal probability, add, subtract, multiply and calculate incentives etc. I think this is a fundamentally wrong attempt to fit qualities in to quantities and use them for anything beyond a discussion or analysis.

From a reflection on this and various other experiences in the last thirty three years of my work on  performance appraisals I like to suggest the following:

  1. Ratings in appraisals are notional and at best should be used for discussion to integrate performance on a number of non-additive parameters (like adding for a regional sales executive his achievement of sales targets, and the percentage increase in customer base, with how well he has developed his juniors, and how much he followed the various systems). They can’t and should not be used to force fit into normal curve blindly or determine incentives mathematically. At best they could be used for discussion and review of performance. Ratings are poison but they may be inevitable side products of the performance process. They should not become the primary pre-occupation of appraisals.
  2. Performance should be assessed against expectations and expectations could be changed during the course of performance with the availability of new information, data and challenges. Expectation sharing and reviewing is the most important part of performance management.
  3. It is high time we drop the term appraisal and use the terms “Management”. Management is broader and encompasses many things for a system. It includes planning, development, improvements, recognitions etc. Those who prefer to be even more focused can use terms like: PMS - Performance Management Systems, PDS- Performance Development System,  PIP- Performance Improvement Program etc.
  4. Merely changing he title does not help but the spirit needs to be promoted. It can be promoted by having a new look at the potential of PMS and by using PMS for objectives other than appraisals and generating numbers in percentages etc..
  5. Good performance should be rewarded. But what is good performance should be understood from the beginning by each individual and there should be a shared understanding of what is reward able performance and what is not by the performer and his superiors alike. This understanding should be there at the beginning of the performance period and not at the time of deciding the rewards.
  6. Small rewards and recognitions should be encouraged to be followed and each supervisor should have a good degree of autonomy to recognize and reward the performance of his or her performing employees and this may constitute a significant part of the CTC  (say 5% to 10%) of juniors. Recognition should take place all through the performance period and should not be limited to the annual stock taking or performance reviews.
  7. Annual reviews of performance should be conducted using innovative methods and should become a part of life. Such reviews need not necessarily result in assigning numbers to individuals.
This is not a complete list of thoughts but a mere glimpse of the way we need to think.

I like to illustrate the basis of this thinking by a simple illustration of how we have been promoting a new way of looking at performance planning. I give below  a new way of looking at performance planning and goal setting.

Invest Twenty and Direct 2000 to 20,000 Program

 

Recently I was working on their PMS for company outside India. I was asked to help them implement a new system they have just designed. It is a infrastructure company with many  General Managers and Senior GMs at the helm. I asked 25 of them attending the workshop to answer the following four questions:

·         To what extent did you have clearly set work plan for the last six months?

·         To what extent did your seniors with whom you work shared the same understanding of your work plan and priorities in the last six months?

·         To what extent are you able to put to use most of your capabilities in the last six months?

·         To what extent are you clear about the work plan and priorities for the next six months?

They were asked to use the following scale:

100% = fully, 75% = Mostly, 50% = somewhat, 25% = A Little, 0% = Not at all

I am giving below their responses

 

To what extent did you have clearly set work plan for the last six months?

•100% = 3

•75%= 18

•50% = 4

•25%= 0

•0% = 0

Average percentage of extent to which there is clearly set work plan = 74% . If we consider unplanned work as a wastage it is about 26% in this company. If the CTC of all the 25 top level managers is about Rs. 10 crores (with an average CTC of  Rs 40 Lakhs per GM their total CTC is Rs. 10 crores), there is a waste of Rs. 2.6 crores of cost to the company due to unplanned work and the opportunity cost may be much more. Such unplanned work gets passed down the hierarchy and multiplies. Hence the solution is to reduce this wastage by planning work. PMS can therefore be a good tool to reduce wastage through planning. 

 

To what extent did your seniors with whom you work shared the same understanding of your work plan and priorities in the last six months?

•100% = 7

•75%= 10

•50% = 5

•25% = 3

•0% = 0

Average of the extent to which shared understanding exists = 71% . If PMS is effective this shared understanding can be improved.

 

To what extent are you able to put to use most of your capabilities in the last six months?

•100% = 2

•75%   = 9

•50%   = 7

•25%   = 1

•0%     = 0

Average of the extent to which capabilities are being used in the last six months = 68%. This indicates that there is a 32% of talent wastage.

 

To what extent are you clear about the work plan and priorities for the next six months?

•100% = 9

•75%   = 13

•50%   = 3

•25%   = 0

•0%      = 0

Average of the extent to which clarity exists about work plans and priorities = 80%. This indicates the future potential wastage of top management Time.  

Simple questions and analysis like this have brought to focus the need for better utilization of talent though planning work, having a shared understanding of the work. A good PMS can reduce the wastage of time, talent and ensure better utilization of human resources.

The scope for the same is indicated by the answers provided by a number of managers from MNCs, Family owned businesses and professionally managed companies in India and outside.

Appendix 1 gives data from three organizations an MNC in India (N= 28), a family owned business company in India (N= 41) and a professionally managed  company ( from another country ( N = 85). The results indicate the similarity in the situation. All these organizations sought improvements in their PMS. 

These results clearly indicate the potential use of PMS for performance enhancements. The results also indicate the similarity in the implementation of PPMS in MNCs, Family owned businesses and professionally run companies in India and abroad.

It is these insights that have given rise to the a program we have designed at TVRLS which is now called as “Invest Twenty and Direct 2,000  to 20,000 ™”.  I have been propagating this by communicating to line managers and top management that their managers can learn to direct 2000 hours of their performance time to 20,000 hours of their junior’s performance time by merely investing 20 hours of their time for planning their and their juniors work. So  Invest 20 and Direct 2,000 to 20,000. We have helped many senior managers to cost the value of their time and showed benefits of such planning. Executives can be demonstrated to affect savings in their own time and get a better ROI on their time investments. In other words organizational performance, resource utilization including talent utilization which is becoming expensive day by day  goes up and cost reductions take place with better planning.

Similarly we have demonstrated that by viewing Performance Review Discussions as learning opportunties for seniors to learn from their juniors we have changed the meaning of Coaching and mentoring to a different degree. PRD and coaching sessions are meant to develop coaches as much as the performers. In fact I now take the view that PMS is a learning opportunity.


Appendix1: Performance management data from three industries from India and outside

 

MNC in India

To what extent did you have clearly set work plan for the last six months? (N= 28)

•100% =  Managers- 4

•75%   =  Managers- 14

•50%   =  Managers- 10

•25%   =   Managers - 0

•0%     =    None - 0

Extent to which seniors shared same understanding of work plan and priorities in last 6 months

 

•100% = 3 Managers

•75%   = 12 managers

•50%   = 9 Managers

•25%   = 4 Managers

•0%     =  0  Manager

Extent to which clear about their Priorities for the Next six months

•100% = 5 Managers

•75%   = 16 Managers

•50%   = 6  Managers

•25%   =  0  Managers

•0%     =  1

Extent to which managers were able to put to use their capabilities in last 6 Months

•100% =  1 Managers

•75%   =  18 Managers

•50%   =  9 Managers

•25%   =  0 Managers

•0%     =  0 Managers

Professionally managed Company from another country ( n= 85)

 

To what extent did you have clearly set work plan for the last six months?

  • 100% =  11 Managers
  • 75%   =  59 Managers
  • 50%   =  10 Managers
  • 25%   =   5  Managers
  • 0%     =    None
28% Unplanned work or time wasted due to lack of clarity. i.e. Nearly twenty four persons time wasted in last six months due to unplanned work or 12 person-years of unplanned work

Extent seniors shared same understanding of work plan and priorities in last 6 months

 

·         100% = 20 Managers

·         75%   = 32 managers

·         50%   = 20 Managers

·         25%   =  9 managers

·         0%     =  1 Manager

If a manager’s boss does not share the same work plan and priorities as the manager,  think of  the consequences to the individual, his boss and the organization. In this case 31% non congruence.

Extent to which managers were able to put to use their capabilities in last 6 Months

 

·         100% =  11 Managers

·         75%   =  39 Managers

·         50%   =  28 Managers

·         25%   =  5 Managers

·         0%     =  0 Managers

Percentage of Unutilized competencies = 33

Extent to which clear about their Priorities for the Next six months

 

•100% = 26 Managers

•75%   = 38 Managers

•50%   = 16 Managers

•25%   =  3  Managers

•0%     =  None

Level of Plan Congruence = 76%

Family Business  Company( N = 41)

 

To what extent did you have clearly set work plan for the last six months?

•100% =  Managers- 7

•75%   =  Managers- 20

•50%   =  Managers- 14

•25%   =   Managers - 0

•0%     =    None - 0

Extent seniors shared same understanding of work plan and priorities in last 6 months

 

•100% = 7 Managers

•75%   = 18 managers

•50%   = 12 Managers

•25%   = 3 Managers

•0%     =  1  Manager

Extent to which clear about their Priorities for the Next six months

 

•100% =  6 Managers

•75%   = 19 Managers

•50%   =  13Managers

•25%   =  3  Managers

•0%     =  0

Extent to which managers were able to put to use their capabilities in last 6 Months

•100% =  11 Managers

•75%   =  18 Managers

•50%   =  10 Managers

•25%   =  2 Managers

•0%     =  0 Managers


 



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