Performance Management
SUB T I TLE
Performance Management
Performance management is a systematic process through which
managers ensure that employees’ activities and outputs contribute to the
organisational goals.
Objectives
• To help the organisations achieve its business objectives.
• To motivate and control employees.
• To serve as a basis for many HR decisions ( Hiring & lay-
offs, T&D, Compensation Management)
Components of Performance Management
• Goal Setting: SMART goals (Specific, Measurable,
Achievable, Relevant, Time-bound).
• Performance Appraisal: Evaluating employee
performance.
• Feedback on performance
• Performance Development
Performance Appraisal Methods
R AT ING INDI VI DUA L R AT I N G G R O U P M E M B E RS
• Graphic rating scales • Paired Comparisons
• Critical incident method • Simple Ranking
• Behaviorally anchored rating • Forced distribution ( Bell Curve
scale (BARS) Approach)
• Measuring results (MBO) • Assessment center
• 360-Degree feedback
BARS for Customer Service Performance
• 1. Unsatisfactory- Frequently ignores customer inquiries.
• 2. Needs Improvement- Occasionally responds to customer inquiries
but often requires prompting.
• 3. Meets Expectations- Responds to customer inquiries in a timely
manner.
• 4. Exceeds Expectations- Proactively addresses customer inquiries
before they escalate.
• 5. Outstanding- Consistently anticipates customer needs and offers
solutions.
Challenges in Performance Management
• Lack of Clear Goals (Not setting SMART goals)
• Not communicating the goal enough
• Not spending time aligning on the goal
• Not differentiating performance
• Bias in Evaluation (selective perception, similar to me error, contrast
error, error of central tendency, Halo/ horns error)
• Resistance to Feedback
• Motivating people to perform
• Creating a culture of openness
How to make PMS more Effective?
• Regular Training for Managers
• Ensuring effective evaluation skills
• Encouraging Employee Involvement
• Engaging employees in their performance management
• Fostering a Growth Mindset and promoting continuous learning and
development.
Use of Technology
• Conducting surveys on employee satisfaction and engagement, which are
critical for PMS
• Holding 360-degree feedback through Digital platforms which streamline
the appraisal process, and reducing administrative burdens.
• Identifying skill gaps through Learning management systems (LMS) and
finding ways for enhancing performance.
• Monitoring progress and maintain accountability through tools like
project management software and productivity trackers ( Remote Teams)
• Advanced technologies (AI and Machine Learning) can predict
performance trends and provide personalized recommendations for
employee development.
Compensation Management
S T R AT E GIE S, B E S T P R ACT I CE S, A ND T R E ND S
Compensation
• Compensation refers to the total remuneration and benefits that an
employee receives in exchange for their work. It encompasses both
monetary and non-monetary forms of rewards.
• Compensation Management involves designing and implementing a
system to reward employees' performance and ensure fair pay.
Monetary & N0n-Monetary Compensation
Monetary Compensation
• Base Salary (the fixed amount), HRA, Allowances usually on a monthly or bi-weekly basis
• Bonuses: Additional financial rewards given for achieving specific goals or milestones.
• Commissions: Earnings based on the sales or performance metrics achieved, commonly
used in sales roles.
• Overtime Pay: Extra compensation for working beyond the standard hours.
• Gratuity, Pension funds, and stock options
Non-Monetary Compensation
• Benefits: Health insurance, retirement plans, Paid leave ( Earned leave), LTC, and other
perks.
• Recognition: Awards, certificates, and public acknowledgment of an employee’s
performance.
• Career Development: Opportunities for training, education, and career advancement.
• Flexible working hours, remote work options, and family support program
Objectives of Compensation Management
• Aligns employee rewards with organizational goals
• Attract Talent
• Prevent demotivation
• Motivates staff
• Retain talent
• Ensure Fairness,
• Promotes equity among employees.
Compensation Strategies
• Market-Based Pay
• Performance-Based Pay
• Skill-Based Pay
• Team-Based Pay ( profit- sharing )
Designing a Compensation Plan
• Job Evaluation : Rating the jobs in an organisation
• Job Analysis: Understand the role and responsibilities.
• Market Research: Benchmark against industry standards.
• Pay Structure: Develop a salary range and pay grades.
• Performance Metrics: Define how performance will be assessed.
Legal and Ethical Considerations
• Compliance: Adhere to labour laws and regulations (e.g., minimum
wage, overtime).
• Equity: Ensure fair pay across gender, race, and other demographics.
• Transparency: Maintain clear communication about pay policies.
• Compensation of Gig workers
Trends in Compensation Management
• Remote Work Adjustments: Addressing pay for remote employees.
• Total Rewards Approach: Combining salary, benefits, and work-life
balance.
• Personalization: Tailoring compensation packages to individual
needs.
