How Indian companies score on performance management


A performance management system will be effective only if the senior management derives the goal, aligns the managers with it and subsequently cascades it to the lower levels

Performance management is one of the key ingredients for increasing the productivity and profitability of any organisation. Though there is always an ambiguity in this belief, use of the right methodology for performance management is always a debatable subject in companies.

For an effective performance management system, the company’s senior management needs to derive a goal, align the managers with it and subsequently cascade it to the bottom level, and to each employee of the company.

According to a recent study on performance management, conducted by People Business, 77 per cent of respondents claimed that they were aware of the company’s goals and around 69 per cent agreed that their personal goals were aligned with that of their respective companies. Interestingly, 72 per cent of respondents, who were managers, agreed that they cascade down their goals to their team members.

Quite an ideal situation indeed, given the fact that these three are prerequisites of an effective performance system.

The respondents came from across industries, be it banking, consulting, consumer goods, pharmaceuticals, financial services, automobile, IT and public sector units (PSU).

The other important aspect of an effective performance management system is, the on-going communication that should flow from the top management to the individual employee via the managers. Similarly, there has to be a reverse flow of information too, from the bottom to the top, on the progress of the achievement, on a regular basis.

On this parameter also around 60 per cent of the respondents agreed that there is a regular (monthly) discussion on the progress of goals in their respective organisations.

The third and most important, yet difficult, part of the performance management system is the evaluation of performance. The process should allow employees to identify and document learning associated with performance goals and competency development. It must also encourage them to think about and plan their career development and related activities.

However, on this parameter, India Inc. needs to get a hold of the situation. Only 42 per cent of the respondents felt that the performance management system helps the employees in career development.

An effective performance management system has the ability to clearly distinguish between high performers and low performers. This evaluation provides the basis for compensation differences, rewards, incentives, and training requirements for different performance levels.

However, the study reveals that only 38 per cent of the managers feel that the current performance management system in their organisation was good enough to clearly distinguish between the high and low performers.

It is very important that employees understand the clear linkage between performance and associated rewards and recognitions. 55 per cent of the managers surveyed said that they understand the linkage between performance and rewards.

Human resources play an important role in ensuring that the process is fair, accurate and managed appropriately. Their support to managers during the performance management process is of utmost importance. Only 37 per cent of the managers surveyed feel that they get sufficient amount of support from the HR division in the performance management process of their organisation.

However, there were a few companies which passed the litmus test for effectiveness of the performance system.

For instance, 3M India is one company where the organisational priorities are clearly defined and cascaded. It also puts in considerable effort to create a participative approach for performance evaluation. Also, there is a strong talent and career programme to support the outcomes.

On the other hand, SABMiller practices an innovative approach to performance review. It provides continuous feedback to its employees, the frequency of which goes up to 10 or more in a year. This has resulted in a remarkable increase in the engagement level scores of the company.

Viacom 18 has aligned its performance management programme to reflect its business needs. In order to develop creative teams, it makes use of both fixed and open goals. Open goals revolve around innovation, path breaking ideas and creative inputs.


  1. Perfectly alright. But there are other issues too and the effectiveness of performance management system should be looked at from the view point of what are the objectives of the system itself .Is is only productivity or something else like employee engagement,employee commitment and so on..

  2. PMS process has to be thoughtful selection. However, in thee Indian context the bell curve is implemented in most of the companies, wherein forced ratings are to be given to match the curve. It also needs to be examined that is the selection of good performer or bad performer is based on parity between employees having same aspects of KRA’s & KPI’s, resources, locations, and competencies, thereby meaning no cross comparisons between employees of diff functions merged in the same dept.It is also important that the KRA & KPI’s are drafted carefully & approved by the reporting lines diligently, so as to minimize the ambiguity on cutting the points on pretext of work attitude, behaviour, punctuality/attendance etc. In my opinion PMS can be highly successful if the employee is measured or evaluated against his own performance & not that of peers.

  3. Next, we looked at how satisfied these same employees were with their company s performance management system. Employees were asked to rate the system by indicating their agreement with the statement My company s performance management system clearly differentiates the good performers from the poor performers in my company.

  4. measuring performance of employees is not an easy task because there are many factor which leads performer toward non performer , Boss, Company environment , Family condition there are so many factor which affect. Only KRA evaluation is not PMS , Overall assessment of employees where Every aspect should be addressed , We can benchmark the employees who are doing outstanding , what factor are which leads the employee for betterment.

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Prajjal Saha is the editor and publisher of HRKatha, which he founded in 2015. With nearly 25 years of experience in business journalism, writing, and editing, he is a true industry veteran who possesses a deep understanding of all facets of business, from marketing and distribution to technology and human resources. Along with his work at HRKatha, he is also the author of the Marketing White Book. Thanks to his extensive experience and expertise, he has become a trusted source of insight and analysis for professionals across a wide range of industries.