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.