THE INDIA HR SUMMIT - II

Presents

EPITOMIZING PERFORMANCE

THE SYNERGIZING ROLE OF HR

“Performance Assessment – A Shift from Intangibles to Tangibles”

Under the aegis of:

Presented by

Jonathan Franklin Babinall

Prachee Sehgal

Subhadip Bagchi

Neelam Mundhra

“Many of the things you can count , Don’t count. Many of the things you can’t count, really

Count!”

-Albert Einstein

ABSTRACT

Performance management is the systematic process of planning work and setting expectations,

continually monitoring performance, developing the capacity to perform, periodically rating

performance in a summary fashion and rewarding good performance1

Although more and more organizations are using competency models and accompanying

behavioural standards as a basis for performance management, there is also increasing focus on and

importance of evaluating employees’ results as part of the performance management process. A

critical issue faced by organizations is how to measure and evaluate results . Performance

Measurement can be done in two ways : objective and subjective. Objective performance measures

include production data(dollar volume of sales, units produced, number of errors, amount of

scraps),as well as employment data(accidents, turnover, absence, tardiness).These variables directly

define the goals of the organisation, but, they often suffer from several glaring weaknesses, the

most serious of which are performance unreliability and modification of performance by situational

characteristics. The objective in performance appraisal should be to judge an individual’s

performance and not factors beyond his or her control. Moreover objective measures focus not on

behaviour, but rather on the direct outcomes or results of behaviour. Admittedly there will be some

degree of overlap between behaviour and results but the two are qualitatively different *.Finally, in

many jobs(e.g., those of middle managers),there simply are no good objective indices of

performance, and, in the case of employment data(e.g. awards ) and deviant behaviours(e.g.

covering up one’s mistakes),such data are usually present in fewer than 5 percent of the cases

examined**.Hence they are often useless as performance criteria.2 In short, although objective

performance measures are intuitively attractive, theoretical and practical limitations often make

them unsuitable. And, although they can be useful as supplements to supervisory judgements,

correlations between objective and subjective measures are often low***.

*(IIgen & Favero,1985) **(Landy & Conte 2004) *** Bommer, Johnson, Rich, Podsakoff & Mackenzie,1995:Cascio & Valenzi,1978:Heneman,1986).

Consequently it is often not easy to predict employees’ scores on objective measures of

performance. The disadvantages of objective measure have led researchers and managers to place

major emphasis on subjective measures of job performance. However since subjective measures

depend on human judgement, they are prone to the various biases. To be useful, they must be based

on careful analysis of the behaviours viewed as necessary and important for effective job

performance. There is a enormous variation in the types of subjective measures used by

organisations. Some use a long list of elaborate rating scales; others use only a few simple scales;

still others require managers to write a paragraph or two concerning the performance of each of

their subordinates .In addition, subjective measures of performance may be relative (in which

comparisons are made among groups of ratees) or absolute (in which a rate is described without

reference to others). This paper talks about various such measures which can be used to gauge

employee performance and their evolution over the years to accommodate the requirements of the

ever changing economic and social environment.

INTRODUCTION

PERFORMANCE ASSESSMENT- A SHIFT FROM INTANGIBLES TO TANGIBLES

Gone are the days when performance measurement use to be a green eyeshade profession**,

essentially managed by inertia, without critical re-evaluation. In today’s competitive world, only

those companies can survive who are constantly re-engineering their processes to meet the demands

of the changing circumstances. The economic scenario today is characterised by growing

competitive pressures, weak economic conditions, the need to obtain value from overheads and the

demand for more flexible production. The requirement of the time is that performance measurement

should reflect business imperatives which include improved productivity, the achievement of global

economies of scale and efficiency, and the enhancement of customer satisfaction .

In this attempt, it is very important to realise that workforce is the single most important renewable

source of competitive advantage as firms compete more and more though “knowledge capital”3

and “brainware”4. Those firms that can attract, focus, and motivate the appropriate workforce

** Green eyeshades are a type of visor that were worn most often from the late 1800s to the middle 1900s b, telegraphers, copy editors and

others engaged in vision-intensive, detail oriented occupations. Because they were often worn by people involved in accounting, auditing, fiscal

management, economics, and budgeting, they became commonly associated with these activities. The term "green eye-shades" can be applied

derogatorily to individuals who are excessively concerned with pecuniary matters or small and insignificant details (Wikipedia)

capabilities and behaviours stand the best chance of not only surviving but thriving in competitive

environments.

But this entire exercise requires a sound, logical performance measurement system which ensures,

firstly, that organisations are held accountable for their performance and actions; and, secondly,

facilitates learning and improve performance. These two roles are often at odds with each other, and

tensions are provoked around this ‘accountability–learning dichotomy’5. Hence it becomes

extremely important to design a performance measure which is S.M.A.R.T. i.e.

Specific – Objectives and standards should let employees know exactly which actions and

results they are expected to accomplish.

Measurable – Whenever possible, objectives and standards should be based on quantitative

measures such as direct counts, percentages, and ratios.

Attainable – The objective or standard should be achievable, but challenging, and attainable

using resources available.

Relevant – Individual goals, objectives and standards should be in alignment with those of

the unit and the department in support of the University’s mission.

Timely – Results should be delivered within a time period that meets the department and

organization’s needs.6

How does it help?

Objectives and standards identify baselines for measuring performance results. From performance

objectives and standards, supervisors can provide specific feedback describing the gap between

expected and actual performance.

Hence developing a good performance assessment is a baffling task.

History of Performance Management

Let’s take a peep into the history of Performance Measurement…

Theoretical notions of performance and efficiency were first introduced by Frederick Taylor at the

beginning of the twentieth century. He proposed the application of scientific methods to discover

the most efficient working techniques for manual forms of labour as well as to improve managerial

control and supervision. Taylor’s mechanistic management approach became known as ‘Scientific

Management’. Taylorism was seen to legitimise management as a control agent, and Taylor’s

techniques laid the groundwork for management control systems. Subsequent developments in the

search for greater managerial efficiency were shaped by the work of highly successful managers,

such as Henry Ford, in developing the early mass production systems; as well as the writings of

theorists like Henri Fayol who identified the basic principles of rational administration. He defined

the key managerial functions, including planning, organising, command, co-ordination and

control*.

The first decades of the twentieth century were marked by this positivist and mechanistic

understanding of how human organisations function, and the belief in objective measurement**.

New performance measurement systems were introduced. For example, the Dupont Company

developed a Performance Pyramid which linked financial ratios to rates of return on investment***.

The growing awareness of the value of such systems and the recognition of the need for more

sophisticated measures prompted organisations to experiment with non-financial performance

indicators to complement the range of financial measures already used. General Electric, in the

1950s, was one of the first organisations to implement a broad-based set of performance measures

incorporating both financial and non-financial measures. The centrality of objectives to these

processes was highlighted by Peter Drucker’s work on Management-By-Objectives****. Ongoing

interest in performance measurement, and an increased understanding of the processes involved, led

to a greater acceptance of the need to take a more holistic and balanced approach to such systems.

*(Hatch 1997; Courtney 2002) **(Lynch and Dicker 1998).*** (Neely 2002), ****(Drucker 1973)

While, in the 1980s, much interest was centred on new measures of specific organisational

dimensions designed to supplement financial measures, the focus of the 1990s was on integrated

performance measurement frameworks such as the Balanced Scorecard and the Performance Prism.

The involvement of key stakeholders in the processes is central to these frameworks; the way they

identify and communicate their priorities and strategic needs is increasingly recognised as a crucial

element in such systems*.

The integration of non-financial, qualitative, and process-based measures with existing financial

and quantitative performance measurement systems reflects greater awareness of the complexity of

the management process. Initially, organisations were depicted as mechanistic and rational entities

that could be measured objectively; now they are increasingly perceived as evolving cultures and

dynamic systems. There is currently greater understanding of the impact of human interaction and

negotiation on organisational development and management processes. But despite this trend, the

epistemological tensions between the quantitative and the qualitative, the hard and the soft, are

inherent in many debates about effectiveness and efficiency. 7

Traditional Methods

Graphic Rating Scales

A scale that lists a number of traits and a range of performance of each. The employee is then rated

by identifying the score that best describes his or her level of performance for each trait.

Advantages: It is simple to use and provides a quantitative rating for each employee.

Disadvantages: The standards may be unclear. Also the halo effect, central tendency

leniency and bias can be the main problems.

*(Neely 2003)

Ranking Method

Under this method the employees are ranked from best to worst on some characteristics.

Advantages: Ranking Method is inexpensive & simple to use and it avoids central tendency

and other problems of rating scale.

Disadvantages: Reliability and validity of the method is a problem. The method may be

affected by rater bias or varying performance standards. Also of the size of the difference

between individuals is not well defined.

Paired Comparison Method

Under this method, the appraiser ranks the employees by comparing one employee with all other

employees in the group, one at a time for each trait and indicating which is the better employee of

the pair.

Advantages: Results are in more precise rankings than just alternative ranking.

Disadvantages: The method is difficult and time consuming. Also the employees are simply

compared to each other on total performance rather than specific job criteria.

Forced Distribution Method

Under this method, the rater after assigning the points to the performance of each employee has to

distribute his ratings in a pattern to conform to normal frequency distribution. It is similar to

grading on a curve. With this method, predetermined percentages of rates are placed in performance

category.

Advantages: This method allows the appraiser to get results for predetermined number of

people in each group.

Disadvantages: Appraisal results depend on the adequacy of original choice of cut-off

points

Free Form Appraisal

This method requires the manager to write a short essay describing the employee’s performance

during the rating period. Here the emphasis is on evaluation the overall performance, based on

strength/weakness of employee performance rather than specific job dimensions

Advantages: By asking supervisors to enumerate specific examples of employee behaviour,

the essay technique minimizes supervisory bias and halo effect.

Disadvantages: The process can be time consuming and the quality of the ratings depends,

not actually on employee performance, but on the writing ability of the rater.

Critical Incident Method

The supervisor continuously records the critical incidents of the employee performance or behavior

relating to all characteristics (both positive & negative) in a specially designed notebook and rates

the employees on the basis of notes taken.

Advantages: Helps specify what is “right” and “wrong” about the employee’s performance;

Forces managers to evaluate subordinates on an ongoing basis.

Disadvantages: It is difficult to rate or rank employees relative to one another.

The Scenario Today….

Performance measurement approaches are continuously criticised as insufficient and inappropriate.

Therefore, various attempts have been made over the years to modify existing frameworks, use

them in different ways, and create alternative frameworks. Often, the same framework or strategy is

used for different purposes such as planning, management, and measurement, despite the fact that

each process requires different framework features. Consequently, the terminology is not very

precise; the same performance approach may be characterised by some as a performance

management framework, and by others as a performance measurement system. The point to be

noted is that the appraisal process is a means to open the lines of communication about the

organizational needs, the individual's areas of growth required to support those needs, and metrics

that describe success. But unfortunately, there is not enough clarity around examples of

competencies or skills due to the subjectivity involved in traditional measures. A “meeting of the

minds” across managers around descriptions of the competencies that lead to success is required

which has led to the evolution of quantitative measures for Performance assessment marked by a

shift from Intangibles to Tangibles.

A look at some of them….

Total Quality Management (TQM) 8

By 1990 the corporates ushered in the concept of Total Quality Management (TQM), pioneered by

Japanese firms like Nippon Electrical Corp. and Toyota. Although TQM had a lot of qualitative

aspects, yet efforts to quantify such measures were instantaneous. Metrics like quality, customer

satisfaction, innovation and even human resource related measures were identified, and a

competitive benchmarking technique was developed to quantify them. Although widely accepted

and practiced, TQM does have certain constraints. TQM is often criticized for failing to explain

specific performance gaps and identify who is responsible for them.

Six Sigma

In recent years statistical tools have been extensively used to quantify performance assessments. Six

Sigma is one such cost saving, quality-focused strategy, designed and developed by Motorola to

reduce defects and problems. Six Sigma has found world-wide recognition as an accurate

performance assessment tool and is used by many organizations around the world especially those

engaged in production and delivery.

Behaviorally Anchored Rating Scale (BARS)

BARS or Behaviorally Anchored Rating Scale is a modern method used to measure and report on

performance. BARS are normally presented vertically with scale points ranging form 5 to 9. This

method combines traditional rating scales as well as critical incident methods. Effective and

ineffective behavior related to the job is identified and converted to performance dimensions

(quantified). Groups of participants are then asked to re-classify incidents. All meeting re-

translations and standard deviation criteria will be used as BARS. ‘Midas’ uses BARS as its official

Performance Appraisal Method.

Benchmarking 9

Benchmarking, originally invented as a formal process by Rank Xerox is usually carried out by

individual companies in order to study and measure performance of departments, employees and

the organization as a whole. Benchmarking is the process of comparing the cost, time or quality of

what one organization does against what another organization does. Best-practice benchmarking is

a process whereby organizations pursue enhanced performance by measuring their processes and

practices against those in other organizations. For example, comparisons may be made with

competitors, partners, and organizations with similar processes operating in different spheres, and

even other parts of the same organization. Benchmarking is a strategy that can be used to measure

performance and identify performance gaps, as well as bring innovative ideas into organisational

processes, thus improving organisational management. The shift to active organisational learning

requires analysis of performance measurement by comparisons with better performing

organisations, and investments of time and resources in order for improvements to take place. The

actual implementation of benchmarking varies with regards to the network of contacts created, the

degree of mutual receptivity of ideas, and the willingness to test these ideas in a new context.

Neely distinguishes between ‘indicator benchmarking’ which focuses on performance

measurement, and ‘ideas benchmarking’ which is concerned with performance improvement.

Benchmarking between similar organisations is likely to be competitive, and the process may be

inhibited by considerations of commercial advantage. Consequently, similar benchmarking partners

are more likely to pool indicators than share ideas. In the less competitive public sector, the number

of benchmarking networks is increasing. Over the years, the notion of benchmarking has undergone

an evolution from internal benchmarking to generic process benchmarking:

• Internal Benchmarking: comparing similar operations within one’s own organisation

• Competitive Benchmarking: comparing with best practice of organisations in direct competition

• Functional Benchmarking: comparing practices and methods with similar processes in the same

function outside one’s industry

• Generic Process Benchmarking: comparing one’s work processes with those organisations that

have innovative, exemplar processes

Evidence suggests that there is a benchmarking maturity curve whereby organisations appear to

move from simple comparisons of easily measured discrete activities with close partners, to

comparing more complex processes with a range of partners. While indicator-driven benchmarking

may lead to problems of comparability and consistency of data, the extensive use of comparative

assessment of good (and bad) practice suggests that such an approach delivers immediate and

operational benefits.

Economic Value Added (EVA) 10

An ideal performance measure should ensure that the managers would bear all the consequences of

their own actions, but are not exposed to the fluctuations over which they have no control. In search

of such a metric – traditionally - companies are used to capture managerial performance and reward

them through the operation based measures like Profits, EPS(Earnings Per Share), ROCE(Return on

Capital Employed) and ROE(Return on Equity). However these measures are not free from

limitations. An appropriate performance measure should assess how managerial actions affect the

firm value. For this to happen the performance measure must incorporate at least three things *.

a. the amount of capital invested

b. the return earned on the capital and

c. cost of capital (WACC-Weighted Average Cost of Capital) – reflecting the risk adjusted

required rate of return

The Stern Stewart & company, a New York City based consulting firm developed the Economic

Value Added (EVA) for the purpose of managerial performance evaluation.

Economic value added (EVA) provides the rupee value created for investors in a given time period

by weighing the profit generated by a decision against the value of the capital employed to generate

that profit.

*(Irala, 2005).

EVA is the Adjusted Net Operating Profit After Tax (ANOPAT) for a period minus the capital

charge (the rupee cost of capital) of the investment over that period.

EVA can be expressed as

EVA = Adjusted Net Operating Profit After Taxes (ANOPAT) - Capital Cost

Where , ANOPAT3 = Capital Employed (CE) X ROCE (as ROCE = EBIT (1-T) / CE)

Capital Cost = WACC X Capital Employed (CE)

Thus, EVA = Capital Employed (CE) X ROCE - WACC X Capital Employed

EVA = (ROCE - WACC) Capital Employed

Capital is generally measured by book value

WACC is the weighted Average of cost of Equity (generally measured by CAPM) and cost of Debt.

If managers are told that their performance is measured by EVA and compensation is liked to that,

they would try to improve EVA by doing one or more of the following.

A. Improve returns with the existing Capital

B. Employ Capital productively

C. Reduce the capital cost

The Use of EVA in Performance Appraisal Process at Selected Indian companies

Balanced Score Card 11

The Balanced Scorecard is a performance measurement and management framework which was

developed by Kaplan and Norton in 1992 in order to measure the economic and operational

performance of a firm. The Balanced Scorecard aligns performance measures with organisational

objectives through strategic performance management. The framework provides a balance between

financial and non-financial measures; between internal and external measures. It integrates four

dimensions of performance, each containing goals and corresponding measures*. These dimensions

or perspectives are:

• The Customer Perspective – this refers to customer concerns about time, quality, performance,

service, and cost.

• The Internal Business Process Perspective – this refers to those business processes that have the

greatest impact on customer satisfaction.

• The Innovation and Learning Perspective – this refers to innovation, as well as improvements

to existing products and processes.

Company The usage of EVA

Godrej

As a measure that aligns the interests

of the employee, the company and the

shareholder

TCSAs a performance measure linked to

compensation

Infosys

As a tool to tell its clients that the

value delivered by Infosys is greater

than what the client pays for.

MaricoAs a signalling device to tell its

employees that capital is important.

Dr. Reddy's

As a qualifying criterion to grant

rewards such a variable pay, stock

options and performance bonuses.

• The Financial Perspective – this refers to the extent to which the company strategy contributes

to profitability, growth and shareholder value.

The Performance Prism 12

After analysing the weaknesses and characteristics of existing performance measurement systems,

Neely (2002) developed his own performance measurement and management framework, the

Performance Prism, which takes as its point of departure the reciprocal relationship with each

stakeholder. The Performance Prism links value creation with performance measurement by

investigating the organisational strategies, processes and capabilities needed to create value for

stakeholders. The Prism is based on Neely’s belief that a good performance measurement system

should provide a balanced picture of the business and its performance. He argues that any

performance measurement framework should be multi-dimensional and comprehensive.

The Performance Prism is applicable across the organisation; across its functions and hierarchy; and

entails methodologies for measuring specific activities or processes. Compared with the Balanced

Scorecard, it incorporates a range of stakeholder perspectives such as those of regulators and

pressure groups. Neely presents five distinct but interlinked perspectives: stakeholder satisfaction,

strategies, processes, capabilities and stakeholder contribution. The Performance Prism is designed

as a dynamic model illustrating the interplay between these five perspectives. It can be applied at

any organisational level, and provides a balanced picture of the organisation, highlighting external

(stakeholder) and internal (strategy, process, and capability) measures.

Human Resource Accounting 13

Human resources a company possesses is an asset to the company. The special skills and their

outcomes that human resources possess is called Intellectual Capital (IC). The IC should be

quantified and recorded in the books of accounts in order for a firm to be accurately valued. This

(Kaplan and Norton 1998a)

concept is gaining popularity among HR managers for performance assessments. This method

includes –

1. Real Capital Cost part

2. Present value of future salary/wages payments

3. Performance evaluation part

In India companies like Infosys, ONGC are using Human Resource Accounting.

Assessment Centre 14

This method was first applied in the German Army in 1930. In this approach individuals from

various departments are brought together to spend 2 or 3 days working on an individual or group

assignment similar to the ones they would be handling when promoted. Observers rank the

performances of each and every participant in order of merit. Most companies find it difficult to

make error-free decisions when it comes to identifying people for senior jobs, or when they want to

promote. HR’s challenge is to help managements make the right decisions. The assessment centre

concept is very powerful for such decision-making. An assessment centre will have a standardised

process for evaluation of behaviour using multiple inputs. These centres need well-trained process

observers and robust techniques are used. Trained assessors observe and evaluate candidates on

their relevant managerial qualities, while those candidates are performing a variety of situational

exercises. Assessment centre exercises (e.g., role-play, in-basket, fact-finding and group

discussions), intend to measure dimensions such as leadership, planning, sensitivity, problem

solving, and many others. For success of the centres, assessors have to demonstrate the capability to

observe and record the behaviour of candidates. This is demanding as assessors have to understand

the difference between merely looking for concrete verbal and non-verbal behaviours and

interpreting these behaviours. Assessors should be able to organise their behavioural observations

by job-related dimensions. This means indicating to which dimension each behaviour belongs.

Another skill involves accurate rating of candidates on dimensions. They should have the ability not

to make comparative judgements. This is critical. Infact assesors must actually put down scores for

the behavioural attributes of employees under assessment. This signals a vital shift from intangibles

to tangibles as, it seeks to quantify behaviour, skill, potential and discipline amongst others. Some

companies which have pioneered the use of this technique are AT&T, IBM, GE and Sears.

Management By Objectives (MBO)

MBO involves setting specific measurable goals with each employee and then periodically

reviewing the progress made. It consists of six main steps:

Set the organizations goals

Set departmental goals

Discuss departmental goals

Define expected results

Performance reviews

Provide feedback

The introduction of MBO is a reflection of the need for assessing impact and ensuring greater

accountability. This method quantifies the metrics of goals and their subsequent achievement by

setting standards. Performance is measured against standards.

ROI – On The Cutting Edge

Increasingly, HR departments are turning to a variation of an established financial metric--return on

investment or ROI--to demonstrate the financial vitality of their most critical and highly visible

initiatives. The HR-tailored ROI ratio is calculated by assigning monetary values to an HR program

and dividing the value by the program's costs. (Total program benefit divided by program costs).

Key ROI ratios include – Revenue factor, Human Capital Value Added, Human Capital ROI, Total

Investment Factor, Training investment factor and turnover costs. These metrics can be used to

evaluate performance of individuals and groups in an organization.

Sixth Pay Commission – Performance Assessment and Reward

IIM – Ahmedabad conducted a study regarding the implementation of a performance assessment

system in government organization. They came up with PRIS or Performance Related Incentive

Scheme which was used by the Sixth Pay Commission(Annexure 2.5.5). Under this scheme,

individuals/groups are judged against pre-set mutually agreed upon goals for the period (non

additive and non cumulative). The suggestions included the phasing out of the ad-hoc bonus

schemes and PLBs. The savings thus generated could be used to finance PRIS. The result of PRIS

is efficiency, customer and employee satisfaction.

Under PRIS it is suggested that bonus rates lie between 5% and 20% of basic pay. Special care is

taken to ensure that performance and delegation of power go hand in hand. The system helps to

measure accountability on the basis of – ability of the system to deliver, on time delivery, expected

quality and customer satisfaction. The performance is evaluated quantitatively by re-engineering

Management Information Systems to focus on work processes linked deliverables and outcomes.

Subsequently Balanced Scorecards are used to refine and integrate the process. The process is

quantifiable and see-through and thus widely accepted.

Montecarlo Simulation

Montecarlo Simulation is extensively used in forecasting the human resource requirement of certain

organizations and demand supply dynamics prevailing in job market from various quoted industry

practices. It is proved beyond doubt that every employee from his inception to a organization is

evaluated consciously or subconsciously on daily basis. If an effort is made to make the process

more routine by maintaining daily evaluation score card based on different parameters (weighted

average) over a certain period of time, an extensive datasheet can be generated. Then by employee

Montecarlo Simulation, his position in the organization can be forecasted.

Also different employees’ probability to grow up to a certain level can be judged through a tailor

made performance score card system that varies from sector to sector. Using it, a proper succession

and growth plan can also be designed to suit their growth in the potential slab.

Recommendations

A real time performance appraisal modelling –a tangible way

After studying various industry prevalent practices, in various public & private sector organization, it can be said undoubtedly that though there has been a lot of efforts are

made by HR professionals to standardise the process, a degree of certain subjectivity always would be there. In any case, every organisation is unique and to standardise

human quality in a quantitative terms requires painstaking exercises. A probabilistic model to quantify the qualitative characteristics on a 10 grade point is presented below-

15

Core Values                 

 To be evaluated on a continuous scale of 1-10, with 1 being

minimum & 10 being maximum

  1 2 3 4 5 6 7 8 9 10

Business Ethics                    

Exhibits a high level of

morality & fairness in all

his actions; is transparent

in his dealings; complies

with all guidelines relating

to disclosures under

various acts and rules.                    

Customer Focus                    

Has conviction that the

customer is the centre of

all activity; is courteous,

sincere, patient and

sensitive to the customers

and honors commitments

on time.                    

Organizational and

Professional Pride                    

Holds the company in high

esteem and has a sense of

ownership with it; holds                    

Ratings

his profession in high

esteem and takes pride in

belonging to it.

Mutual Respect and Trust                    

Has high regard for and

faith in the fellow

organizational members;

believes in collaboration

and openness and has good

team spirit                    

Innovation and Speed                    

Thinking new and ahead

and being swift without

compromising on quality,

is creative and innovative

and has the willingness to

experiment and take risks                    

Total Quality for

Excellence                    

Believes in pursuing

excellence in all spheres of

activity; makes continuous

efforts in improving

standards of performance,

systems and processes.                    

Aggregate Score                    

Total possible score based on 6 qualitative parameters is 60 (6 x 10)

On a daily basis entries are made on a scale from 1 to 10 for the various parameters. Though there

can be ‘n’ number of parameters, due to limitations in the scope of discussions, we primarily

emphasise on these parameters. Due to the uniqueness of different industries, the parameters should

be customised accordingly and the weightages also should be altered similarly. On a grade point

scale through a relative grading technique an interval of scores is assigned to a pre-determined

performance level.

Illustration –

55 and above – exceptional

45 – 55 - very good

35 – 45 - satisfactory

30 – 35 - average

Below 30 - extensive training required

Performance evaluation into the future is the need of the hour. Initially performance evaluation

started out with being strictly bound to profit and sales figures. Soon business managers and HR

managers alike discovered the need for quantifying intangible aspects of employees. Factors like

discipline, initiative, commitment towards the organization, business ethics, customer focus,

organizational and professional pride, mutual respect and trust, innovation and speed and total

quality for excellence must surely account for something. It was soon understood that for a

performance assessment system to be worth its weight, it had to include such intangible factors.

Here arises the problem of quantifying such intangibles. The challenge is to seamlessly integrate the

intangibles with the tangibles by finding appropriate ways to quantify them. The performance

measurement systems have shown significant development, from financial to integrated financial

and non-financial measures for the past two decades. Several non–financial (qualitative)

performance measurement approaches, or frameworks, for building and managing performance

measurement systems have evolved today.

According to various authors,*enterprises that have been successful at performance measurement

have generally developed measurements based on the following characteristics:

(such as Brown, 1996:4-9; Artley, 2001:19 ;Kaplan & Norton, 1996:163; Reisinger, et al. 2003:430; Parker: 63-66),

Performance measures need to be aligned with the organisation's strategy - The starting point

is to determine what to measure. This depends on the organisational vision, mission and strategy *

Vital few versus the trivial many - Similarly, Kaplan & Norton (1996:163) conclude that

designing few and improved measurement system may save time and arrive at specific goals and

objectives for success. The key to having a successful set of metrics is paring down organizations’

database to the vital few key metrics that are linked to success .

Linkage to vision, values, and key success factors - Identifying vision where you want to be and

to know how to link measures with the key success factors is essential in today’s competitive

environment.**

Metrics should focus on the past, present, and future – Measures (metrics) should be long-term

oriented as well as simple to understand and implement***. The problem with most measures is

that they focus on the past.

Metrics should be linked to the needs of the customers, shareholders, and employees – This is

well illustrated that the set of measures used by an organization has to provide a "balanced" picture

of the business and reflect the external measures for shareholders and customers, and internal

measures of critical business processes, innovation, learning and growth to obtain necessary

information from all parts of the organization****.

Metrics should flow down to all levels and should be consistent –

According to Brown (1996:6) metrics need to be defined for the highest level of the organization

first and then flow down to all levels and functions.

Multiple measures can be combined into several overall indices of performance - This practice

of aggregating data into a single statistic is risky, because the aggregate statistic often hides trends

that might be noticed in the subsidiary measures*****.

*(Parker, 2000:63). **(Litman, et al. 1999:15).*** Kaplan & Norton, 1996:38,**** (Kaplan & Norton, 1996:9), *****(Reisinger, et al. 2003:430)

Metrics should be changed as your strategy and situation changes –

According to Kaplan & Norton (1996:22) point of view, measures must change dynamically with

the strategy as the basis for continuous improvement and for designing an adequate information

system. Performance measures should be modified when there is a change in the organizations

objectives.

Measures must be reliable - It is therefore important to identify measures, which can be made

reliably and consistently over the desired time period*.

Metrics need to have targets of goals based on research – Organizations have to design their

target to shoot for challenging, worthwhile, and achievable goals**.16

Conclusion

*(Parker, 2000:63) **(Litman, et al. 1999:5-6)

Over the last few years the landscape of Indian industry has under gone a huge change. After witnessing years of unprecedented growth, the economic scenario is not too bullish .Mantra of lean organization with a focus towards retaining best talents is the flavour of the season and hence performance management becomes very critical here. While in the short term, the performance assessment systems, need to be adjusted to changing circumstances and managerial priorities by changing performance indicators, ensuring continuous monitoring or adopting the milestones approach, In the longer-term, performance measurement systems and frameworks should be modified to reflect changing organisational imperatives and societal concerns .In this process ,if a shift from intangibles to tangible occurs ,there is no harm in adopting it and moving ahead with time.

Values are changing, rules have been re-written, it’s a critical time. Maybe the great Neville Cardas is not right always. “Scoreboard is an idiot” – maybe true for Victorian England’s cricket fantasy but in third world sweaty brick and mortar scenario, scores may tell untold stories. Puritan may express their doubt, but when there is a thesis, there has to be an anti- thesis and then comes synthesis. Thus the clash of two schools of thought of subjectivity and objectivity makes ways to a new way of HR Management – scorecard with a human element, i.e objective subjectivity and here lies the future.

References

1.http://www.opm.gov/perform/WPPDF/2002/HANDBOOK.PDF

2., Wayne F Cascio , Herman Aguinis , Applied Psychology in Human Resource Management,

Prentice Hall

3,4. Mark A Huselid., Brian E. Becker, The Workplace Scorecard,Managing Human Capital to

Execute strategy, Harvard Business School Press

5. The New Look of Corporate Measurement EIU and KPMG Consulting,Universities Press

6. http://hrweb.berkeley.edu/GUIDE/performance.htm

7. europarl.europa.eu/comparl/budg/events/20051205_hearing/palmer_en.doc

8,9 ,11,12. http://www.intrac.org/docs/OPS44Final.pdf

10. Irala, Lokanandha Reddy, EVA-The Right Measure of Managerial Performance?, Indian

Journal of Accounting and Finance, Apr-Sep 2005

13.Frederiksen Jens V., Westphalen Sven Age, (1998), “Human resource accounting: interests and

conflicts”, Cedefop Panorama,A discussion paper Prepared on behalf of

;CEDEFOP – European Center for the Development of Vocational Training , website:

http://www.cedefop.gr

Roslender Robin, (2004), “Accounting for intellectual capital: rethinking its theoretical

underpinnings”, Measuring Business Excellence, 8(1), 38-45

Frederiksen Jens V., Wsetphalen Seven Age (1998); “Human Resource Accounting : interest &

conflict”

ICAI, Chartered Accountancy Course Material, 2002

14.http://www.psychometrics.co.uk/adc.htm

;http://www.itpeopleindia.com/20020916/management1.shtml - Dr. EJ Sharma CEO Hurmist

15. NTPC Performance and Training Manual

16. http://etd.uovs.ac.za/cgi-bin/ETD-browse/view_etd?URN=etd-06282006-105902