Managing People & Performance in Organizations (MPPO)

Session 14 - Performance Management

Debolina Dutta |Gopal Mahapatra| Neha Bellamkonda | Surendra Babu Talluri

Recap
Performance Management

Strategy deployment requires planning, review, and evaluation.

Organizational strategies get translated as goals – organizational,

department/unit level, Team level and Individual level

This process of cascading goals ensures that organizational strategies

get embedded in individual jobs

It is this process, that refers to Performance Management.

 Performance Management and Performance Appraisal

• Performance Management:
– Dynamic, continuous process.
– Tracking strategy implementation of the organization
– Improves organizational effectiveness.
– Aligns Strategic goals with team and individual goals

• Performance Appraisal
– At the individual level
– Evaluating performance based on goals
– Provides developmental feedback
– Is tied to rewards and recognition
Components of Performance Management
PMS Process
PMS Methods (Traditional)
PMS Methods (Modern)
PMS Methods (Modern)
 1. performance planning
• how does individual contribute to ‘big picture’
• meaning of KRA, criteria / metrics, targets & objectives
• set SMART objectives aligned to business plan
• review competencies and agree pdp

4. development dialogues 2. managing / assessing performance

• assessing performance against objectives
• identifying T & D needs through • role of self / peer / internal customers / suppliers /
development dialogues Individual & team
• focus is on potential & future needs • recognise good performance
• career & succession planning • identify issues early
• finalizing pdp • update objectives as required

3. performance review, counseling

• focus is on performance
• transparency of rating
• involvement of Supervisor
• evaluation of context
• focus on improvement
• strengthening relationship / emotional involvement in
growth
• review pdp

Source : TV Rao Performance Appraisal & Performance 2000

Rain Barell Case: Let us discuss

What can we say

What actions did
about Rain Barrell as
Hiram undertake?
an organization?

What are Hiram’s What are Hiram’s

Intended Unintended
consequences? consequences?
Introduction
• Hiram Phillips, CFO and chief administrative officer of Rainbarrel Products, a diversified consumer-
durables manufacturer, has meeting with Sally Hamilton and Frank Ormondy from Felding &
Company

• He was heading into a breakfast meeting that would bring the statistics that would demonstrate the
positive results of the performance management system he’d put in place a year ago

• Nothing but Good news.

Fat and Happy
• He would start at the beginning—or, anyway, his own beginning at Rainbarrel Products a year ago.

• Keith Randall, CEO of Rainbarrel, was known for being an inspiring leader who focused on innovation.

• “Fat and happy” was how Hiram characterized Rainbarrel in a conversation with the headhunter who
had recruited him.

• Here was a company that had the potential for greatness but that was held back by a lack of discipline.

• The only thing Rainbarrel was missing was what someone like Hiram Phillips could bring to the
table.

• And now, a year later, he was ready to declare a turnaround.

Lean and Mean
• It was an impressive achievement: a reduction in labor costs

• He came up with the idea of identifying the bottom quartile of performers throughout the
company and offering them fairly generous buyout packages.

• But when that hadn’t attracted enough takers, he imposed an across-the-board headcount
reduction of 10% on all the units.

• Hiram had also created a new policy in which the commission reflected the actual purchase price.
Cause for Concern
• In the elevator, Hiram recognized two young women from Rainbarrel

• One was grimacing melodramatically as she turned to her friend. “I’m so dreading
getting to my desk,” she said.

• “Right when I was leaving last night, an e-mail showed up from the buyer at Sullivan. I
just know it’s going to be some big, hairy problem to sort out. I couldn’t bring myself to
open it, with the day I’d had. But I’m going to be sweating it today trying to respond by
five o’clock. I can’t rack up anymore late responses, or my bonus is seriously history.”

• Her friend had slung her backpack onto the floor and was rooting through it, barely
listening. But she glanced up to set her friend straight in the most casual way.

• “No, see, all they check is whether you responded to an e-mail within 24 hours of
opening it. So that’s the key. Just don’t open it. You know, till you’ve got time to deal with
it.”
More Cause for Concern
• Findings of the “People Survey” - Lew Hart

• Current and retired employees were complaining about being treated poorly by sales personnel

• There was a lot of residual unhappiness about the layoffs, and not simply because those who
remained had more work to do.

• Some people had noted that, because the reduction was based on headcount, not costs, managers
had tended to fire low-level people, crippling the company without saving much money.
More Cause for Concern
• And then there was a chorus of complaints from the sales organization.
– “No role models.”
– “No mentoring.”
– “No chance to pick the veterans’ brains.”
– “No knowledge sharing about accounts.”

• More than ever, salespeople were dissatisfied with their territories and clamoring for the more
affluent, high-volume districts
The Ugly Truth
• The “QMI” - engaging a few valued customers in a conference call, to collect raw data on customer service
concerns and ideas.

• Shipping department issue - It takes forever to get the stock replenished

• One of the buyer stated, “I can’t figure out how you fellas define ‘shipped.’ We were told last Tuesday
an order had been shipped, and come to find out, the stuff was sitting on a railroad siding across the
street from your plant.”

• “That’s an important order for us,” another voice piped up. “I sent an e-mail to try to sort it out, but I
haven’t heard back about it.”

• Hiram winced, recalling the conversation in the lobby that morning.

The Ugly Truth
• The call didn’t end there—a few more short-comings were discussed.

• Then Keith Randall, to his credit, pulled the conversation onto more positive ground by
reaffirming the great regard Rainbarrel had for Brenton Brothers and the mutual value of that
enduring relationship

• Promises were made and hearty thanks extended for the frank feedback.

• Meanwhile, Hiram felt the eyes of his colleagues on him.

Dazed and Confused
• The climate was suddenly bad for the news Hiram had looked forward to sharing. But he knew
that delaying the discussion would be weak and wrong.

• After all, he had plenty of evidence to show he was on the right track.

• The problems the group had just been hearing about were side effects, but surely, they didn’t
outweigh the cure.

• Perhaps he should reframe his opening comments in light of the employee and customer
feedback.
Dazed and Confused
• As he considered how he might do so, Keith Randall appeared at his side.

• “Looks like we have our work cut out for us, eh Hiram?” he said quietly—and charitably enough.
“Some of those metrics taking hold, um, a little too strongly?”

• Hiram started to object but saw the seriousness in his boss’s eyes.

• He lifted the stack of reports Felding & Company had prepared for him and turned to the
conference table.

• “Well, I guess that’s something for the group to talk about.”

What can we say about Rain Barrell as an organization?

• Healthy and successful company

– Two quarters of not so good performance (industry wide phenomenon)

– Struggling to adjust compared to competitors
– Randall : an inspiring leader focused on innovation
– Mission : Customer service as a value
– Organizational culture: idea driven, collegial, community oriented (sales to
former employees)
– Organization became lax… needed some focus on tightening its belt (budget
integrity low, ideas received funding, lacks discipline) “Fat and Happy” (potential
for greatness, Ferrari engine that needed an expert mechanic)
What actions did Hiram undertake?

Reduction in labor cost

• exiting poor performers through severance packages

• Forcible headcount reduction of 10% across the board
with no financial assistance

Higher productivity in call centre

• New targets
• Monitoring and peer pressure
• “Wall of Shame”
What actions did Hiram undertake?
Increase in on time shipments

• Lack of clarity on what “on time” and “shipped meant” within the
organization
• Using an objective measure –shipped is leaving the company
property; on time is promise made

Commission on sales to employees

• Current and retired employees to buy products at discount

• Sales people earned commission on full price (straightforward rules
and simple reward system: reduced it to actual price)
• Earlier a complex system consisting of sales, mentoring, prospecting
new clients and keeping the account information current were used.
All of this was subjective.
Hiram’s Intended consequences
Reduce cost

Increase productivity

Make all performance metrics objective

Keep it simple

Focus is on money
Unintended consequences
Negativity in R&D department

Bean counting rather than creativity – filing patents but commercialization

Breakthrough product but no budget

Complaints from current and retired employees –shabby treatment while placing orders

Managers fired low level people and protected at higher levels.

Sales people dissatisfied with the territories and no mentoring

Shipping not done and employees avoiding responding to customers

Morale decline
What are the other aspects that we need to look at?

No common and
No coordination
CEO oversight and shared
between the senior
governance weak understanding of
management team
what is performance

No Communication of
interdependencies goals, expectations
Role of consultants?
across the actions of the metrics
taken by Hiram changes?
What should Rainbarrel do now?
Immediate Immediate damage control by identifying high performing leaders to drive
damage control the appropriate performance culture.

Management team needs to define clearly the strategic goals for the
Strategic goals organization that align with its culture – both short term and long term

what do we want employees to do differently to support the business?

Questions to ask Why aren’t they already doing it?

Seek inputs Seek inputs from employees on ways to reach the goals.
What should Rainbarrel do now?
Communicate Communicate the expectations of the organization at different levels

Align and cascade Align and cascade goal across levels

Free up Free up budgets with some discretion to managers.

Hold Hold managers accountable for the goals. Provide support and assistance to do the same.

Go Go beyond pay for performance and look at recognition like praise, appreciation
LOOKING AT PERFORMANCE MANAGEMENT
Theoretical lenses that influence Performance
and rewards
Goal Setting Theory

• Goal Commitment – Can

achieve it and want to
achieve it
• Prevention vs. promotion
focus
• Implications –
Management by Objectives
Other theories

• Equity theory

• Justice theories
FEEDBACK AS CRUCIAL TO EFFECTIVE
PERFORMANCE
Feedback
• Be specific
• Ask for information
• State what you have observed
• Explain the impact
• Pause and ask for reaction
• Suggest concrete steps
• Focus on performance, not personality
• Don’t sandwich the message
DDI International
Reward systems and performance management
Compensation

Recognition
Motivating Work
environment
Employees

Career
development
Reflect on the different elements of compensation that your organization
provided or what the company presentations mentioned during summer
placement
Different reward mechanisms

Franco‐Santos, M., & Gomez‐Mejia, L. (2015)

 Extrinsic Rewards
Fixed Pay
• Base pay
Compensation Variable pay
• Contingent on individual/team performance
• Incentives/bonuses

• Retain employees
Benefits (non-cash • Promote physical and mental health
services) • Well being (Workplace flexibility, leaves, caring for dependents)
• Paid leaves
Promotions • Advancement in terms of rank/position which leads to higher compensation,
greater autonomy, work enrichment
Learning and
• Formal/informal trainings
development
• Increase sense of competence, self-efficacy

Recognition • Cash or non-cash awards, gift cards, trips, prizes

Workplace environment • Safe and comfortable environment

& working conditions • Eliminate safety hazards
Total reward systems
Intrinsic Rewards

Sense of meaningfulness • Positively valued experiences

• Purpose and significance of work

Sense of choice • Level of autonomy/discretion

Sense of growth
• Feeling of achievement/enhancement of skills

Sense of community
• Positive feeling of belongingness
Make rewards work
Define, measure and then reward

Use rewards that are available

All employees are eligible

Make rewards visible

Make rewards contingent

Make rewards timely

Use non-financial rewards

Developing an effective R & R system

1. Effective rewards and recognition practices need to reflect a company’s culture (basic values
& beliefs)

2. Align with the nature of its business, strategy and goals.

3. Absence of fairness significantly hurts employee perception and efficacy of R&R practices.
Absence of fairness is evident by factors like

✓ Insufficient external parity

✓ Inadequate internal equity

✓ Lack of impartiality in assessment

✓ Lack of clarity of desired actions & results which will be rewarded

✓ Inadequate transparency on how and why some employees get rewarded.

Developing an effective R & R system

4. Recognition practices (which are essentially non-monetary) represent great unutilized

potential, as recognition:

✓ can be given both publicly and privately

✓ does not require big budget

✓ Include senior leaders, but also by peers and juniors

✓ can be more proximate to the actions and results, and hence strongly reinforcing

✓ can be done frequently

5. Empowering and encouraging people managers and peers to provide recognition makes
recognition practices more effective.
This Photo by Unknown Author is licensed under CC BY-NC-ND