Role of Human Resource in Performance Management

Performance Management is an ongoing communication process , undertaken in partnership, between an employee and his or her immediate supervisor that involves establishing clear expectations regarding job functions, organizational goals, performance feedback, performance measurement, barrier removal and continuous improvement. Today companies focus on creating objectives of the organization and aligning the same with individual objectives, development of necessary & sufficient skills in the employees to perform better and rewarding them for the desired performance with monetary and non-monetary benefits. All these practices go a long way in increasing employee morale and overall productivity. Motivated, productive employees are an integral part of any company in the present competitive market. A performance appraisal system facilitates optimization of employee performance and also helps in identifying areas for development. It is also useful for taking administrative decisions relating to payment of incentives, promotions etc. The performance appraisal system should provide for recognition of employee performance in the face of adverse external influences, if any. For example, the performance appraisal of a sales person should take into account the effects of a slump in the market or high inflation rate. The roles of HR in terms of objectives of Performance Appraisal are as follows: Sr No. 1 Objective Setting targets and goals as performance standards Remarks Performance standards and specific goals are set at the beginning of the appraisal period. These targets motivate the employee to perform better. The evaluation of employee performance helps understand the strength and weaknesses of the employee. This evaluation also helps to determine the achievement of pre-set goals and targets. An employees areas of weakness are also the areas for improvement or development. These are the shortcomings in the individuals performance, which need to be improved upon. Rewarding a good performer and punishing a bad one encourages employee to perform better. As has been stated in the reinforcement theory, behavior is a function of its

Evaluating employee performance

Identifying training and development needs.

Rewarding performance

Improving performance

consequences. Once the strength and weaknesses are identified , the employee can be encouraged to overcome his weaknesses and leverage his strength to optimum his performance.

THE APPRAISAL PROCESS The first step in the appraisal process is the determination of standards of performance based on the organization objectives and the job descriptions. The performance standards and objectives have to be determined by the employee and the supervisor together. These have to be communicated to the employee in a simple and lucid manner. The goals and standards should be specific and quantifiable. The next step in the process of appraisal is the measurement of employee performance against the pre-determined goals and standards. This determines what components of the performance are to be measured. At this stage, the process of measurement , namely, how the performance components are to be measured , has to be determined. The next step is the actual process of measurement. Performance appraisal has to be a continuous process and the feedback should be given to the employee at regular intervals. Making a note of the critical incidents, either positive or negative, helps the manager keep a track of the employee performance. Feedback has to be given once in 2-3 months, depending on the need to do so, which would help the employee in meeting the objectives. Jindal Iron & Steel Company for example, has quarterly reviews based on the goals, the skills employed and the potential of the employee. This helps the employees track their performance and grooms them for higher responsibilities. The reviews could also me on monthly basis. The next step is a very critical step and involves communicating the results of appraisal to the employee concerned. It is the responsibility of the manager to make the employee feel comfortable with the whole process. Continuous feedback and orientation would ensure a simple final appraisal discussion, with a very few differences of opinion. Once the appraisal is finalized after discussing it with the employee, it has to be put to effective use. Though most organizations link it to the rewards system, some prefer to restrict it to the development of employees. Whatever might be the organization policy, the document of appraisal has to be effectively and immediately put to use to ensure a better performance during the next appraisal period.

The ideal way to ensure maximum utility of performance appraisal is to link the performance standards to rewards system and the competency standards to training and development. The gaps in the competency level can be identified and necessary training be imparted to the employee.

Some examples of best practices in Employee Performance Appraisal Hughes Escorts Hughes Escorts, the subsidiary of the US-headquartered telecom company Hughes, uses a competency-based performance-enhancement model. Each position in the organization is defined in terms of 23 key competencies, categorized into four groups: attitude based, knowledge-driven, skill-centered and value based. The company uses these competencies to measure shortfalls and provide relevant training inputs. This is done to both maximize productivity and make employees aware of their professional standing. National Panasonic This Japanese white-goods major has developed a performance-assessment system driven by Key Result Areas (KRAs). KRAs describe performance goals business, functional and behavioral with defined time frames and are decided jointly by the employee and his or her manager at the beginning of the year. It is a structured exercise using a written format. These KRAs are then used to map the employees progress and based on the results, the company decides to plug performance gaps with the help of relevant training inputs. National Panasonic puts a great deal of emphasis on this process for reskilling its employees as it believes in developing its employees instead of opting for expensive lateral recruits. Assuring and maintaining the confidentiality of the appraisal is a major responsibility of the HR function. An employee who has received an unfavorable appraisal would not like the details to be made public. In contrast, any appreciation of employee performance has to be in public in the form of rewards, special incentives etc. Therefore the HR department has a major role to play in the successful implementation of a performance appraisal system.

Performance Linked Reward System

Employees are motivated by both intrinsic and extrinsic rewards. To be effective, the reward system must recognize both sources of motivation. All reward systems are based on the assumptions of attracting, retaining and motivating people. Financial rewards are an important component of the reward system, but there are other factors that motivate employees and influence the level of performance. In fact, several studies have found that among employees surveyed, money was not the most important motivator, and in some instances managers have found money to have a demotivating or negative effect on employees. Organizations adopt alternative reward systems to increase domestic and international competition. The competitive reasons for the growing emphasis on performance-based compensation are companies cutting costs, restructuring, and boosting performance. To ensure the reward system is effective and motivates the desired behaviors, it is essential to consider carefully the rewards and strategies utilized and ensure the rewards are linked to or based on performance. To be effective, any performance measurement system must be tied to compensation or some sort of reward. Rewarding performance should be an ongoing managerial activity, not just an annual pay-linked ritual. Strategies for rewarding employees performance and contributions include both nonfinancial and financial mechanisms. Some of the primary ones are discussed below. The list is not exhaustive, and individual units/departments may identify additional mechanisms that are appropriate for and support their culture and goals. Praise/recognition from supervisors - Praise and recognition from supervisors is consistently found to be among the most important motivators. Employees want to be recognized and feel their contributions are noticed and valued. It is important that supervisors recognize the value and importance of sincerely thanking employees verbally and/or in writing for their specific contributions. Challenging work assignments - Challenging/new work assignments are another mechanism available to supervisors to reward good performance. Such assignments can provide employees opportunities to develop new skills, expand their knowledge, and/or increase their visibility within the organization. They also send an important message that employees contributions are recognized and valued. In considering such assignments, supervisors should consult employees about the types of assignments that would be most valued, and they should also assess whether workloads will need to be redistributed to ensure employees have adequate time to devote to new tasks. Professional growth and development opportunities- Supervisors may provide employees opportunities to participate in educational programs or other

activities that will expand their skills/knowledge. Employees benefit by developing new skills, and the institution benefits from the additional expertise individuals bring to the job. Nelson notes a recent survey found that 87% of responding workers viewed special training as a positive incentive, and it appeared most meaningful to employees with postgraduate education. Paid Leave - Supervisors may award employees up to 32 hours of paid leave annually in recognition of meritorious performance). Progression through the salary range - Employees may receive salary increases to recognize the attainment of new and/or the enhancement of existing skills/competencies or for assuming increased responsibilities within the scope of the current position. The salary increase represents a progression through the salary range approved for the position

Merit increases - allows supervisors to give employees an annual merit increase to recognize consistently meritorious performance or successful completion of a project that had a significant impact on a department or the university. The reward may be in any amount up to 5% of the employee's current base salary, subject to the availability of funds. Budgetary information regarding fiscal year merit increases are issued annually as part of the budget process as soon as the institution's fiscal position can be determined. To be eligible for a merit increase, employees must have been employed for at least six continuous months and at least six months must have elapsed since the employee's last salary increase, promotion, salary increase due to progression in the salary range, demotion or transfer from another department. Lump Sum Merit A lump sum merit is a one-time award, not added to base pay, that can be awarded to an individual for meritorious job performance. Meritorious job performance is defined as either consistently high level of job performance over a sustained period of time; or successful completion of an assigned project that had a significant positive impact on the department or the university.

An employee cannot be guaranteed in advance a payment of a lump sum merit for achieving performance targets. A lump sum merit award is not considered compensation for purposes of the overtime calculation for FLSA non-exempt employees. A lump sum merit award is considered compensation for purposes of inclusion and contributions for Teachers Retirement System (TRS) or Optional Retirement Program (ORP) per HB1545, Section 51.962 as amended. Lump sum merit awards are included in the Tax Sheltered Annuity (TSA) calculation. A lump sum merit may be paid from any fund source. Payment from a grant fund will be up to each individual granting agency.

An important part of base pay management is the maintenance/monitoring of an employee's base pay salary and progression through the salary range. HR strongly encourages managers to award the regular merit increase as an additive to base pay if the employee's current pay is below salary range midpoint and the permanent funding is available.

HR can play a significant role in performance linked reward system by ensuring followings: 1. Develop Clear expectation: Before developing effective performance based rewards the HR Manager along with line managers describes what exactly they expects from the employees and convert those expectation through clearly defined goals, because overall organizational goals may not apply to all employees. 2. Create a clear line of sight: A line of sight should be maintained between rewards and actions. Employee must be communicated that their direct effects efforts will impact the results that management wants. Employees should not hold responsible for something which they cannot directly affect. 3. Set achievable goals: The employee's or group's goals should be within the reach of the performers. The performance based rewards must be tied to either individual or group that has reasonable chance of being achieved. 4. Establish credible system of measurement: The program should operate according to its principles and purpose. The performance measurement system should be credible such that the participant (employees) must have faith in the fairness of the measurement system. The measurement system should be fair & objective; it should be understood and agreed upon by both management and the participants. 5. Empower Employees: Management should ensure that the entire system should be geared to maximum productivity, communication & co-operation so that employees should be trained in the skills that are necessary to achieve their job related goals, they should be provided with necessary information to take intelligent job related decisions, employees should be empowered to make decision on their own. 6. Make rewards meaningful: The achievements rewarded should provide an important return on investment to both the performer and the organization. For incentives to be effective, the actual reward must be significant that it should be motivational enough to produce desired behaviors. 7.Make incentives/reward payouts immediate: For the connection between the performance and reward to be truly motivational, management should strive for a much shorter time frame for incentive payouts whenever possible.

Performance Review:
Formal performance reviews are a crucial part of the ongoing dialogue between managers and their employees. The objectives of the review conversation are to make sure that the employee and manager share a clear definition of the job, an understanding of performance expectations for the position, and an assessment of the employee's performance. Performance evaluation is a necessary and beneficial process, which provides annual feedback to staff members about job effectiveness and career guidance. The performance review is intended to be a fair and balanced assessment of an employees performance.

Tips for Successful Performance Reviews:

Frequent Conversations Prepare Managers and Employees for the Annual Review Midyear conversations present opportunities to assess progress toward goals and to make midyear corrections. Learn more about preparing and conducting the review conversation. Keep Job/Position Descriptions Up-to-Date Job/position descriptions should be reviewed annually to reflect the frequent change in responsibilities and duties in MIT's positions. Document the Conversations A written performance review form or memo is important because it documents a shared understanding of past performance and provides a record of expectations for the work going forward. Create a Reciprocal Process Frequent conversations about performance create a reciprocal process and an atmosphere of shared responsibility for the work. Managers and employees who do meet regularly to discuss performance goals report that the annual review conversation becomes a summarya low-stress "non-event" that is just part of an ongoing cycle. Start with a Self-Appraisal Individual managers can also ensure that every employee receives an annual review and that the review process is based on a self-appraisal form completed by the employee.

Consider Multi-rater Feedback Finally, a richer view of the employee's contributions can often be gained by including feedback from colleagues and customers. Get more information on creating an informal multi-rater review. Differentiating Pay Studies show that one of the most effective ways to retain top performers is to reward them based on job performance. One way managers can do this most effectively is by carefully distributing their merit pool. We encourage managers to differentiate merit increase amounts to recognize each employee's performance, contributions, and past year's achievements. Individuals who demonstrate superior performance should be recognized with review increases at or above the established merit allocation amounts, even though lesser amounts will then be available for individuals who demonstrate average performance. In addition, we recommend that managers engage in open communication with staff regarding the specific merit allocation so that employees understand their level of performance as it compares to the merit range established.

HR Managers role in Performance Evaluation:

Performance evaluation has several components: orientation, training and development, feedback and annual appraisal. Managers involved in the performance evaluation process assume responsibility for all of the evaluation's steps from beginning to end, starting from the employees first day on the job until the annual performance appraisal. Orientation Managers should provide each new employee with a copy of his specific job description. Ideally, candidates get a copy of their job description during the recruitment and selection process. A managers primary role is to provide new employees as well as seasoned employees with the tools necessary to perform their job functions. This sets the stage for ongoing performance evaluation. Managers also are responsible for workforce planning as it relates to performance evaluation -- workforce planning matches the right job assignments and tasks with employee skills, qualifications and interests. Training Performance evaluation includes employee training and development, which are within the purview of a management role. Although managers may use the talent of experienced, long-term employees to assist with skills training, the ultimate responsibility for training rests on the shoulders of the department manager. In addition to developing the skills and capabilities of their employees, managers identify

employees who have high potential. Such employees are distinguishable from high performing employees. Managers use their own skills and talent to select employees who demonstrate aptitude and promise. Feedback Managers are responsible for providing employees with constructive feedback on a regular basis. Throughout the evaluation period, managers give their employees ongoing support, feedback and counseling on performance issues and disciplinary and corrective action. When employee performance suffers, managers are the first ones to observe the decline. Its their responsibility to address performance issues and determine whether an employee needs skills training or corrective action to return her to an acceptable performance level. Appraisal The culminating event in performance evaluation is the actual performance appraisal. Managers complete leadership training that enables them to understand the importance of performance management and evaluation, as well as how to prepare for and conduct an annual performance appraisal. Preparing for an appraisal requires that managers know how to rate employees; their duty is to rate employees according to the companys expectations and its performance standards. Therefore, a managers role includes observation and assessment. Its up to the manager to conduct an appraisal meeting that employees look forward to and one that encourages employees to achieve their goals year after year.