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It’s that time of the year again! When the industry buzzword is “Appraisal” ….. at least for a few months.

For employees – commences the race to getting to the highest bonus bracket.

For managers, supervisors – dealing with the stress of negotiations, confrontations and potentially unwarranted employee pride

For HR – is the true test of their Performance Management strategy

In my view as HR, if the HR strategy is successful, the employee race is meaningful and the managers stress situations are minimal.

So how do we measure the success of the Performance Management / Appraisal strategy? This has been an area of debate for organizations and HR.

Performance Management Systems today have moved from being a mere pay-for-performance tool to a multi-purpose tool that not only maps the career path of an employee within the organization but also determine the mental health (morale) of the employee. Sunil Goel, MD of HR firm GlobalHunt India said that in the current scenario wherein talent poaching is on high stream the appraisal has become one of the tools to retain the top performers in the organization. This leads to the premise that the right Performance Management System is key to the Employee Engagement levels within the organization which has a domino effect on the retention of employees, productivity of both employees and the organization.

Based on the above premise, Performance Management Systems have seen a whirlpool of changes from its inception as a mere tool of income justification. Companies in India have started to depart from the traditional method of evaluating performance as a “top to down appraisal” normally carried out by the superior  to contemporary methods in compliance with the significant change in organization’s structure, processes and culture.

Performance Management Systems in various sectors

A study conducted by Rani, L., Kumar, N., & Kumar, S. (2014) for private banks in Rohtak City, India, has indicated that most banks in this province have started to use 360 degree appraisal to evaluate their employees.

According to the studies carried out by Sanyal, M. K., & Biswas, S. B. (2014) for IT field in West Bengal, India, the use of modern Performance Management Systems such as 360 degree and Management by Objective (MBO) which plays a vital role for the HRD activities.

India is the world’s largest sourcing destination for the IT industry, accounting for approximately 52% of US $ 124-130 billion market. A study of performance management systems used by the top 10 IT companies (based on revenue-2014) which includes – TCS, Infosys, Wipro, Tech Mahindra, HCL Technologies, Mphasis, Oracle Financial Services, Mindtree, Polaris Technology and Rolta India sequentially shows that coincidentally these companies use either 360 degree feedback or Balanced Score Card a.k.a the Bell Curve Method.

Both methods have its own loopholes, though these methods are being used by top IT companies. The satisfaction level of employees towards these appraisal methods are very low (source: discussions in the HR forums like citeHR.com) and there is a need of a new appraisal method which prevents these errors and has the advantages of these methods. Until the time that happens it is the era of 360 degree feedback or Balanced Score Card.

A Closer look at the Popular Performance Management Systems

From my own experience and seconded by my conversations with HR leaders directly involved in the performance appraisal process, the much popular Bell Curve is loved for its transparency in identifying top performers (no ambiguity there), identifying the suitability of employees within their roles, keeping managers in check and enabling the L&D department within companies manage the development expectations of the employees and the organizations. The flipside of this being, the Bell Curve can be much too rigid leading to loss in employee morale and is definitely a taboo in small companies.

Performance Management Systems today are moving to be a well-rounded employee centric system. Systems focusing on short-term performance processes and an agile feedback loop are the trend of the  day. According to a survey by CEB research, 49% of HR leaders have eliminated or are considering eliminating ratings with feedback becoming the core of performance management. In the process, there is a paradigm shift towards a people-development model along-side integration of people goals with organization goals.

An article in TOI Tech reveals some of the IT giants who have ditched the traditional Bell Curve system. Tata Consultancy, India’s largest IT services company, is the latest to abandon bell curve based performance appraisal and is moving to a system of continuous feedback. TCS is looking at building more digital, collaborative tools to ensure that the continuous feedback process is easy to maintain. The company aims to get a holistic view of performance and potential. Joining the bandwagon are other biggies – Infosys, Wipro, CISCO, IBM, Microsoft and HCL Technologies.

It is not just IT/ITeS firms which are seeing a change. Axis Bank, the country’s third-largest private sector lender, has decided to follow a new method of assessment called “Acelerate” and will not follow the old system from this financial year onwards (An article in Business Standard confirms). Rajesh K Dahiya, group executive, Axis Bank told Business Standard earlier that Axis Bank has changed the entire performance management system to look at capability that is built and what it would deliver to the organization. According to the new system, the focus would be more on learning and development and using it  as a tool to measure performance. Deloitte, has eliminated annual ratings and reduced performance conversations to an employee-manager feedback ‘check-in’ on a weekly basis.

While these organizations have been early adopters of the of this real-time system, the shift in my opinion will be gradual.

 So this brings me back to the million dollar question for us HR folk – Does my Performance Management System influence the Employee Engagement in my Company?

While the answer to this question – Only time will tell! I believe, that your Performance Management System will not automatically bring you employee engagement or productivity benefits. For this to happen, we must surround the system with the right messaging.

Here’s a few questions I would ask myself –

  • Does my Performance appraisal method mentally stimulate my employees?
  • Does my Performance appraisal method invoke and build trust and communication between my managers and my employees?
  • Does my Performance appraisal method provide my employee with insight on how their own work contributes to the overall company performance?
  • Does my Performance appraisal method provide my employees with the right learning curve and visibility to his/her career path?

While this may not lead us to a 100% ideal Performance Management System, but I believe in the present industry scenario it will ensure that we arrive at a reasonably holistic approach towards a better engaged workforce.

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