Case Game: The Case Of Performance Evaluation

CASE GAME
The Case Of Performance Evaluation
Contd.

THE DISCUSSION

MERVYN RAPHAEL
MD, William M. Mercer

Organisations often see performance and rewards management systems as piecemeal elements. CEOs and HRD practitioners spend little time on exploring the link between strategy and people performance. The executive committee of Total should first spend time debating upon and establishing this link. Assuming that the vision and strategy blueprints have already been defined, the executive committee should first focus on defining 'super-measures' of organisational performance in the context of this vision and strategy.

Kumar and Rao would need to be careful not to fall into the trap of defining measures in financial terms alone. While they may be an appropriate starting point, financial measures are often mere post-mortem indicators. They cannot tell you where you are going except for the very short term.

A more comprehensive approach would be to use a system that includes financial measures, but also goes beyond them to consider customer, operational, and employee measures.

The next important step would be to define what are commonly termed 'measurement pyramids'. This would involve outlining how the performance measures would cascade across the structure of the organisation. And how actions of employees would actually impact these measures.

The next step would be to create an organisation-wide MIS that captures and tracks performance against these measures. Simultaneously, Total should clarify responsibilities among defined positions in the organisation. This would ensure that a robust objective-setting process actually emanates from position responsibilities and gets weighted in the context of organisational objectives.

If Total decides to continue measurement against skills or traits, these should be defined in the context of relevant behaviours. This needs significant organisational effort, in terms of defining the levels and observable behaviourial traits for each skill, and linking them to specific functions in the organisation. Rao should also ensure that all evaluators are equipped with the relevant tools and techniques. He should start developing assessment tools for promotions and job rotations where sole sources of feedback would be inadequate.

Kumar and Rao should examine the implications closely before introducing a multi-rater feedback like 360-degree appraisal. The objectives of this must be clearly defined. The crucial issue here is whether the prevailing organisational culture at Total supports such an initiative. The experience at Mercer is that this process works best with development objectives and less in the context of evaluation.

A.K. SENGUPTA
Director, SPJIMS

The purpose of an ideal performance system is two fold. First, to ensure, review and benchmark performance of an individual employee, in a given period of time, against pre-determined standards. It could be an absolute, as well as comparative, analysis between a given set of employees doing similar jobs.

Second, to reward (through incentives or otherwise) or penalise the employees depending upon their performance. It can even help in deciding whether an employee is capable of taking on greater responsibilities. This is known as potential appraisal.

However, to make the system effective, there are several pre-requisites. It should be rational, objective, and transparent. It should be communicated to the persons concerned and be acceptable at least to a reasonably large number. The performance parameters-or the key result areas-should be well-defined and measurable. The appraising and reviewing authorities need to be trained in the processes of delivery. And, finally, changes must be introduced in a phased manner so that there is an adequate de-freezing period.

These issues are more applicable to middle-level managers who are facing a severe threat of existence in the modern-day knowledge society.

It is obvious that Total has not taken the necessary pre-emptive steps before introducing a new performance appraisal scheme. Rao can amend the situation by taking the following steps:

Define the key result areas for personnel at each level, particularly middle- and senior-level executives.

Communicate and train the assessors and assesses so that they know the methodology of the system and what to expect from it.

Introduce a three-level system-self-appraisal, rating by the immediate boss, and reconfirmation by a reviewing authority. In case the reviewing authority differs in rating from that of the immediate boss, she should give specific reasons for the same.

Revise the frequency of the appraisal to at least twice a year.

Ensure that the reporting authority has a frank and open discussion with the appraisee. The arguments put forth by the appraisee should be communicated by the reporting authority along with her own comments to the reviewing authority.

Ensure that the incentive (monetary or otherwise) based on performance appraisal is objective. It should not be used as a punitive mechanism unless warranted as a last step.

Introduce counselling, as suggested by Roy, with a view to improve the performance of the appraised officer.

In my view, Total should defer the introduction of 360-degree appraisal till these mechanisms are put into place and given time to stabilise.

SATISH KHANNA
President, Lupin Lab

The performance management systems at Total cannot be generic. They must be specific to each of the four business divisions of Total. The performance measures must be in tune with each division and its business goals.

Evidently, this means that the system must be dynamic, not static. It must be reviewed at Total more periodically than has been done in the past. Kumar and his team should fine-tune the measures once in 12-15 months and review the system completely once in two years.

As there is a renewed focus on performance, now is the time to introduce a two-tier reward system-a team incentive and an individual incentive. Unleashing what is called the ''power of teams'' has an electrifying effect on managerial performance. It directs everyone to focus on business results. And the ''demonstrative'' element raises motivation levels.

The first step is to identify, in each division, all deliverers to the bottomline. Their number would vary with each division and they would come from various functions that are critical to the success of the division. A commodity buyer in the Soaps Division, for instance, or someone handling supply chain in a logistics-driven business like consumer durables.

It is noteworthy that support functions like hr, finance, and administration, whose performance, however high, impacts only peripherally on business results of the division, are automatically excluded. So would be the business heads of each division.

You would thus get a pool of about 15-20 deliverers in each division in the middle-management group. Their incentives should be linked to pre-determined, but variable, measures like turnover, margins, and cost savings. A fixed percentage of that measure should be distributed uniformly to members of this elite corps.

The incentive amount should have no bearing on the individual's salary grade. The amount may be paid once per quarter. A major advantage of a team incentive is that it is open and transparent. Everyone will know his or her incentive entitlement well before receiving the cheque.

The difference between team incentive and individual incentive is akin to the difference between one day cricket and test cricket. The focus in one-day cricket is on winning. Speed, stamina, innovation matter a lot. Team spirit is crucial. A major fallout of team incentives is that it enhances connectivity among islands of excellence within the company.