UNIT III
PERFORMANCE MANAGEMENT SYSTEM
Performance management system is the systematic approach to measure the performance of employees. It is a process through which the organization aligns their mission, goals and objectives with available resources (e.g. Manpower, material etc), systems and set the priorities.
The execution administration framework is a constant procedure of characterizing and conveying the activity parts and duties, execution desires, goals and set their needs between boss (administrator) and subordinates (workers). It incorporates association, office and representative shared objective and targets which are lined up with frameworks and assets. It is the channel of providing clarity about goals and also to improve the business processes through various methods and mechanism.
The competency, skills and knowledge gaps are also identified through this process which can be improved by providing guidance, trainings, coaching and mentoring to employees or teams at different levels and designations. It optimizes the results through a roper channel and process which reduces the conflicts and grievances among teams or employees. Because each individual is clear about the expectations from his/ her role and put their efforts to meet performance standards.
This process can be applied to single department / function or to whole organization. It aims to continuously monitor and measure the performance standards against the desired goals and objectives.
1. The 360-Degree Appraisal
This method involves giving out a questionnaire with questions regarding the performance of a colleague and they need to fill it up. This feedback can be considered by the manager while evaluating the performance at the end of the quarter/year.
2. General Performance Appraisal
This method involves continuous interaction between the employee and his manager continuous setting of goals and achieving them. Whether the employee has been able to do justice the entire process or not is evaluated at the end of the year.
3. Technological/Administrative Performance Appraisal
This appraisal technique concentrates on technical more than any other aspect of performance on the job as the employees involved have specialized skills. They’re judged on the skills they possess and the activity they complete.
4. Manager Performance Appraisal
The performance of a manager should also be appraised and this includes not just his/her performance on the job but also relationship management with clients at his/her disposal. Generally, anonymous feedback forms are received which are then considered for appraisal.
5. Employee Self-Assessment
This method is very unpopular among employees as nobody can deal with rating himself or herself. The self-assessment sheet is compared with the one filled up by the manager and the differences are discussed.
6. Project Evaluation Review
This method involves performance appraisal of the team members involved at the end of every project and not at the end of every year. This helps the team and its members develop with each passing project.
7. Sales Performance Appraisal
A salesperson is evaluated on the basis of his/her sales skills and accomplishment of financial goals set previously. Goals set in case of sales should be realistic and ways of achieving them should be decided by the employee and the manager concerned.
TRANSFER
• Transfer means shifting of an employee from one job to another, one unit to another or one shift to another and may involve a new geographical location.
• Transfers have a number of objectives, such as moving employees to positions with a higher priority in terms of goals, placing employees in positions more appropriate to their interests or abilities or filing department vacancies with employees from overstaffed department.
According to Dale Yoder, “A transfer involves the shifting of an employee from one job to another without special reference to changing responsibilities or compensation.
A transfer is a lateral movement of an employee from one job to another.
CAUSES OR RATIONALE OF TRANSFERS
• Meeting Organisational Needs
• Meeting Employees Requests
• Better Utilization of Employees
• Developing Allrounders
• Manpower Adjustments
• Avoidance of Conflicts
• Punishing the Employees
• Relief to the Employees
• Tenure System
TYPES OF TRANSFERS
• Production Transfers: These transfers are resorted to when there is need of manpower in one department and there is surplus in another department.
• Remedial Transfers: In case an employee does not feel comfortable on his job, he may be transferred to some other job
• Job-Rotation Transfers: It is a common practice to train employees in different jobs with the aim of increasing their versatility and improving their chances of promotion.
• Shift Transfers: In case of industrial firms, there are normally three shifts. Usually these shifts are rotating.
• Inter-Plant Transfers: If a transfer is from one plant to another, it is known as inter-plant transfer.
PROMOTION
• A promotion is the transfer of an employee to a job that pays more money or one that enjoys some preferred status.
• Promotion is the advancement of an employee to a better job-better in terms of greater responsibilities, more prestige or status, greater skill and especially increased scale of pay or salary.
• The purpose of a promotion is to provide a position which in general is worth more to the organization than the incumbent’s present position.
PROMOTION AND UPGRADATION
• Promotion means advancement of an employee to a higher post with greater responsibilities and higher salary, better service conditions and thus higher status.
• When salary of an employee is increased without corresponding change in job status, it is called upgrading
• The job itself may be upgraded to a higher scale of pay or if there are variable scales of pay for same job according to skill required, upgrading may mean moving to a higher scale without changing the job.
• Both promotion and upgrading are devices used by management to reward employees for better performance and to increase their morale.
RATIONALE OF PROMOTION
• To recognize an individual’s performance and reward him for his work so that he may have an incentive to forge ahead. Employees will have little motivation if better jobs are reserved for outsiders.
• To promote job satisfaction among the employees and give them an opportunity for unbroken, continuous service.
• To provide opportunities for career advancement.
• To build up morale, loyalty and a sense of belonging on the part of the employees when it is brought home to them that they would be promoted if they deserve it.
• To create among employees a feeling of contentment with their present conditions and encourage them to succeed in the company.
• To reduce discontent and unrest among the employees.
• To develop a competitive spirit among the employees for promoting better performance.
MERITS OF PROMOTION
• The internal candidates having intimate knowledge of the organization can handle the new jobs easily
• It will increase the morale of the employees
• It will ensure sincere effort on the part of employees because they know that they may rise to senior positions by promotions
• The costs of training the insiders on the senior posts will be less
DEMERITS OF PROMOTION
• Better qualified outsiders may not be reached by the management. Moreover, the person promoted to a senior job may not possess the required qualities.
• The mobility of manpower is restricted. Employee turnover to a certain extent is good for the health of the organization.
• In promotion, there may be clash between factors like seniority and ability. The decisions may lead to favoritism.
• Further growth of the business is hindered by the limited talent of the insiders. The entry of fresh talent into the organization will be restricted.
MERIT AS BASIS OF PROMOTION
• Merit as the basis of promotion offers maximum inducement for improvement.
Employees know that competence is the only basis for getting promotion.
• Promotion on the basis of merit motivates the employees having potential for growth.
• Merit based promotion ensures that efficiency of the organization is maintained.
• Merit based promotion policy also attracts young and promising candidates to apply for jobs in the organization. This infuses fresh blood into the organization. Ability of the employees may be judged by written or oral examination, personal interviews and their records of performance. Thus, ability criterion ignores the value of experience.
SENIORITY AS BASIS OF PROMOTION
• Promotion will be made as a matter of course and every employee will know his place in the promotion list.
• Respect for elders is a part of cultural value system in a number of societies. Seniority as a mode of employee promotion is consistent with such cultural value system of the society.
• There will be no chance of favoritism or dispute regarding promotion. The measurement of seniority is simple as well as exact.
• It will reduce labor turnover as the employees feel secured about their promotion.
• It will increase the morale and productivity of employees. It will also promote their loyalty towards the organization.
SENIORITY CUM MERIT AS A BASIS OF PROMOTION
John Newstrom and Keith Davis in their book 'Organisational Behaviour' state "counselling is discussion with an employee of a problem that usually has emotional content in order to help the employee cope with it better."
Counselling helps to improve employee mental health and wellbeing. Good mental health means that people feel good about themselves, right about other people, and are able to meet the challenges of life.
Functions of Counselling:
The main objectives of counselling are to enable employees to develop self-confidence, understanding of self and others, self-control, and the ability to work effectively. To achieve these objectives, the counsellors perform the following functions:
1. Advice - The counsellor tries to understand the problem faced by the counselee and tells the counselee the things to be done before guiding.
2. Reassurance - giving the counselee courage and confidence to face a problem.
3. Communication - providing information and understanding of the problem.
4. Release of Emotional Tension - helping the person to feel free of frustrations and stress.
5. Clarified Thinking - encouraging the person to think of the problem in a matured manner, but refrains from telling the counselee what is right.
6. Reorientation - encouraging a change in counselee's psychic self through a change in basic goals and values. For example, the counsellor may help the counselee to recognize and accept one's limitations.
When Counselling is Required:
Employee counselling can be conducted by the employer or by an external counsellor when employees are not performing or behaving as expected. The counselling offered at the company can support and assist employees through work-related problems or personal issues that may interfere with job responsibilities.
Benefits of Counselling:
Compensation includes payments like bonuses, profit sharing, overtime pay, recognition rewards and sales commission, etc.
Compensation can also include non-monetary perks like a company-paid car, company-paid housing and stock opportunities. Compensation is a vital part of human resource management, which helps in encouraging the employees and improving organizational effectiveness.
From a manager's point of view, the compensation package offered to a company's employees is essential not only because it costs money, but because it is likely to be the primary reason the employees work for the firm.
Compensation packages with good pay and advantages can help attract and retain the best employees. A quick survey of employees about compensation is likely to expose an expectation that wages are fair and cover basic living expenses, keep up with inflation, leave some money for savings (perhaps for retirement) and leisure, increment over time.
A company's compensation scheme also informs a great deal about the firm's values and cultures. Employees often look at what a company pays rather than what it says. In many aspects, people behave as they are rewarded.
A compensation scheme projects what the company expects of its employees. For example, if quality is an essential value, then it should be implemented through some element of the total compensation system.
Components of Compensation
Compensation includes payments like bonuses, profit sharing, overtime pay, recognition rewards and sales commission, etc.
Compensation can also include non-monetary perks like a company-paid car, company-paid housing and stock opportunities. Compensation is a vital part of human resource management, which helps in encouraging the employees and improving organizational effectiveness.
From a manager's point of view, the compensation package offered to a company's employees is essential not only because it costs money, but because it is likely to be the primary reason the employees work for the firm.
Compensation packages with good pay and advantages can help attract and retain the best employees. A quick survey of employees about compensation is likely to expose an expectation that wages are fair and cover basic living expenses, keep up with inflation, leave some money for savings (perhaps for retirement) and leisure, increment over time.
A company's compensation scheme also informs a great deal about the firm's values and cultures. Employees often look at what a company pays rather than what it says. In many aspects, people behave as they are rewarded.
A compensation scheme projects what the company expects of its employees. For example, if quality is an essential value, then it should be implemented through some element of the total compensation system.
Components of Compensation
Compensation as a whole is made up of different components that work as an aid for an employee after retirement or in case of some accident or injury. Now we shall see the key elements or components that make compensation.
Wages and Salary
Wages mark hourly rates of pay, and salary marks the monthly rate of pay of an employee. It is irrelevant of the number of hours put in by an employee working in the firm. These are subject to annual increase.
Allowances
Allowances can be defined as the amount of something that is allowed, especially within a set of rules and regulations or for a specified purpose. Various allowances are paid in addition to basic pay.
Some of these allowances are as follows −
Dearness Allowance − This allowance is given to protect real income of an employee against price rise. Dearness allowance (DA) is paid as a percentage of basic pay.
House Rent Allowance − Companies who do not provide living accommodation to their employees pay house rent allowance (HRA) to employees. This allowance is calculated as a percentage of salary.
City Compensatory Allowance − This allowance is paid basically to employees in metros and other big cities where cost of living is comparatively more. City compensatory allowance (CCA) is normally a fixed amount per month, like 30 per cent of basic pay in case of government employees.
Transport Allowance/Conveyance Allowance − Some companies pay transport allowance (TA) that accommodates travel from the employee’s house to the office. A fixed amount is paid every month to cover a part of traveling expenses.
Incentives and Performance Based Pay
Incentive compensation is performance-related remuneration paid with a view to encourage employees to work hard and do better.
Both individual incentives and group incentives are applicable in most cases. Bonus, gain-sharing, commissions on sales are some examples of incentive compensation.
Fringe Benefits/Perquisites
Fringe benefits include employee benefits like medical care, hospitalization, accident relief, health and group insurance, canteen, uniform, recreation and the likes.
In recent years, a great deal of attention has been directed to the development of compensation systems that go beyond just money. We can say that all the components of compensation management play a very important role in the life of an employee.
In particular, there has been a marked increase in the use of pay-for-performance (PrP) for management and professional employees, especially for executive management and senior managers. Compensation is a primary motivation for most employees.
Employee rewards and recognition system is not just a positive action towards employees. If it is implemented effectively, it proves to be an efficient tool in encouraging the employees to create and bring business for the company.
Rewards
Recognizing the efforts of employees and encouraging their morale results in increased productivity and decreased attrition rate. It is a documented fact that an encouraged and dedicated workforce can change the fate of a company.
Establishing and executing a reward system needs careful analysis of the company policies and procedures. Deciding how to recognize employees’ efforts and what to provide them needs thorough analysis of duties and risks involved in a particular job.
Performance Linked Compensation
Performance-based compensation is an incentive-based form of compensation that can be paid to portfolio managers of investment funds. Regulated mutual funds with performance-based compensation may add approximately 0.20% to their management fees for performance-based incentives. Within the investment industry, hedge fund managers are most well known for receiving high levels of performance-based compensation.
Performance-based compensation also refers to additional compensation paid out to employees that have performed above and beyond their job requirements at an extremely high quality.
Performance-based compensation rewards an investment manager or an employee for meeting certain performance targets or for high-quality work. For investment managers, it provides incentives to make smart and risk-appropriate investment choices that result in an appreciation of invested assets. This allows them a percentage of the returns in addition to the managerial fees they charge.
For employees, performance-based compensation is a reward for their hard work and acts as an acknowledgment of their contribution to the firm as well as functioning as an incentive to stay with the company. Most employee bonuses are performance-based compensation.
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