Performance management in India

Presented By: Group-4

Chirag Babariya (08)
Nisarg Patel (24)
Ruben Krishnatrayya (29)
Rutvik Patel (30)
Yash Vaja (44)
Jay Jaglaganeshwala (46)
Performance management
• Performance management is the
process of creating a work
environment or setting in which
people are enabled to perform to
the best of their abilities.
• Performance management is a
whole work system that begins
when a job is defined as needed. It
ends when an employee leaves your
organization.
 Advances in the workplace and networking
technology

Reason for Multigenerational workforce

Performance
management
Optimistic Indian Economy
in India
Burgeoning young workforce
Report outline
• This study draws its finding and analysis
primarily from the performance
management Trend Survey, conducted
by Pwc India in 2015.
• They asked a wide range of questions in
order to explore the various facets of
organizational performance
management, ranging from purpose of
the current system to what to what
organizations are looking at changing
about their current as well as future
approach.
Percentage break-up of survey respondents
by industry
Consumer

Finance and Insurance

4%
4%
18%
Hospital

18% Pharmaceutical

E-commerce
50 respondents Construction
20%
IT/ITeS
16%
Manufactuting
4%
4% 8% Oil and Gas
4%
Other
 • What is the primary purpose of your organization’s current performance management system?
• How effective has your organization’s current performance management system been achieving its identified
Objective and purpose?
effectiveness

• What issues prevent your current performance management system from achieving its intended purpose(s)-
people-related and process-related impediments or systemic ones?
Impediments

• What is nature of the rating process followed in your organization?

• What is the perceived effect of linking rewards to performance evaluation outcomes?
Structural
aspects

• In the recent past, have you made any major changes to your performance management system, or are you
planning to make any changes in the near future?
Approach to • What are the parameters which have changed or are changing in your performance management system?
change
An overview of performance management
system in India

93% 12% 52% 16%

Indicate that Believe that their Have made or Have done away
supporting the PMS is highly are planning to with all forms of
business objectives effective in make changes individual rating as
is the primary achieving their to their current part of their PMS
purpose of the objective PMS in the near
PMS future
1. Objective and effectiveness
• The system in place were found be more effective in driving objective
such as ‘promoting creativity among employees’ rather than more
oft-cited objective such as ‘supporting delivery of business objectives’
or ‘supporting development and career progression decision’.
• It is interesting that while there is considerable use of performance
system in the recognition of individual contribution, they are not as
frequently utilized in the recognition of team contribution.
• With collaborating being the cornerstone of workplaces today, it is
worth exploring why organizations are not reflecting this reality by
giving weightage to team contribution in performance evaluation.
 Objectives and effectiveness of PMS
100%
93%
90%

80%
Percentage of respondents

70%

60% 57%
55%

50%

40% 38%

30%

19%
20%
14%

10% 7%
5%

0%
Support the Support Recognise Identify and Reinforce specific Help with the Promote creativity Recognise team
delivery of business development or individual manage weak and values and engagement and and initiative contribution
objectives career progression contribution strong performers behaviour motivation of the among employees
decision workforce
Cont.…
• Current systems are focused on shareholders and how employees
have delivered returns to them (usually in financial or numeric terms).
• Employees themselves are lesser stakeholders in the entire process,
as compared to when these systems were first implemented.
• Today, employees are key stakeholders of the business, and
organizations need to take cognisance of this to ensure that
performance management approaches are geared towards employee
development and welfare as well.
Industry lens:
• It was found that while objectives have a strong linkage to immediate outcomes (revenues and targets),
PM does not seem to be geared towards affecting potentially long-term outcomes which can be driven
by focusing on objectives such as ‘reinforcing specific values and behaviors’.
• Perceived effectiveness of PMS by industry (on a scale of 1-4):

Manufacturing: Consumer: Finance and IT/ITeS:

3.09/4 3.33/4 insurance:
3.5/4
3.13/4

Organizational size lens:

• When we looked at this data through the lens of organization size, we found that the importance of
measuring individual contribution is much higher in smaller organization and decrease with size.
• Perceived effectiveness of PMS by size (on a scale of 1-4):

Less than 1000 Between 1K- Between 10K- More than 50k
employees: 10K employees: 50K employees: employees:
3.43/4 3.07/4 2.99/4 3.13/4
2. Impediments
• With regards to the factors that impede the effectiveness of PMS, the
survey revealed that the structural elements of the system ( process-
related impediments, which are 30% on an average) do not seem to
create as many roadblocks as people-related elements ( managers
and employees, 49% each on an average)
• PM can be broken down into two clear elements: behavior and
outcomes.
• Current system tend to promote an objective-setting process that is
outcomes driven, rigorous, and relies on technical data to a great
degree, sometimes even at the cost of ignoring behavioral and others
subjective markers.
Cont.…
• Pwc found multiple evidence indicating the difficulty that organization
currently face in effectively conducting evaluation concurrently.
• To overcome the same, many organizations are today maintaining two
separate processes: one to evaluate individual on behavioral
elements and another one quantifiable metrics, and both are taken
into account while taking critical talent decision.
• Organizations that are implementing purely structural changes to
their PMS may be attempting to solve a people problem with process
solution.
Industry lens:
Degree of perceived impact of a particular factor (on a scale of 1-10, where 10 means the factor is an extreme
impediments):

Impact Manufacturing Consumer Finance and IT/ITeS

insurance
Manager related 5.3 3.9 4.7 3.0
Process related 3.1 2.0 2.7 3.6
Employee related 4.8 3.3 5.6 4.0

Organizational size lens:

Degree of perceived impact of a particular factor (on a scale of 1-10, where 10 means the factor is an extreme
impediments):
Impact Less than 1000 Between 1000- Between 10000- More than 50000
employees 10000 employees 50000 employees employees
Manager related 5 4.9 5.2 4.2
Process related 3.6 3.02 2.76 3.2
Employee related 3.3 5.1 5.1 4.7
3. Structural aspects
• When studying the structure of performance evaluation adopted by
respondents, Pwc observed that while on one hand, the use of individual
rating continue to be commonplace (84%), the IT/ITeS is moving away from
this trend, with nearly 40% of the respondents leveraging project or team-
based training.
• While exploring the scope to implement team-based rating, organizations
need to consider whether a group approach to rating is likely to encourage
individual members to excel, and to identify checks and balances to be
incorporated to prevent social loafing.
• PM and rewards have always gone hand-in-hand and survey found that
current PMS are most likely to impact bonus payout decision, followed
closely by salary and career progression through bands.
 Use of individual rating

Manufacturing Consumer Finance and IT/ITeS

Industries Insurance
90% 100% 80% 60%

Less than 1000 1000-10000 10000-50000 More than 50000

Size
100% 90% 95% 80%

Degree of impact that the PMS has on decision regarding various kind of rewards
(on a scale of 1-4, where 4 is strongest possible impact)
Impact bonus Impact long-term incentives

3.56 2.38
Impact salary Impact career progression

3.33 3.27
 Use of distribution

Mnaufacturing 37 50 13 0

Consumer 25 50 25 0

Finance and insurance 40 40 20 0

IT/ITeS 17 33 17 33

>1000 14 43 29 14

1000-10000 37 37 19 7

10000-50000 50 22 14 14

<50000 50 12 38 0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Forced distribution Guided or encouraged distribution No use of distribution Approach varies by business or level
• What need to be contemplated, though, is whether pay is the only or even the most significant mode of
rewards or if other modes such as career growth and developmental interventions are equally, if not more,
effective.
• Organizations may consider increasing the linkage between performance and developmental interventions in
order to balance the current rewards-only focus and also create a long-term outlook.

Perceived outcomes of linking PMS to rewards (positive and negative outcomes):

Undermines the overall culture and moral of employees

8%

Create issues between individual and teams

12%

Distorts decision making on rating

20%

Forces process to be taken seriously by all parties

39%

Financial impact ensures there are consequences for certain behaviour/risk taking
53%

Helps motivate employee to improve performance

80%

0% 20% 40% 60% 80% 100%

Percentage of Respondents
4. Approach to change
• Organizations are gradually but certainly acknowledging the need for
a change in their approach to managing performance.
• They found that 52% of organizations surveyed are either currently
making changes to their PMS or plan to do so in the near future.
Changes that are being made or planned by organizations surveyed
Per. (%)
Moving away from incentivisation of short-term objectives 54%
Focusing on team goals rather than individual goal 46%
Making the process more transparent/not having singular power centers 78%

Introducing ongoing feedback in place of annual appraisal 72%

Shifting the balance from financial rewards to intrinsic rewards 46%
Making the system more outcome-focused rather than process-focused 70%
Reducing differentiation and moving away from forced distribution 48%
• The concept of providing a performance ‘experience’ rather than a process will
mean the introduction of real-time feedback, be it positive or development.
• This can take the shape of ongoing evaluations (throughout the year) with
multiple managerial discussion, high-quality interventions and developmental
inputs being provided.
• Another cornerstone of performance ‘experience’ will be establishing support
system for managers and employees so as to drive systemic changes. This will
enable to managers to tackle difficult conversations and take ownership of guided
distribution approaches that are becoming commonplace, while enabling
employees to better state expectations and also seek and appreciate feedback.
• With the changes to system, most importantly, organizations need to be cognizant
of how they are implemented and understood by employees. This will be key to
ensuring that employee perception of the process fairness is not impacted.
Industry lens:
Percentage of respondents that are making or planning to make changes to their PMS:

33% 44% 60% 75%

IT/ITeS
Manufacturing Consumer Finance and
Insurance

Organization lens:
Percentage of respondents that are making or planning to make changes to their PMS:

0% 72% 60% 60%

<50k
>1000 Between 1k- Between 10k- employees
employees 10k 50k
employees employees
Conclusion
• The goal of performance management is to enhance the performance of
the individual and the organization by evaluating and rewarding
performance in an equitable and reliable manager.
• The challenges facing organizations today is to implement a system that
meets the diverse and often tangential needs of the various stakeholders of
the process.
• There is no one-size-fits-all approach to managing performance and
observed that having a ‘right’ approach in place depends on the context of
each organizations.
• Therefore, what becomes an important first step is contemplating certain
questions against the background of organizational context and realities.