Management Consulting, Management Development,
Asst. General Manager - Hr
It depends upon the company outlook. But good performance system is aligning the business objective with individual one. You have find lead indicator and lag indicators to make it simpler. The business related objectives are mainly the example if lag indicator and function related objective are lag indicators.
There should not be any hard and fast formula on this. It should be based on how the person has the control on the results of specific indicators.
Ideal way is to make the company scorecard (own by CEO) and then cascading it down the line.
17th May 2011 From Singapore, Singapore
- There are multiple problems.
- Firstly, everything in performance is not necessarily measurable. Even if you devise some formula, it is not perfect and not acceptable to everyone.
- One may come-up with a well thought out formula for performance measurement and rewards linked to it. As a result of whole exercise some employees get x amount as a reward, which happens to be say 10% of their CTC. The common argument is why you need to have such a long process and you have to put so much of effort and time to arrive at reward figure of 10%. We would have anyways got it by default.
- Quantum of reward will also depend on : What %age of revenues management wants to share with employees ? Which class of employees ? and How ? What competitors are doing ? Am I loosing employees to competition ? How much I am ahead or behind of my business competitors in terms of revenues, market share and sharing of revenues with employees ? What is a market value of my employees ? What is demand for my employees in employment market ?
- Pl. refer to recent classic case of Indian Airlines Pilots Strike. Airline is in red. It would have gone bankrupt and would have been shut down long back, had it been a private company, without the support of government. Still pilots went on strike demanding hike in salaries, caused huge losses and embarrassment to airline and still airline had to concede to their demands. Why because, there are no ready replacements for pilots and airline can not function without pilots. Here pilots are not rewarded for their performance but for unique market position they hold in market, though airline has no profit to show and revenue to pay their hiked salaries.
- Hence there is no perfect formula and set %ages. Formulas and %ages will change from market to market, industry to industry, management to management, company to company among different class of employees.
18th May 2011 From India, Pune
I believe ratings are for deciding the quantum in the first place... Don't you agree? Else, one could do away with it... Simplistically, it is based on the principle that not everybody works the same way in a company and the effect of the work of individual employees could differ from the company perspective.
At the end of the day, there is no perfect one, but there can be a guestimate for any one (and a strong logic)... We want to explore that... Or would you like to skip that step for good?
19th May 2011 From United States, Daphne
- I fully agree with you. There has to be some process and system for i) objectively evaluating performance of employees and to identify excellent performers, average performers and poor performances ii) some way of rewarding employees based on their performance and to share good profits earned by company.
- Point I was making in my post is: sometimes the results given by well defined formula and long process are the same as that of a very basic or conservative way of increasing salary. Still I would support to have some system or process of suggesting rewards.
- As I mentioned in earlier post, there is no specific formula or %age and each company can arrive at some formula considering all relevant factors. Again you will have to change formula and %ages every year.
- Very commonly followed practice currently is to do compensation and benefit survey of select organization in your industry and benchmark your positions and remunerations to remain competitive.
20th May 2011 From India, Pune