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Dear Seniors,
I am working with manufacturing firm. We have team of 15 employees. As per company policy, a fixed amount has been added in every employees' salary. If an employee performs 100%, the employee will get 100% of that amount. If similarly employee performs 40%, he will get only 40% of that amount. But this performance is done only on judgmental basis of his/her senior. There is no parameters set for it. Being responsible for HR activities of the organisation, I have to streamline the process. Your valuable suggestions can help me streamlining the monthly evaluation process. Awaiting for your valuable response.

From India, Pune
Dinesh Divekar
Business Mentor, Consultant And Trainer
Ed Llarena, Jr.
Owner/ Managing Partner
+1 Other

Dinesh Divekar

Dear Pooja,

What you need to do is establish comprehensive Performance Management System (PMS) in your company. For this you need to study the systems and process of each department and design the Key Result Areas (KRAs). Performance bonus should be linked to the score of KRA.

Mere concentration of output by the employees cannot be the sole criteria to measure business performance or organisational performance. If you are interested to concentrate on the productivity of the organisation then you need to concentrate on the following costs:

a) Inventory Carrying Cost of Raw Materials

b) Work in Progress (WIP) Inventory Costs

c) Inventory Carrying Cost of Finished Goods

d) Capital costs to run the operations

e) Capacity costs

f) Maintenance costs

g) Quality costs

h) Ordering cost

i) Set up cost

k) Inspection cost

If you do not concentrate on these costs then there lies a risk too. Your workers may get payment as per attainment of their KRAs but organisation could be loser. Organisation could be loser because there could be huge mismagement of above costs. Secondly, workers have good number of reasons on why their KRA could not be attained. What is the use of such PMS? You or your management needs to take call on this factor also.


Dinesh Divekar

From India, Bangalore
Dear Sir, Thank you for your valuable comments. Will definitely incorporate the suggestions mentioned by you for better productivity of employees and the organisation. Regards
From India, Pune
Ed Llarena, Jr.


It appears that the policy that your company is implementing right now is more of a "productivity incentive scheme", and NOT an appraisal system. As is, it is a good one, unless the cost implications of such a scheme was not properly budgeted or planned by your company.

HR practitioners who are new in an organization must learn and understand the rationale of a policy before attempting to modify or change it. They must also learn how to distinguish the differences and implication of various policies, before trying to play smart and attempt to change them. A good start will be to look at the complaints or objections raised on the policy, and try to see the suggestions by employees concerned on how it can be improved.

There is an ocean of difference between a productivity incentive scheme from bonuses. An HR practitioner who cannot make a difference may not last long in his position/ responsibility.

Best regards.

Ed Llarena, Jr.

Managing Partner

Emilla International Consulting Services

Tel: / 006352-742-0315

Email: <>

From Philippines, Parañaque
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