You have shared the article on Performance Management System (PMS). However, my major observation is that you have not written anything about measurement of organisational performance. In the course of my consulting on PMS, I have found that people are rewarded though certain organisational ratios were never measured. Following are few examples:
a) A capital equipment had outlived its economic as well as technical life. However, huge funds were allocated to keep the equipment serviceable. Nobody thought that they were sinking their precious working capital on the depreciated asset. However, Maintenance Head and Purchase Head took pat on the back for keeping the equipment serviceable.
b) Another client who is into EPC projects, never measured Cost of Warranty Repairs. All that mattered to them was completion of project in time.
c) My several clients have not measured Inventory Turnover Ratio (ITR) or Account Receivable Turnover Ratio (ARTR). What is the logic of leaving out measurement of these important ratios?
I can go on giving examples like this. The above flaws occur because focus of PMS is on individual and not on organisation. PMS is more for measuring organisational performance than individual performance. Be it remembered that it is organisation that pays us and not those who work in it!
To refer my reply on PMS at another thread, you may click the following link:
For further queries, feel free to contact me.
27th October 2016 From India, Bangalore
You said that: "PMS is more for measuring organisational performance than individual performance. Be it remembered that it is organisation that pays us and not those who work in it"!
All the while, I was thinking that the PMS you have been discussing and promoting in this site is about the system of appraising employee performance. So, it is now clear that your PMS is more of an organizational and financial audit ----- more than anything else. So in your PMS, performance is NOT individual employee performance, BUT ORGANIZATIONAL AND FINANCIAL PERFORMANCE.
This sounds a little strange and can be confusing, but I could understand where you are coming from. Indeed, the use of terminologies can vary from place to place. Just like the use of the words "Salary Structure" in this site that denotes what is popularly called as "SALARY COMPONENTS" in many HR textbooks.
29th October 2016 From Philippines, Parañaque
You have written that "it is now clear that your PMS is more of an organizational and financial audit".
PMS is neither organisational nor financial audit. Audit is defined as a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern. It also attempts to ensure that the books of accounts are properly maintained by the concern as required by law.
In PMS, we do not check financial statements or books of accounts but what we check is whether ratios or other measures of performance are measured or not. In audit, auditor will check whether the PO was issued to the supplier before of the purchase material or whether laid down procedure was followed or not while purchasing material. However in PMS, cost incurred per PO is measured and assigned as KRA to the Head Purchase.
To make understand, I have given three examples of how organisations did not measure some of the ratios. In spite of these examples why there was a doubt I did not understand.
Take the example of steel manufacturing unit. Production in metric tonnes per employee is vital a ratio that distinguishes one steel plant from another. Now this is organisational ratio. In PMS, this ratio need to be assigned to production head or some other head. However, if the performance of production head is measured on some other ratios leaving out this vital ratio, it would be defeat of Performance Management System.
While designing PMS, we need to identify organisational or department specific ratios. This requires lot of customisation and we need to go beyond the regular textbooks as well. I am given to understand that famous computer manufacturing companies HP and Dell have identified few costs that are unique to their supply chain and forever they strive to manage these costs. List of these costs is not mentioned in the traditional books on finance or accounts or cost management. Costs do not get managed by themselves but these are managed because someone is given responsibility to do that.
Hope, I have tried explaining what I wish to say in this comment. However, no further comments will be given.
29th October 2016 From India, Bangalore