Seeking Advice on Setting Up a Performance Management System for a New Company

Dear Seniors, I would appreciate your expert advice on the following; it's for a friend starting a new company. We are introducing the PMS (Performance Management System) for the first time in the company. Kindly advise.

Questions Regarding Performance Management System (PMS)

1. Should we fix the KRA for the whole year, or may it be on a six-monthly basis as well? In our company, we have a system of payment of incentives/bonuses every six months, but we want to fix KRA in April for the whole year. According to HR, in the case of PMS, we need to fix the KRA always on a yearly basis.

2. As per HR, once the KRA is fixed, it cannot be changed despite any changes in the business scenario, situations, or the occurrence of any exceptional events, etc. Once it is fixed, it cannot be changed. Is there any rule of such a type in the PMS system?

3. As per HR, we cannot have fewer than 4 KRA or more than 6 KRA. Is there any such rule in the PMS?

4. Please check with a few companies where the PMS system is followed to see how much time they give their staff for fixing/writing the KRA under the PMS system. Can this process or activity be done within one or two days?

My Best Regards,

Prashant

Please find clarification for the query raised by you.

KRA Fixation: Yearly or Six-Monthly?

1. Should we fix up the KRA for the whole year, or may it be for six-monthly bases as well? Actually, in the company, we have a system of payment of Incentive/Bonus on a six-monthly basis, but we want to fix KRA in April for the whole year. As per HR, in the case of PMS, we need to fix the KRA always on a yearly basis.

Ideally, KRAs are to be fixed for the entire year. There should be a system of periodic review of the progress. You can fix milestones for each KRA (break one KRA into progressive actions/activities that can be measured).

Flexibility in KRAs: Can They Be Changed?

2. As per HR, once the KRAs are fixed, they cannot be changed despite any changes in the business scenario, situation, or any exceptional events, etc. Once they are fixed, they cannot be changed. Is there any rule of such type in the PMS system?

It is a wrong notion. KRAs can be modified if the situation demands. Any organizational and environmental changes may demand a modification of the KRAs. Please understand PMS is your system that you should customize to best fit your company and to make it effective in achieving the company's goals. Ultimately, there are no sacrosanct rules.

Number of KRAs: Is There a Limit?

3. As per HR, we cannot have less than 4 KRAs as well as more than 6 KRAs. Is there any such rule in PMS?

Again, a wrong notion. KRAs are to be cascaded from the specific goal. In your case, the company is new, and perhaps the company's objective is to penetrate the market. This single mandate has to be fragmented function-wise, position-wise, and role-wise. There is no norm for a minimum or maximum number of KRAs. You might have heard about SMART. KRAs should be SMART - Specific, Measurable, Achievable, Realistic, and Time-bound.

Timeframe for Setting KRAs

4. Please check with a few companies where the PMS system is followed to see how much time they give their staff for fixing/writing the KRAs under the PMS system. Can this process or activity be done within one or two days?

KRAs are to be percolated top-down. KRAs are not to be superimposed; they are to be mutually agreed upon by boss-subordinate, by assessor-assessee team leader, and team members.

Regards,
Shailesh Parikh

Vadodara, Gujarat

[Phone Number Removed For Privacy Reasons]

Human Resource Management or Performance Management deals with humans and cannot be done by strict formulas. It has to be flexible to be modified as per the requirements in a dynamic environment. If your HR Manager is advising you as you stated above, he/she seems to be very fresh and not having much corporate experience. He must have read some books/searched the internet and given you the report.

PMS Application in Organizations

PMS is a system that has to be applied in an organization based on its needs, business, culture, and maturity of the people. The KRAs have to be developed in consultation with the concerned person for whom they are being set. The process can be done in 1-2 days or it may take more time depending upon the way your discussions progress.

There is no bar on the number of KRAs. They are set for each area of responsibilities handled by the person. However, having a very long list of KRAs does not serve any purpose. The KRAs are normally set for a year and are reviewed at regular intervals to check the progress and revise the targets/KRAs in wake of the situations, if required.

Lastly, I would suggest that the whole process should be handled by an experienced and mature person who can understand the people. The reason is that if the process is handled by immature managers, it would have a negative impact on the organizational culture and its business.

Thanks & Regards,

Avika

Defining KRAs and Performance Management

KRAs have to be defined at the beginning of the year, and a mid-year review is required to assess the performance level of the employee. Five KRAs are ideal for any firm. KRAs are dynamic in nature, and you can amend, adjust, or conclude them based on organizational needs. Furthermore, you can also link your incentive/bonus program to the defined KRAs for achieving organizational objectives.

Neatly briefed on KRA, I am very much impressed with them, but the awards are baseless, purely going as per the wishes of HODs. No one bothers about the grievances of a person who achieved the given target, and HR does not bother in many cases. Production and Sales staff can have sales targets per annum. If any failure occurs in the middle of the year, i.e., change of production planning, both will get corrected accordingly. The same can be mentioned in the remarks in PMS as to why they could not achieve, but based on the company's performance/benefits, PMS can be processed further.

Then what about the Admin and HR scope and measurability? Rewardless services cannot be measured and fixed per year. Admin and HR jobs are time-bound; whether they are attended or not attended is the only concern. The most affected staff in any company will be Admin and HR only.

Regards,
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