How Do You Successfully Implement a New Performance Management System for 100 Employees?

Setting Up a New PMS Process in an Organization

Please share the complete process of setting up a new Performance Management System (PMS) in any organization. If I have to implement the new PMS process in an organization with a manpower size of 100, what pointers need to be kept in mind before implementing it? Awaiting your thoughts.

Regards,
Madhur

I totally agree with what Mr./Ms. Ed Llarena mentioned above. I would like to add more that the HR department should study, establish the draft, and provide it to all line managers at your company for completion before implementing the draft into practice. Alternatively, you should consult with each line manager who heads each department, as well as the CEO of your company, to determine what they want to evaluate in employee performance, how to measure it, and which data on employee performance is available.

Best regards,
Vinh

I can give you some guidelines to start this activity. The important assumption is that the performance of each individual department and each employee therein must help the organization achieve its objective (Growth) for the year. So, to start, ask your MD about what your company wants to achieve in the coming year. Now, to achieve these objectives, define the objectives of each department. Break these departmental objectives into individual employee's objectives for the year. Each departmental head needs to discuss the objectives of the respective employees individually and get their agreement on the same.

Now, suppose there are five objectives for an employee, we must rank each objective in the order of its importance in terms of percentage so that the sum of rankings given to all 5 objectives would total 100. As a next stage, define the criteria to ascertain the successful achievement of each objective. To keep each employee motivated, periodic reviews - say quarterly - are taken by each departmental head. At the end of the year, make an assessment of individual employees based on their percentage score and decide the criteria for increments, performance bonuses, promotions, etc.

This exercise requires a lot of detailed work, defining the company's goals and objectives practically, fostering good understanding between employees and their departmental heads, and last but not least - discipline to reward based solely on performance without any individual whims or biases. All employees must also be briefed on the operation of such a performance management program before the start. You can contact me in case you need any further guidance.

Regards,
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Dear Satish,

The process you have given for PMS is a good one. However, we still need to be a little more cautious.

Understanding Performance Management Systems (PMS)

PMS is not just about measuring an individual's performance. It's not just about designing measures based on the organization's goals. PMS is more about the comprehensiveness of the measures. We need to question whether we are measuring what needs to be measured. Are our measures superficial?

Let me give you an example from my training on Purchase Management yesterday. One of the participants mentioned that they procured spares for capital equipment in 2008, which were never used and remained idle. Repeat purchases of spares were made in 2009, 2010, and 2011. Over the four years, the inventory of spare parts accumulated to Rs 4.5 Cr. After four years, they realized they were accumulating unnecessary inventory. Since 2012, they stopped buying spares; however, the capital equipment has now aged and is likely to be phased out.

The question arises: Why were spares purchased when there were sufficient spares in stock? Whose failure is this—Stores, Purchasing, or the CFO? Due to the absence of Key Result Areas (KRAs), nobody took responsibility, but the organization suffered.

Real-World Example of PMS Implementation

Another example from a client I worked with during a consulting assignment. When I designed the measures for the Civil Projects department, the Head of Department openly admitted that despite his vast experience of 37 years and having overseen hundreds of projects, it was the first time he encountered new measures to evaluate civil projects. He is about to retire.

Therefore, apart from the process, what you measure in PMS holds significant importance.

Thanks,

Dinesh V Divekar

Thanks, everyone, for sharing your thoughts.

@B.K.Bhatia - I will definitely go through the website mentioned by you.

@Satish - Thanks for providing detailed input on the process. Considering that I have understood the final goal of my organization and the KPIs are also framed, what should be the next step? Do I need to design a questionnaire to be shared with the Team Managers for further discussion? If yes, what pointers should be included in the framework? Or should we have a direct discussion with the Team Managers about their team members?

Thanks!!

Madhur

Below are steps that can help us in PMS. Please correct me if I am wrong.

1. Set up the vision of the organization.
2. Set up the goals of the organization for the respective year.
3. Accordingly, set up the KRAs of management employees by the Board of Directors with mutual understanding and consent of both sides.
4. Accordingly, management shall set up the KRAs for managerial levels.
5. The same flow shall be followed for the rest of the other staff too.
6. Set up tools for the access of performance appraisal.
7. Analyze performance appraisals.
8. Get a clear picture/result of individual performance and indirectly company performance.
9. Conduct training needs analysis based on the results.
10. Provide the training.
11. Evaluate the effectiveness of the training.
12. Again, the same cycle of performance appraisal shall be followed.

Thank you.

It's good that you have identified KPIs for individual managers. Make sure that the identified KPIs, if achieved, can meet the final goal of the organization. If so, then you can go ahead.

Explaining the Performance Management System

Now explain to all the persons within the organization the performance management system and how it is linked to their rewards in monetary terms. Ask each member to make their action plan indicating various milestones for their KPIs and target dates for each. This will also help their superior to monitor progress periodically. The action plan should also mention the resources that are required to be provided by the superior for each activity in the action plan. The management, specifically the superior, must support with all help and keep them motivated during each review.

Likewise, this process should be done for all the members. At the end of the year, the final assessment should be conducted in the presence of the respective employee and their internal customer, the head of the department. For example, a KPI for a buyer in the purchase department is to deliver material on time. The assessment criteria include no loss of time in the production department due to material shortages. Therefore, during the final assessment, the HOD of the manufacturing department should be called along with the concerned buyer from the purchase department to agree on the achievement of the KPI.

Such assessments must be based on facts, documentary evidence, and the expected benefits from achieving the KPI. All three parties should sign the final assessment document – the superior, the internal customer HOD, and the concerned employee to complete the process.

Regards,
Satish Akut
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