Showing posts with label Compensation MAnagement. Show all posts
Showing posts with label Compensation MAnagement. Show all posts

Learnings From Parle Agro's Performance Appraisal



Company      Parle Agro Pvt.Ltd.
   
Learning from our meeting –
                                                  After our discussion I learnt that performance appraisal process provides an opportunity for introducing organizational change. It facilitates the process of change in the organizational culture. The interactive sessions between the management and the employees, the mutual goal setting and the efforts towards the career development of the employees help the organization to become a learning organization. Conducting performance appraisals on a regular basis helps it to become an ongoing part of everyday practice and helps employees to take the responsibility of their work and boosts their professional development.

It is an opportunity for an organizational culture shift-
  • Performance appraisal process focuses on the goal setting approach throughout the organization.
  • Performance appraisal helps the clarity and understanding of the roles and responsibilities of the employees.
  • The performance appraisal processes have the potential positive effects on recruitment
  • It increases organizational effectiveness i.e. what to do and how to do through a formal and structured approach.

10 things or tips for effective Performance Appraisal-
                                                                                                      Well-written performance appraisals are among the most effective tools for managing by objective and for developing people. Use these 10 Tips for Effective Performance Appraisals to significantly increase your team's effectiveness and perceived value within your organization.
  1. Increase your employees' comfort level with performance appraisals.At the beginning of each review period, explain the appraisal process, rating system, and appraisal form to your employees. Agree on performance objectives and measurements for the upcoming review period.

  1. Take full advantage of performance appraisals. Start thinking about appraisals as an opportunity to increase the efficiency and effectiveness of your team. Use them to:
    • Clarify team and individual responsibilities and priorities so that everyone stays focused on activities that produce desired results.
    • Summarize continuing on-the-job discussions to reinforce their significance.
    • Document performance of the entire review period; recognize team and individual accomplishments and contributions. 
    • Measure performance based on mutually understood, job-relevant criteria.
    • Identify and suggest actions to improve results.
    • Appraise each individual's potential for more responsibility.


  1. In addition to keeping your own records, encourage your employees to keep ongoing records: updates to team and individual objectives when Company objectives change, progress reports, commendations, descriptions of results achieved with special assignments, documentation of ongoing coaching discussions and of feedback from other business areas.

    Having the employee's input will let you know what the employee considers important (that is, how well you are communicating priorities) and will help ensure an accurate, fair appraisal.

  1. Use examples, facts, and accomplishments drawn from these ongoing records to present a factual, complete summary of employees' results. Specific wording keeps employees focused on objectives, proves ratings, and gives employees something concrete to "latch on to" to improve or maintain performance. Finally, specific, accurate wording protects the Company in the unlikely event of legal proceedings.

  1. Use objective (factual) wording so that you concentrate on observed behaviors rather than on personality traits or "attitude." Instead of "Laura has a bad attitude," write, "Laura's customer interactions meet two of Customer Service's 'Five Criteria for Excellence.' Improvement areas are 'focus,' 'courtesy,' and 'listening.'"

    Use objective wording to write credible performance appraisals that reinforce desired behaviors.
  1. Help employees achieve their full potential through recognition and encouragement. Use constructive wording to cite accomplishments and suggest improvements. Be thorough and honest, but be careful to consider the effect of negatively worded comments on employees. Comment on only a few development areas: those that are critical to your team's success and those that you have discussed previously with the employee. Translate those areas into improvement suggestions.

  1. Use benefit wording to reinforce desired behavior and motivate employees. Remind your employees and your next level manager of the value and significance of your employees' actions.


  1. Use performance appraisals to summarize the year's performance and your discussions with your employees, not to introduce development areas for the first time. Include no "surprises." Feedback to an employee has its most significant impact immediately after a specific behavior has occurred. Always deal at once with unsatisfactory performance, especially serious conduct violations.

  1. When writing action plans for development needs:
    • Keep an immediate or short-term focus.
    • Link the plan and any training you recommend to team business objectives.
    • Write clearly stated and task-related action plans.

  1. Avoid picayune comments that trivialize the whole appraisal. Keep the performance appraisal focused on significant accomplishments and critical improvement areas that are tied to your team's business objectives.
Increase motivation to perform effectively 

Case Study- EVA Incentive Scheme, The TCS Approach & Experience




Introduction –
                         The case examines the compensation management system at TCS based on the EVA model. With the implementation of EVA based compensation, the salary of employees comprised of two parts - fixed and variable. 
The variable part of the salary was arrived after considering Corporate EVA, Business unit EVA and also individual performance EVA. The new system was implemented successfully and it helped the company identify the non-performers.
 The company also benefited a great deal in retaining talent. However, it also received criticism from several quarters for 'putting golden handcuffs on excellent performers.

Company Background –
                                       TCS started operations in 1968, as a division of Tata Sons Limited, one of Asia's largest business conglomerates, with a wide range of interests in engineering, telecommunications, energy, financial services and chemicals. The initial journey in the IT business was not easy for TCS. 

During the first two decades of its operations, TCS faced many hurdles due to the rigid government licensing system, which made it difficult to import computers. Describing the difficulties in doing business during those times, "It would take us two years in India and almost a year in the US to get all the clearances we needed to import computers. By the time we got the approvals, the model of the computer would have changed.

The EVA Model
                               TCS adopted EVA in 1999, when the company had a staff of around 15000, working at several locations across the world. Through the EVA model, TCS aimed at creating economic value by concentrating on long term continuous improvement.
VA measured operating and financial performance of the organization and the compensation of all employees was linked to it. TCS went in for the EVA as during that time, the company was not a public limited company and hence could not have a stock option plan. There were several people who played an important role in the success of the organization, who needed to be recognized. As there was no wealth sharing mechanism in place, EVA was adopted to focus on continuous improvement rather than short term goals and also to motivate employees

The Benefits
                                The benefits of EVA were realized across all levels in the organization. Employees became aware of their responsibilities and their share in increasing the EVA of the unit and organization. All the units could determine how they had fared against the targets.
The bonus banks also helped in sustaining performance from the individuals, with close relationship between pay and performance. There was an increased sense of belonging among the employees and the employees were motivated to increase their contribution as they were also equally benefited by the increase in EVA.

EVA was not just a performance metric but an integrated management process aimed at achieving long term goals. One of the major benefits of implementing EVA in TCS was increased transparency in the organization. The internal communication within a unit had increased considerably.

The Drawbacks

                                  The EVA-based compensation system received severe criticism during the initial years of its implementation. Industry analysts commented that EVA concentrated mainly on return on investments, due to which the growth of TCS could be restricted. In 2003, TCS caused uproar in the IT industry when it reduced the variable salaries of employees by 10%. This was the initial impact of EVA which was implemented in the company from April 01, 2003.

Case study- Performance management system at Bharti Airtel






Introduction-
                           Bharti Airtel Limited was one of the world's fastest growing telecom companies
That carved for itself a leadership position in the global telecommunications sector. In October
2007, it achieved the distinction of becoming the fastest private telecom company in the world to reach the landmark of 50million customers in a single country, within a short period of 143 months of start of operations. It was India’s leading private sector provider of telecommunications services, covering a wide spectrum comprising mobile, fixed line, broadband and enterprise services. As of December 2007 it was India's largest integrated private telecom service provider with 55.16 million mobile subscribers constituting a market share of 24.09% of the entire mobile telephone industry.

Bharti Airtel was the first telecom company to have an All-India footprint by covering all the 23 telecom circles of India.
It was one of the five largest companies in India in terms of the market capitalization and the flagship organization of Bharti Enterprises, one of India’s leading business groups with diverse interests such as telecom, agro products, insurance and retail. Its brand 'Beetel' was the country’s largest manufacturer and exporter of world class telecom terminals.




Case Analysis


Strengths
                With the key result areas that are used for measuring individual Performance, managers are able to focus their efforts and energies in the right direction and be rewarded for the same. The appraisal is based more on facts than on value judgments or intuitions and gives appraise full opportunity to discuss his point of view. Every employee giving in writing their goals for the next financial year is extremely beneficial since it ensures transparency in the process and builds up the manager’s trust and confidence in the system, thereby increasing his motivation and commitment towards work. A set of Performance factors that are used to evaluate employee’s help in converging the objectives of the individual and the company and helps organization in reaching a position of excellence and sustained growth
Problems
                  The Performance appraisal form of each employee passes through a number of heads and needs to be signed and rechecked by a number of VP‘s, which may create lot of confusion and waste large amount of time. The appraisal comprises of lot of comments and remarks by various heads and VP’s rather than simple grading on the basis of points, which is not so practical and convenient in evaluating. The appraisal system is done yearly and not quarterly. Rewards based on appraisal system are given only occasionally which hampers the motivation of the employees. Employees don’t get feedbacks properly as a result they can’t work properly on it.

I have recommended the following:
                                                            Broader HRD base: One other thing to be noted is that there is only one HRD office for the whole organization, which is not sufficient enough. The company should have a few more of these department controls set up to make it reachable to every employee of the organization.
The appraisal system should be done on half yearly basis that is at least one appraisal system in every 6 months. This helps the employees to keep a track of their own performance also.
The rewards based on appraisal system should be given often and regularly; this gives motivation to the employees. The rewards should be given either in monetary basis or reward basis.
Appraisal should be done by the very next boss (e.g., Sales manager should appraise the business executive who are working under them only). If the VP’s do the appraisal system in many cases it is found that they are not fully aware of the person’s performance.