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Home > Business > Special

A guide to staff appraisal tools

Purvi Sheth | October 18, 2005

Don't expect Greg Chappel to win any popularity contests around here. The Indian cricket team's coach found himself on the wrong side of the fence after he raised the issue of non-performance among players.

Despite the fact that non-performers stand out in a cricket field as clearly as the red cherry against a sight-screen, Chappel's comments didn't go down too well.

Tracking performance in sports is easy: the scoreboard never lies. But business is a different ballgame. In line functions like sales and operations, results are quantifiable and can be compared against targets. But how do you measure an employee's output in areas like HR and R&D? And it's almost too easy to slip under the radar on "softer" issues like interpersonal skills and leadership abilities.

That's dangerous. It takes just one under-par player to pull down the average of the entire team -- and that's a no-go in the present, ultra-competitive environment. "Customers have increasing demands. There's no place for mediocrity," says Arvind Agrawal, management board member and president, corporate development and human resources, RPG Group.

Almost all Indian companies today speak of the importance of productivity and the need to celebrate their star employees. But are they just paying lip service or have they truly understood the cost of non-performance? In a result-oriented business environment, The Strategist analyses the issue of underperformance.

One last chance

Pillion riders, watch out:

Corporate India is in a take-no-prisoners mood. Agrees Pradeep Mukerjee, Citigroup's vice president and director HR for India, Bangladesh and Sri Lanka: "Compared to the past, tolerance levels for businesses have come down a lot."

Still, while non-performing heads will roll faster than before, granting second chances is still common. That's unlike multinational giants like Cisco and GE, which fire the bottom 10 per cent regularly.

"A poor performer is not always a poor performer for life," says S Padmanabhan, executive vice president, global human resources, Tata Consultancy Services. That's an opinion others share. "We asked all our managers that if they had 50 options to tackle poor performance in their own business, what would they do? All of them agreed on giving the poor performer one more chance," says Agrawal.

Weeding out

How do companies identify their black sheep? Consider two Tata Group companies as case studies.

The Rs 9,749-crore (Rs 97.49 billion) infotech major has 45,000 employees on its rolls. Close to 90 per cent of the company's income flows in from outside India. And the bulk of its employees work across TCS offices in 34 countries and on-site in more than 50 countries. For most of them, the supervisor changes every time a project changes. Given that no two projects -- or, for that, matter, no two bosses -- are alike, performance appraisal must be a nightmare. Or is it?

TCS conducts two appraisals: one at the end of the year and another at the end of a project. Appraisals are based on Balanced Scorecard, which tracks the achievement of employees on the basis of targets at four levels -- financial, customer, internal, and learning and growth.

The financial perspective quantifies the employee's contribution in terms of revenue growth, cost reduction, improved asset utilisation and so on; the customer perspective looks at the differentiating value proposition offered by the employee; "internal" refers to the employee's contribution in creating and sustaining value; "learning and growth" are self-explanatory. The weightage given to each attribute is based on the function the employee performs.

Based on their individual achievements, employees are rated on a scale of one to five (five = "superstar"). If employees get a low rating (less than two) in two consecutive appraisals, the warning flags go up. "If the poor performer continues getting low scores then the exit option may be considered," adds Padmanabhan.

Over the years TCS has found the pattern that leads to the maximum decline in performance -- boredom. If employees work for more than two years on the same project, typically either their performance dips or they leave the organisation.

To avoid that, TCS shuffles its employees between projects every 18 months or so. "Performance drops if motivation drops," adds Padmanabhan.

Another Tata group company, Tata Chemicals, has taken the appraisal route one step ahead. In 2001, to bring in transparency into the evaluation process, the company set up an e-enabled performance management system. Here's how it works.

Targets set at the beginning of the year are reported in Balance Scorecard. During appraisals, the supervisor assigns marks on the five-point scale. If subordinates disagree with any part of the assessment, the discussion is recorded online. Which means that when the reviewer (the boss's boss) goes through the appraisal, he has access to all arguments surrounding it.

Still, poor scorers at Tata Chemicals can breathe a little freely.

Tata Chemicals carries out a relative comparison of declining performers: for instance, if there are 10 underperformers who have scored two, a relative grading is done to find out the best in the lot. Only those in the bottom 5 per cent are identified as poor performers.

Match making

Is poor performance the result of a mismatch between an individual's capability and his job profile? PSU petroleum major Bharat Petroleum decided to find out. In an earlier interview, BPCL general manager, corporate human resource services, D M Reddy had told The Strategist that "How you deploy your talent is important."

Which was why, in 1999, Bangalore-based HR firm Credo Consultancy was brought on board to evaluate the managerial potential at BPCL's refinery unit. Close to 300 managers were part of the exercise in which they were shown videos on potential business situations. Their individual reactions were carefully jotted down.

These notes were the basis on which assessments were made on 12 competencies, eight personal values and two management styles. The findings were compiled on nine grids: at the bottom of the scale was "derailed", which comprised managers who were in jobs unsuited to their potential; at the opposite end of the scale were the "stars", where managers were tailor-made for their responsibilities.

The results were scary. A phenomenal 36 per cent of the managers who were evaluated ended up in the "derailed" grid, which meant they were doing the wrong job. Not surprisingly, they were not bringing in the results the company wanted. Only 14 per cent of managers were "stars" while 13 per cent had a high potential.

The path ahead was clear to BPCL. Having identified a set of competencies its managers required, the company decided to bridge the gap between what they had and what they would need through training. But that is another story.

Quickbite: performance enhancement

"To be a winner," according to Jack Welch, "business leaders should wake up each day as if it were January 1."

Many times there is an unrecognisable thin line between today's declining performance, decided failure and adversity quotient development.

As modern-day businesses and economies evolve, the definition and parameters of performance and its measurement keep changing. In theory, performance is "to act a part; to accomplish". However, the question here is how well has this part been played.

The business environment has fundamentally changed. Previously accepted disparities in technology, market access and production capability separated business from one another. These gaps are shrinking dramatically and companies as well as individuals have access to similar technologies, markets, methods of production and channels of distribution.

The focus now includes return on people, apart from return on assets and investment. The result is that traditional measures of performance have less significance.

Looking beyond pure financial yardsticks, organisations can measure their return on people through productivity, responsiveness, innovation and knowledge base. It is this that provides the most significant competitive advantage.

Wise leaders use measures not only to focus attention but also to drive change and continuous improvement. With massive shifts in the global workforce -- both in terms of attitude and composition -- skilled, knowledgeable employees are becoming more difficult to find, manage and motivate.

The top management and HR functionaries who are puzzled with the optimal practices in performance management need to find: what is performance compared with? Tata Chemicals does a relative comparison of declining performers. A comparative process stimulates internal benchmarking, providing a standard for enhancement.

Factors like time, as in the case of TCS, are used to measure declining performance. Impact on performance in relation to "right person in the right job" (as with BPCL) is a good way of recognising reasons for diminishing performance.

Changes in leadership, organisation design and personal circumstances tend to affect performance. It is the ability of an organisation to systematically identify and diagnose degenerating performance as well as their causes that render it effective in energising the workplace.

Regardless of how organisations shift tasks to fit individuals or individuals to fit tasks, managers will not be motivated unless their jobs involve elements that allow them to grow and expand their competencies.

Companies can try to squeeze more and more output from a less and less tractable workforce or encourage them to better direct their own efforts. Given the realities of today, organisations have very little choice.

Purvi Sheth is vice president, Shilputsi Consultants, an HR consulting firm.

Additional reporting by Rituparna Chatterjee and Prasad Sangameshwaran

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Number of User Comments: 1

Sub: Appraisal system in TCS (TATA CONSULTANCY SERVICES)

Very good article on Performance Appraosals. But you have given a example of TCS.Let me inform you that i worked with TCS from 08/07/1992 to ...

Posted by lachman



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