mba kerala university

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PERFORMANCE MANAGEMENT
Unit I: Introduction to Performance Management - Aims, Characteristics;
Developments in Performance Management; Concerns; Understanding PM, Performance
Appraisal and Performance Management – PM and MBO – 7 rules of excellence – 7 sins
of HR professionals
Introduction to Performance Management
MEANING OF PERFORMANCE:
 “The accomplishment of a given task with the set standards, precision, quality and
completeness”.
The action or process of carrying out or accomplishing an action, task, or function can be
termed as performance.
I.e. Performance is understood as achievement of the organization
in relation with its set goals. It includes outcomes achieved, or accomplished through
contribution of individuals or teams to the organization„s strategic goals. The term
performance encompasses economic as well as behavioral outcomes.
The concept of performance has been expressed by Brumbach as follows:
Performance means both behaviors and results. Behaviors
emanate from the performer and transform performance from abstraction to action. Not
just the instruments for results, behaviors are also outcomes in their own right – the
product of mental and physical effort applied to tasks – and can be judged apart from
results.
This definition of performance leads to the conclusion that
when managing the performance of teams and individuals both inputs (behaviour) and
outputs (results) need to be considered. This is the mixed model of performance
management that covers competency levels and achievements as well as objective setting
and review. Through the medium of performance, an organization is able to effectively
achieve what it sets out to. Indeed, it is the people„s capacities and resources that
determine an organization„s capability to perform and to satisfy or influence its
stakeholders.
 Vroom (1964) suggested that performance is a function of ability and motivation
as depicted in the formula:
Performance = ƒ (ability × motivation).

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People need both ability and motivation to perform well, and if either ability or
motivation is zero there will be no effective performance
 A formula for performance was originated by Blumberg and Pringle (1982). Their
equation was:
Performance = individual attributes × work effort × organizational support
By including organizational support in the formula they brought in the organizational
context as a factor affecting performance.
PERFORMANCE MANAGEMENT
Performance management is a systematic process for improving
organizational performance by developing the performance of individuals and teams. It is
a means of getting better results by understanding and managing performance within an
agreed framework of planned goals, standards and competency requirements.
It is a continuous process of identifying, measuring and developing
the performance of individuals and teams and aligning performance with the strategic
goals of the organization”.
PM contains two major components:
1. it‟s a continuous process
Performance management is ongoing. It involves a never-ending process of
setting goals and objectives, observing performance, and giv- ing and receiving ongoing
coaching and feedback.
2. Alignment with strategic goals
Performance management requires that managers ensure that employees‟
activities and outputs are congruent with the organisation‟s goals and, consequently, help the
organisation gain a competitive business advantage. Performance management therefore creates
a direct link between employee performance and organisational goals.
Other definitions are:
a. Performance management is: „The development of individuals with competence and
commitment, working towards the achievement of shared meaningful objectives within
an organization which supports and encourages their achievement‟ (Lockett).
b.„Performance management is managing the business‟ (Mohrman and Mohrman,).

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c. Performance management is: the process of „Directing and supporting employees to
work as effectively and efficiently as possible in line with the needs of the organization‟
(Walters).
d. „Performance management is a strategic and integrated approach to delivering
sustained success to organizations by improving the performance of the people who work
in them and by developing the capabilities of teams and individual contributors‟
(Armstrong and Baron, 4).
 Means which mangers ensure employees‟ activities and outputs are congruent with
organization‟s goals
 Very broader & complicated function of HR.
 PM starts with the joining of a new incumbent in a system and when employees
quit the organization.
 it is integrated with other key HR activities, especially human capital management,
talent management, learning and development and reward management
PM is an endless spiral, which links several processes such as
performance planning, managing performance throughout the year, taking stock of
managee‟s(employee) performance and potential. Also it includes recognizing and
rewarding success at the end of the year. PM links these processes in such a way that an
individual managee‟s performance is always oriented towards achieving organizational
goals. PM creates positive goal oriented task motivation and aims at reducing intra-
organizational conflict.
Performance management (PM) is a goal-oriented process
directed toward ensuring that organizational processes are in place to maximize the
productivity of employees, teams, and ultimately, the organization. It is a major player in
accomplishing organizational strategy in that it involves measuring and improving the
value of the workforce
Performance management is integrated in two senses:

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(1) Vertical integration, linking or aligning business, team and individual objectives with
core competences
(2) Horizontal integration, linking different aspects of human resource management,
especially organizational development, human resource development, and reward, so as
to achieve a coherent approach to the management and development of people.
AIMS /PURPOSE/OBJECTIVES OF PERFORMANCE MANAGEMENT
The overall aim of performance management is to establish a high performance culture in
which individuals and teams take responsibility for the continuous improvement of
business processes and for their own skills and contributions within a framework
provided by effective leadership. Its key purpose is to focus people on doing the right
things by achieving goal clarity.
Specifically, performance management is about aligning
individual objectives to organizational objectives and ensuring that individuals uphold
corporate core values.
i.e. The aim is to develop the capacity of people to meet and exceed
expectations and to achieve their full potential to the benefit of themselves and the
organization.
 Empowering, motivating and rewarding employees to do their best.
 Focusing employees‟ tasks on the right things and doing them right.
 Aligning everyone‟s individual goals to the goals of the organization.
 Proactively managing and resourcing performance against agreed accountabilities
and objectives.
 The alignment of personal/individual objectives with team, department/divisional
and corporate plans. The presentation of objectives with clearly defined
goals/targets using measures, both soft and numeric.
 The process and behaviours by which managers manage the performance of their
people to deliver a high-achieving organization
 Maximizing the potential of individuals and teams to benefit themselves and the
organization, focusing on achievement of their objectives
 Identifying the barriers to effective performance and resolving those barriers
through constant monitoring, coaching and development interventions.

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 Creating a basis for several administrative decisions strategic planning, succession
planning, promotions and performance based payment.
 Promoting personal growth and advancement in the career of the employees by
helping them in acquiring the desired knowledge and skills.
CHARACTERISTICS/FEATURES/ PREREQUISITES OF PERFORMANCE
MANAGEMENT
1. Performance management is a planned process of which the primary elements are
agreement, measurement, feedback, positive reinforcement etc.
2. concerned with inputs and values. The inputs are the knowledge, skills and
behaviours required to produce the expected results.
3. Continuous process
Performance management should be a continuous process and should be
carried out throughout the year, in its totality i.e., planning managee performance and
development, monitoring managee performance and mentoring managee development
and annual stock taking. These three phases should be implemented sequentially
4. Flexible process
The Performance management process should be flexible and should
ensure the manager and managee acting together. However, each one of these parties
should have sufficient maneuverability to design their own process within the overall
framework for performance management.
5. Focuses on future performance planning and improvement. i.e. futuristic
Performance management should be futuristic. All the three parts of
performance management are oriented towards the future planning and improvement.
Evaluation system gives necessary inputs for future actions
6. Participatory:

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PM is participatory in character. It provides for regular and frequent
dialogue between the manager and the managee to address performance as well as
development needs.
6. Controlling:
PM aims at measuring managee„s actual performance against planned
performance i.e., targets, standards or indicators.
8. Behavioural in Content
PM is completely development nature and concerns itself vigorously with
managee„s psychological behavioural aspects and personality traits, which are critical
inputs to the performance process. PM specify these personal attributes and behaviour of
each employee and meticulously assess the extent of their contribution to managee level
of performance. This paves the way to identify managee‟s future development needs.
7. Win-Win Philosophy:
PM provides the frame work in which manager must support their
managees to succeed and to win.
8. Organizational goals are made clear.
The goals of the unit and the organization are made clear, and the employee
understands the link between what he or she does and organizational success. This is a
contribution to the communication of what the unit and the organization are all about and
how organizational goals cascade down to the unit and the individual employee.
Performance management systems can help improve employee acceptance of these wider
goals
9. Employees become more competent.
An obvious contribution is that the performance of employees is improved. In
addition, there is a solid foundation for developing and improving employees by
establishing developmental plans
10.Clarity of organisational goals
The managers need to clearly and precisely lay down the organisational goals,
objectives and ensure that these are well informed to the managees and other employees

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and make them to realize what the organisation expects from them. The organisational
goals need to be translated into individual, team and departmental/ divisional goals.
11.Evaluation
the individual, team, department/ divisional performance needs to be evaluated on
continuous basis. The organisation should develop an evaluation system and process,
which is designed and developed on scientific lines.
12. Cooperation but not control
the managers should nurture the practice of getting work done through the system
of obtaining managees„ consensus rather than through control or coercion.
13. Self-management teams
the management need to encourage the individual and teams for self-management
of their performance. This procedure creates in the managees a sense of responsibility
and develops a spirit to work with commitment and evaluate his/her strengths and
weaknesses from time to time and plan for reducing the performance gaps.
14. Leadership development
the managers need to identify such of the managees who have leadership potential
and apart from sincerity and honesty to ensure better and effective two-way
communication between the managers and the managees.
15. System of feedback
the organisation must have a foolproof feedback system of managees/
individuals/ teams/ departments„ performance. It should be monitored continuously and
generate feedback loops for better performance management.
Scope of Performance Management
Employees are the most significant resource of an
organisation. Performance management is the mirror that shows the commitment of the
human capital to the organisation and to their assigned task. This system creates an
opportunity for the top management to reward the excellent performance or reprimand
unsatisfactory performance. This powerful system should be a tool to assess the overall

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performance of the organisation. This system not only show case the individual
performance of the organisation, but it is also a tool to measure the developing steps of
the organisation as a whole towards its missions.
The scope of the performance management includes the following:
1. Providing employees a better understanding of their role and responsibilities
2. Increase the confidence of the employees through recognizing their strengths
3. Identifying training needs to overcome the weak areas
4. Improve the relationships in the working areas
5. Improve communication between superior and subordinates
6. Improve teams and team spirit
7. Improve commitment
8. Succession planning through grooming subordinates to future managers
9. Providing space for personal reflections
10.Providing a platform for personal development
11.Providing assistance to achieve personal career goals
12.Providing a better work environment and work place
13.Providing counseling to make work life balance
14.Improving the overall organizational work culture
15.Creating qualitative work environment
16.Recognizing and promoting work culture.
17.Creating ownership
And the list grows day by day. As proposed by management guru Marshall Goldsmith,
organisations need to shift focus from performance „feedback‟ to „feed forward‟. The
„feed forward‟ approach emphasizes proactive and holistic performance management at
individual, team and organisational levels.
Principles of effective Performance Management
Performance management can bring quality and effectiveness only when certain
basic and fundamental principles are followed. These include:

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1. Transparency
The system should be transparent, free from partiality, bias and
discrimination among the employees. If not, the base of the system itself will not be
strong to build anything above that. For example, work allocation, promotions, transfers,
incentives, and bonus – if based on Performance management, then the system should be
transparent and gives no room for employees to complaint.
Decisions relating to performance improvement and measurement
such as planning, work allocation, guidance and counseling and monitoring, performance
review etc., should be effectively communicated to the managees and other members in
the organisation
2. Employee Empowerment and development
Effective participation of employees/ managees (individuals and
teams) in the decision – making process and treating them as partners in the enterprise.
Recognizing employees/ managees of their merit, talent and capabilities, rewarding and
giving more authority and responsibility etc., come under the umbrella this principle.
Participative and empowered employees take the responsibility well.
They develop the belongingness towards the organisation. Recognizing and rewarding
the employees brings them together to work and achieve.
3. Organisational Values and Culture
A fair treatment and ensuring due satisfaction to the employees,
empathy and trust, respect and treating people equally – are all the foundations for the
development of the Culture and values of the organisation, which reflects in overall
output.
The manages / employees should be well informed about the organisational
mission, objectives, values and the framework for managing and developing individuals
and teams for better performance.
4. Amicable Workplace

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A work environment which attracts the employee rather than
expecting the week end to be away from the workplace is the principle. The workplace
should be congenial, warm and amicable to the employees. This helps in improving the
quality of work life and balancing the work life.
6. External environment
Effective and contextual management of external environment to overcome
the obstacles and impediments in the way of effective managerial performance .
Significance/benefits of Performance Management
Performance Management system is essentially evaluating and understanding the
performance of the employees, but also it is an overall holistic process of a cycle of
improving the performance of the individual human who has various interests, various
potentialities, problems, ego, and thousand other traits. Hence, we can say that,
performance management tries to analyze and find the competency of the employees,
identify the areas of performance lack, planning with system to encourage and enhance
the performance for improvement.
Performance Management plays the vital role of identifying and enhancing the
potentials of employees to fulfill the needs and requirements of the jobs assigned to them
as well as to move upward them in his career ladder.
Performance Management helps the overall organization‟s effectiveness and
development by
 Effective business environment
 Improved HR activities
 Motivation
 Improved Work Culture
 Sustainable work force
 Optimal utilization and productivity from the work force
 Scope for continuous learning
Benefits:

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1. PM focuses on results, rather than behaviors and activities.
A common misconception among supervisors is that behaviors and
activities are the same as results. Thus, on employee may appear extremely busy, but not
be contributing at all toward the goals of the organization. An example is the employee
who manually reviews completion of every form and procedure, rather than supporting
summation of the review. The supervisor may conclude the employee is very committed
to the organization and works very hard, thus, deserving a Very high performance rating.
2. Aligns organizational activities and processes to the goals of the organization
3. Cultivates a system- wide , long term view of organization.
4. Produces meaningful measurements
5. Highly visible performance gap
6. Increased pressure to improve
7. Indication where improvement is needed
8. Continuous and sustained improvement in quality, cost, delivery and safety
9. Satisfied customer, shareholders and employees
DEVELOPMENTS IN PERFORMANCE MANAGEMENT
Extensive research carried out in the UK and USA has established that new perspectives
on performance management have emerged with the following characteristics:
 an emphasis on front-end planning rather than back-end review;
 a broader definition of performance that focuses on more than narrowly defined
job responsibilities
 an emphasis on ongoing dialogue rather than forms and rating scales;
 The recognition that there are many factors contributing to performance outcomes.
CONCERNS OF PERFORMANCE MANAGEMENT
Typical concerns expressed about PM are that it seems extraordinarily difficult and often
unreliable to measure phenomenon as complex as performance. People point out that
today‟s organization are changing rapidly, thus results and measures quickly become

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obsolete. they add that translating human desires and interactions is impersonal and even
heavy handed.
The following are the main concerns of performance management:
1. Concern with outputs, outcomes, process and inputs.
Performance management is concerned with outputs (the achievement of results) and
outcomes (the impact made on performance). But it is also concerned with the processes
required to achieve these results (competencies) and the inputs in terms of capabilities
(knowledge, skill and competence) expected from the teams and individuals involved.
2. Concern with planning.
Performance management is concerned with planning ahead to achieve future success.
This means defining expectations expressed as objectives and in business plans.
3. Concern with measurement and review.
Performance management is concerned with the measurement of results and with
reviewing progress towards achieving objectives as a basis for action
.
4. Concern with continuous improvement.
Concern with continuous improvement is based on the belief that continually striving to
reach higher and higher standards in every part of the organization will provide a series
of incremental gains that will build superior performance. This means clarifying what
organizational, team and individual effectiveness look like and taking steps to ensure that
those defined levels of effectiveness are achieved.
5. Concern with continuous development.
Performance management is concerned with creating a culture in which organizational
and individual learning and development is a continuous process. It provides means for
the integration of learning and work so that everyone learns from the successes and
challenges inherent in their day-to-day activities.
6. Concern for communication.
Performance management is concerned with communication. This is done by creating a
climate in which a continuing dialogue between managers and the members of their
teams takes place to define expectations and share information on the organization‟s

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mission, values and objectives. This establishes mutual understanding of what is to be
achieved and a framework for managing and developing people to ensure that it will be
achieved
7. Concern for stakeholders.
Performance management is concerned with satisfying the needs and expectations of all
the organization‟s stakeholders – owners, management, employees, customers, suppliers
and the general public. In particular, employees are treated as partners in the enterprise
whose interests are respected, whose opinions are sought and listened to, and who are
encouraged to contribute to the formulation of objectives and plans for their team and for
themselves. Performance management should respect the needs of individuals and teams
as well as those of the organization, recognizing that they will not necessarily coincide.
8. Concern for fairness and transparency.
Four ethical principles that should govern the operation of the performance management
process are:
– Respect for the individual;
– Mutual respect;
– Procedural fairness;
– Transparency of decision making.
UNDERSTANDING PERFORMANCE MANAGEMENT
There are five issues that need to be considered to obtain a full understanding of
performance management:
1. The meaning of performance;
2. The significance of values;
3. The meaning of alignment;
4. Managing expectations;
5. The significance of discretionary behaviour.
The meaning of performance
Performance is often defined simply in output terms – the achievement of quantified
objectives. But performance is a matter not only of what people achieve but how they
achieve it. High performance results from appropriate behaviour, especially discretionary

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behaviour, and the effective use of the required knowledge, skills and competencies.
„Performance means both behaviours and results. when managing performance both
inputs (behaviour) and outputs (results) need to be considered
Performance management and values
Performance is about upholding the values of the organization. This is an aspect of
behaviour but it focuses on what people do to realize core values such as concern for
quality, concern for people, concern for equal opportunity and operating ethically.
The meaning of alignment
One of the most fundamental purposes of performance management is to align individual
and organizational objectives. This means that everything people do at work leads to
outcomes that further the achievement of
organizational goals. Alignment can be attained by a cascading process so that objectives
flow down from the top and at each level team or individual objectives are defined in the
light of higher-level goals.
Managing expectations
Performance management is essentially about the management of expectations. It creates
a shared understanding of what is required to improve performance and how this will be
achieved by clarifying and agreeing what people are expected to do and how they are
expected to behave and uses these agreements as the basis for measurement, review and
the preparation of plans for performance improvement and development.
Performance management and discretionary behavior
Performance management is concerned with the encouragement of productive
discretionary behaviour. Discretionary behaviour refers to the choices that people make
about how they carry out their work and the
amount of effort, care, innovation and productive behaviour they display. It is the
difference between people just doing a job and people doing a great job.

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PA (PERFORMANCE APPRAISAL) AND PM
a. PM
Performance management is the process of planning performance,
appraising performance, giving its feedback, and counseling an employee to improve his
performance.
Performance management is more comprehensive than performance
appraisal, though performance appraisal is part of performance management. Besides
performance appraisal, performance management involves performance planning and
providing feedback and counseling to employees to improve their performance.
In performance management, all activities are linked to organizational
objectives and strategies. Because of such a linkage, the focus is on why to appraise
rather than what and how to appraise the performance
1. Performance management is closely concerned with the organizational culture and
strategically linked to clearly defined to organizational objectives. Therefore,
performance measure is based on the critical success factors derived directly form the
corporate and business strategy.
2. Performance management system is closely linked to other systems of human resource
management, like planning, succession planning, and training and development. Many
feel that there should be separation of appraisal for rewards from appraisal for
development. Further, it is suggested that peer-level managers should conduct appraisal
for rewards, instead of just immediate superiors.
3. Performance management is a continuous process of monitoring and feedback. There
should be involvement of employees through focus group interviews, surveys, etc., in all
stages for the design, implementation, and review process.
4. Performance management involves effective use of technology in conveying desired
competencies and in monitoring, collecting and giving feedback.
5. Performance management emphasizes comprehensive training to managers not only
for their own development but also to act as effective coaches as the role of coaching in
performance improvement is critical.
6. Performance management is a dynamic system that is suitable for changing workplace
realities, such as working in teams and alternative work arrangements like tele-working,
job sharing, etc.

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Managers need to know whether their employees are
performing their jobs efficiently and effectively or whether there is need for
improvement. Evaluating employee performance is part of a performance management
system, which is a process of establishing performance standards and appraising
employee performance in order to arrive at objective human resource decisions as well as
to provide documentation to support those decisions. The performance appraisal is a
critical part of a performance management system. The following are some different
methods of doing performance appraisal.
b. PERFORMANCE APPRAISAL
Performance appraisal is the systematic, periodic and an impartial
rating of an employee„s excellence in matters pertaining to his present job and his
potential for a better job.
It is the process by which an employee‟s contribution to the organization
during a specified period of time is assessed. Performance appraisal (PA) is a formal
system of review and evaluation of individual or team task performance. PA is especially
critical to the success of performance management. Although performance appraisal is
but one component of performance management, it is vital, in that it directly reflects the
organization‟s strategic plan.
Characteristics of Performance Appraisal:
The following are the characteristics of Performance Appraisal
1. A Process:
Performance appraisal is not a one- act play .It is rather a process that involves several
acts or steps.
2. Systematic Assessment:
Performance appraisal is a systematic assessment of an employee„s strengths and
weakness in the context of the given job.
3. Main Objective:
The main objective of it is to know how well an employee is going for the organisation
and what needs to be improved in him.
4. Scientific Evaluation:
It is an objective, unbiased and scientific evaluation through similar measure and
procedures for all employees in a formal manner.

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5. Periodic Evaluation:
Systematic (i.e., formal) appraisal of an individual employee is likely to occur at certain
intervals throughout that person„s history of employment (say quarterly ,six monthly,
annually, etc.)

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PURPOSE OF PERFORMANCE APPRAISAL
The following are the main purposes of performance appraisal.
1. Appraisal Procedure:
It provides a common and unified measure of performance appraisal, so that all employee
are evaluated in the same manner. It gives an in discriminatory rating of all the
employees.
2. Decision Making: Performance appraisal of the employees is extremely use fooling
the decision making process of the organization. In selection, training, promotion, pay
increment and in transfer, performance appraisal is very useful tool.
3. Work Performance Records: Performance appraisal gives us complete information
in the form of records regarding very employee. In the case o find us trial disputes even
arbitrator accepts these records in the course of grievance handling procedure.
4. Employees Development: Performance appraisal guides the employees in removing
their effects and improving their working .The weaknesses of the employee recorded in
the performance appraisal provide the basis for an individual development programme. If
properly recorded and used, the performance appraisal gives the fair opportunities to
employees to correct and rectify their mistakes.
5. Enables Supervisors to be more alert and Competent:
Performance appraisal enables supervisor to be more alert and competent and to improve
the quality of supervision by giving him a complete record of employee's performance.
He can guide an employee, where he is prone to commit mistakes.
USES of PA
1. Help in Deciding Promotion:
It is in the best interest of the management to promote the employees to the positions
where they can most effectively use their abilities.
2. Help in Personnel Actions:
Personnel actions such as lay-offs, demotions, transfers and discharges etc. May be
justified only if they are based on performance appraisal. While in some cases, actions
are taken because of unsatisfactory performance of the employee, in some other cases it
may be called for due to some economic conditions beyond control such as changes in
production process. In former case, the action can only be justified on the basis of the
result of performance appraisal.

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3. Help in Wage and Salary Administration:
The wage increase given to some employees on the basis of their performance may be
justified by the performance e appraisal results. In some cases appraisal, i.e.,merit and
seniority are combined for higher salaries on better positions.
4. Help in Training and Development:
An appropriate system of performance appraisal helps the management in devising
training and development programmes and in identifying the areas of skill or knowledge
in which several employees are not at par with the job requirements. Thus the appraisal
system points out the general training deficiencies which may be corrected by additional
training, interviews, discussions or counselling. It helps in spotting the potential to train
and develop them to create an inventory of executives.
5. Aid to Personnel Research:
Performance appraisal helps in conducting research in the field of personnel
management. Theories in personnel field are the outcome of efforts to find out the cause
and effect relationship between personnel and their performance. By studying the various
problems which are faced by the performance appraiser, new areas of research may be
developed in personnel field.
Performance appraisal compared with performance management
Performance appraisal Performance management
1.Top-down assessment
2.Annual appraisal meeting
3.Use of ratings
4.Monolithic system
5.Focus on quantified objectives
6.Often linked to pay
7.Bureaucratic – complex paperwork
8.Owned by the HR department
1. Joint process through dialogue
2.Continuous review with one or more
formal reviews
3. Ratings less common
4. Flexible process
5. Focus on values and behaviours as well as
objectives
6.Less likely to be a direct link to pay
7.Documentation kept to a minimum
8. Owned by line managers

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PM and MBO
MBO
The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker
in 1954 in his book “The Practice of Management”. It can be defined as a process
whereby the employees and the superiors come
together to identify common goals, the employees set their goals to be achieved, the
standards to be taken as the criteria for measurement of their performance and
contribution and deciding the course of action to be followed.
MBO is also a mechanism for appraising performance. In fact, it„s the
preferred method for assessing managers and professional employees. With MBO,
employees are evaluated by how well they accomplish a specific set of goals that has
been determined to be critical in the successful completion of their jobs.
 It is the process of defining objectives within an organization so that management
and employees agree to the objectives and understand what they need to do in the
organization.
 The essence of MBO is participative goal setting, choosing course of actions and
decision making.
 Important part of MBO is the measurement and comparison of the employee‟s
actual performance with the standards set. Ideally, when employees themselves
have been involved with the goal setting and choosing the course of action to be
followed by them, they are likely to fulfill their responsibilities.
Features & Advantages of MBO
 Clarity of goals – With MBO, came the concept of SMART goals i.e. goals that
are:
Specific, Measurable, Achievable, Realistic, and Time bound.
The focus is on future rather than on past. Goals and standards are set for the
performance for the future with periodic reviews and feedback.
 Motivation – Involving employees in the whole process of goal setting and
increasing employee empowerment increases employee job satisfaction and commitment.
 Better communication and Coordination – Frequent reviews and interactions
between superiors and subordinates helps to maintain harmonious relationships within
the enterprise and also solve many problems faced during the period.
 Subordinates tend to have a higher commitment to objectives they set for
themselves than those imposed by others.

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Comparison of management by objectives, performance appraisal and performance
management
Management by objectives Performance appraisal Performance management
MBO
• Emphasis on individual
integrating objectives
• Emphasis on quantified
requirements and
performance measures
• Annual appraisal
• No ratings
• Backward looking
• Focus on performance
achievements
• Top-down system
• Monolithic system
• Packaged system
• Complex paper work
• May not be a direct
link to pay
• Applied to managers
• Owned by line
managers and personnel
department
PM
• Focus on organizational,
and individual objectives
• Covers both outputs
(results) and inputs
(competencies)
• All the year round
• May not have ratings
• Forward looking
• Focus on development as
well as performance
• Joint process
• Flexible process
• Tailor made
• Paper work minimized
• May not be linked to
performance pay
• Applied to all staff
• Owned by line managers
PA
• Individual objectives may
be included
• Some qualitative performance
objectives may
also be included
• Annual appraisal
• Ratings
• Backward looking
• Focus on levels of
performance and merit
• Top-down system
• Monolithic system
• Usually tailor made
• Complex paper work
• Often linked to performance
Pay
 Applied to all staff
• Owned by HR department

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7 RULES OF EXCELLENCE FOR HR MANAGERS
In today‟s competitive business environment where people
management has come on priority, excellence in discharging HR functions is on high
demand from HR managers. There cannot be any magic stick by which any HR manager
can be transformed into an excellent one. It is only by proactive mindset and practice; HR
manager can bring excellence in him. No one is born with the excellence value.
Practically it is developed slowly by passage of time.
It is not necessary that only a highly qualified manager from a premier
management school brings with him the guarantee of excellence. What is required is the
quest of learning and attitude of taking ownership of the problems in the organization by
the person.
The following are the rules of excellence for HR managers:

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1. Become leader not a manager.
The basic skills of excellence in HR require a manager to build people, bind
people together with hearts minds and souls and for this he has to become a leader and
not a mere manager. Every organization that has maintained its excellent over the period
of time has been able to do so because it had a leader and not a manager who was able to
transform the culture of excellence. While a manager does things right, as a leader HR
manager should always do right things. While a manager may be efficient to move in a
right direction to achieve excellence, as a HR manager you should have a vision to
choose that direction. While manager may use the authority to discharge his functions, as
a leader you should use your power derived from employees respect. HR manager has to
develop the capability of working well without losing balance in times of crisis.
2. Be careful, honest and sincere while selecting a person.
Engage right person at the right job. Don‟t try to fit a square in a hole. Discourage
favouritism in recruitment. Don‟t compromise with the quality and requirement of the
job. Always prefer attitude in a person. Engage for attitude and train for skills. It is the
attitude of the person which makes a difference while performing his job. Problem starts
from this point.
3. Don’t make induction a ritual.
Most of the HR managers do this exercise as a ritual and leave it on subordinates
which ultimately turn out to be an utter failure in achieving purpose of this exercise. This
is high time for HR manager to mould new employee and tune him with the
organizational culture. Most of the new employees leaving organization in a short tenure
reveal the startling fact of their poor/negative induction at the time of joining making
their prime cause demotivation.
4. Make the employee clear what is expected from him.
It is for the HR manager to ensure that employees working in the organization are
well aware of what the organization expects from them. In one of the reputed
organization when I was called as an expert to diagnose the problem in people
management, after observing the work culture I commented, „In your organization

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everybody is doing every body‟s job and nobody knows what he is doing‟. HR Manager
has to be cautious about this silent killer of the organization culture.
5. Be firm and fair.
HR manager has to practice this policy down the line all the time. While dealing
employee relations he has to exhibit and display his firmness and fairness even in
sensitive situations to command respect from all corners. He has to champion the cause
of employees and employer too.
6. Confront Problems.
HR manager who escape from tricky situations and problems cannot excel in
discharging his functions. He has to confront the problems as they arise and disseminate
them. Always remember that avoiding problems and keeping the dust under the carpet
will not pave the way of excellence. In any organization where HR people pass the buck
and shift the burden of problems like shuttle cock are bound to face more complex
situations which may explode in a more aggressive way causing irreparable losses to
organization culture.
7. Apply the principle of 20-80.
As a HR professional it is not necessary all the time to use your technical
knowledge for achieving excellence but what is required is skill of dealing with people
and this ratio is known as 20-80. 80% is of your people handling skills in all situations
with common sense management of human dignity and 20% is of your technical
knowledge. If your reverse this ratio, you may never achieve excellence.
7 DEADLY SINS OF HR PROFESSIONALS
Sin#1-Treating job seekers like they’re not important
These job seekers could potentially be your customers. If you treat them badly, they will
remember and tell everyone they know of their poor recruiting experience and then they
will stop shopping there or blackball your products and services. Make sure you value
every potential job seeker like they were buying product or services from your company.
Re-design your career site, processes and your policies with this in mind.

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Sin #2 – Not acting like a business function
Most HR groups act like they should have entered the legal profession. Most business
requests are greeted with a “No, you can‟t do that, there is too much risk” or the policy
does not permit us to that or I will get back to you on that and you seldom does anyone
ever hear back. Take calculated risks along the way, they will pay off.
Sin #3 – Not engaging employees
Sin #4 – Not being truthful
Nothing destroys trust like lying or being deceitful about what‟s happening or why you
are putting a certain policy in place. Be direct and at least get employees respect for being
honest. They may not like you but at least they may forgive you.
Sin #5 – Hiding behind your desk
This is a big one: it's important to socialize with employees. Get out there and visit the
shop floor, the labs, the showrooms, the retail stores. Go wherever your employees and
managers are and talk to them. Find out what you can do to make it easier for them to be
productive, to build better products, to feel safer, etc.
Sin #6 – Trying to be everything to everyone
Focus on what your great at and what is the most important to your business and
employees. Outsource or get out of certain functions where the cost is too high or the
value too low. Be tough on yourself on making this assessment. Get outside help if
necessary.
Sin #7 – Not Measuring Value
Sure measure some of the basic HR metrics for core functions but don‟t‟ go overboard, it
creates paralysis. Do focus on your value to your business. This is hard thinking and will
make you feel vulnerable as you expose metrics that you and your team are quite poor at.