White Papers: Employee Performance Management (EPM)

Abstract

Companies today realize that effective management of HR is absolutely crucial for achieving the strategic objective of sustained and rapid growth. One way to measure and track EPM is to consider the twin factors of ‘goal based performance‘ and ‘management of competencies’. Developing employees’ skills & competencies has emerged as one of the biggest drivers of performance with companies looking at automated systems to track and reward performance.

Purpose of EPM

Evaluating an employee’s performance and identifying his/ her development needs are two important functions of a good EPM system. Performance-based remuneration is a strategic part of the EPM since it contributes to the success of employee retention initiatives.

Constituents of a good EPM system

Organizations use a performance appraisal measure, generally in the guise of an appraisal form. This is a comprehensive document which helps managers review an employee accurately and fairly. Appraisal forms typically cater to the following parameters:

• » Employee Self Appraisal
• » Goal based Performance
• » Rating Skills & Competencies
• » Overall Grade, Relative Rating & Pen-picture
• » Employee Development Needs

Employee Self Appraisal

Most employees, particularly at the supervisory or executive levels, actually prefer an opportunity to express his/her achievements, problem areas, aspirations and so on. A structured self appraisal form makes it easy for employees to provide the relevant information. Empxtrack, too, has a tool to measure self appraisal, which includes the following elements:

Self-realised achievements: Here the employee indicates achievements made against the goals that were self assigned. These could include self development goals, team improvement initiatives, community/ social service roles and other tasks, which were not officially assigned to the employee.

• Factors which helped performance: The employee could list the initiatives taken by the management to improve workforce productivity like better work stations, captive power, new plant & machinery, latest tools, systems and processes and various types of training (both technical & managerial).
• Factors that hindered performance: Here is an opportunity for an employee to state, preferably in the form of a suggestion, specific improvements in the infrastructure, leadership style, work place facilities or training that the management could undertake for improved performance.
• Realizing aspirations: Every employee has certain aspirations in regards to their job, be it career growth, promotions, transfer to a specific location, special interest in a particular position, an opportunity to work as a trainer and so on. Once the company can understand and work with the employee to realise this long term goal, it automatically achieves both employee satisfaction and retention.
• Collaborative spirit: Self appraisal must enable an employee to develop gratitude collaborative attitude and give team members their due. Whether they were seniors/subordinates/peers, other employees usually help you achieve your goals.

Goal-based performance

Each employee is assigned, at the beginning of the year, certain goals to be achieved in different periods of time (weekly / monthly/ quarterly/ half yearly/ annual).
Some of these goals may have originated from the company objectives, some could be assigned as KRAs and the others could be a part of the regular deliverables expected. Each goal is associated with a measure (example: 25% of the pending payments to be collected every quarter by each Sales Executive). An employee may have 8 to 10 SMART goals to be accomplished during the year and each goal carries a corresponding weight assigned to it by the employee’s manager.

A good EPM system must allow the manager to view the JDs of all subordinates while assigning weights to different goals and track them till completion. ‘Empxtrack’ provides the facility to automatically transfer details from the ‘Employee Goal Sheet’ to the ‘Appraisal Form’ including the employee’s achievements against each goal. The system automatically evaluates employee’s performance based on the Manager’s rating for each goal. Thus the solution not only provides an end of the year assessment, but a continuous track of performance against each goal.

Rating of Skills & Competencies

Each job description typically comes with a set of competencies and skills relevant to the position. In addition, some organizations choose leadership competencies common to all employees at the management/ executive level. These competencies are associated with rating scales that are then used to measure performance.

Empxtrack Appraisal provides the facility to populate appraisal forms with the relevant set of skills and competencies applicable to an employee’s job position. It also provides an understanding of the meaning of each competency and its respective rating to the reviewer. The solution also allows further customization and managers can enter new competencies/ skills into the Competency Master to cater to specific requirements. A drop down facility to select and enter ratings for each competency makes it easy for the manager to complete the assessment in a few minutes.

Over-all Grade, Relative Rating & Pen-picture

A good appraisal system computes the overall score of an employee based on the weights allocated to both goals as well as competencies. At senior management positions, most organizations assign 60 to 70% weight to competencies and 30 to 40% weight to goals. Also, at senior levels, most companies emphasise primarily on developing leadership competencies while at junior positions, managerial and technical skills remain in focus. Therefore, organizations use different appraisal forms for different levels of employees. Another good practice observed in some of the leading organizations is relative rating by the manager of subordinates of the same level. This helps to discriminate between the best and the second best employee, a capability every manager needs to develop. An employee’s pen picture highlights both the positive and negative traits while helping the manager plan counselling sessions.

‘Empxtrack’ has all the above features, but leaves the choice of adapting these best practices to the user.

Employee Development Needs

A good appraisal system must capture the development needs of the staff, which are decided jointly by the employee and the manager. However, some organizations still expect the manager to identify the development needs of his/her subordinates. Consolidation of these requirements often results in the preparation of a ‘training calendar’ for the organization and a ‘development plan’ for each employee.

Empxtrack fully supports this functionality and also provides organizations with an automated ‘Training Management Information System’ which is fully integrated with the EPM.

Other Important aspects of a good EPM system

• Multiple Channels of Reporting: Some organizations have two levels of appraisal – once by the manager and then by a senior executive, also known as the reviewer. Then there are cases where cross-functional reporting is also undertaken (example: appraisal by Line Manager for operational role or by Functional Manager for a technical role).
• Normalization of Appraisal Scores: Rating tendencies of different Managers vary from lenient (called soft reviewers) to stringent (called harsh reviewers). Normalization, through trend analysis, helps in removing these aberrations. The process requires continuous estimation of the average rating for each manager and for the organization as a whole leading to the calculation of a ‘correction factor’ for each manager. Since trend analysis requires collation of e previous reports initiated by a manager, the normalization process is difficult to be managed without automation. . Since trend analysis requires collation of all the reports initiated by a Manager during the last few years, the normalization process is difficult to be managed without automation.
• Counseling Records: It is a good practice in some organizations to maintain a record of all the discussion conducted by a manager with his/her employee. These could be then viewed during the annual appraisal of the employee. Typically, employees are then asked to document the criticisms and praise offered during the session and get it signed off by the manager.
• Critical Incidents Diary: A manager needs to maintain a record of critical events in which any of his/her subordinates played a crucial role. Also he/she also needs to record incidents of gross violations by subordinates. Such a diary, if available, helps in reporting objectively on employees during their annual appraisal.
• Online EPM: This is a preferred approach even with small organizations as managers may need to spend a lot of time filling out appraisal forms. The online approach also offers a single view of JDs, Counseling Notes, Goal Sheets, Critical Incidents, ratings, description of competencies and other interactive features.
• Integration: An EPM integrated with the employee data base (HRMS), payroll application, succession planning, training management, transfer management and remuneration will be desirable since it will ensure the use of a common data base, thereby ensuring the integrity of information provided for decision making.

Empxtrack Inc. has built-in features to address these six important aspects of a good EPM system. It can be customized to meet the specific requirements of any organization.