As human resources become increasingly critical to the growth of businesses, measuring human capital, identifying, developing, rewarding and managing employee performance is being looked at more strategically than ever before. With investors and other stakeholders evaluating company performance on a quarterly basis, appraisal systems are being tweaked regularly to suit changing business needs.
Beverages firm Coca-Cola India, for instance, recently replaced its five-point rating system with a four-point grading methodology to force reviewing managers to take that tough call on rating appraisees, and not take a median approach. “We found out, in many cases, that the appraiser would take the easy way out and assign a score of 2.5 or 2.7, rather than making the difficult choice of giving 2 or 3,” says Nalin Garg, vice-president, human resources, Coca-Cola India.
Illustration by Jayachandran/ MINT
Five months ago, business process outsourcing company vCustomer Corp. went online with its performance management system. The company broke down quarterly reviews into monthly objectives, and put in place informal feedback sessions every month to avoid any surprises, both for the employee and the employer, at the end of the quarter.
At Jindal Stainless Ltd, raises and promotions of managers will now depend more on tangible deliverables. All managerial staff at the steel firm is evaluated on the basis of current performance—measured by supervisors (40% weightage), and an outside agency, which assesses the leadership potential of the appraisee, weighted at 40%, while 20% weightage is given to the assessment made by cross-functional teams (for all-round feedback). “Along with a sharpened focus on deliverables, this year, we plan to increase the variable component from 15% of the gross salary to 20%,” says S.K. Jain, senior vice-president, human resources, Jindal Stainless.
Like Jindal Stainless, electrical distribution company Schneider Electric India Pvt. Ltd has made it mandatory for reviewing managers to evaluate appraisees according to the specific levels and bands they fall under, and not in clustered groups. For example, regional managers in sales teams will be compared with each other or employees in similar job roles. “The idea is to compare apples with apples,” says Robin Singh, director, human resources, Schneider Electric.
From this year, data analytics and customized process solutions provider eClerx Services Ltd has linked part of the bonus given to managers to competency-based development. For instance, a manager who is found lacking in soft skills is sent for training to fill that gap. “We made this change to make sure managers take training and development to fill competency gaps seriously,” says Kishore Poduri, head of human resources at eClerx.
Through these changes, eClerx and others are aiming at a performance-driven culture—among the first few to do so.
For, says Ganesh Shermon, head of human capital advisory service at consultant KPMG India : “Most companies in India still have basic, ad hoc models that have neither clear objectives set out nor the recognition of the criticality of a performance management system.”
Increasingly, however, companies are moving from a traditional performance management approach to the balanced scorecard—a framework developed by Robert Kaplan and David Norton in the 1990s, which aligns business activities to the vision and strategy of the organization, and monitors the performance of the organization against strategic goals.
Interestingly, there is an increasing amount of scrutiny on quality of work, with companies placing significant importance on qualitative measures. “It is no longer only about numbers and meeting targets. The means to the end (goals) has become very important,” says Shermon. “Companies want to know how employees are meeting their key performance areas. Is there a strategy and ethics involved in it?” says Shermon. “It is often seen that an employee may have met targets but also diluted a bit of the organization’s brand.”
“Appraisal is also about competencies or manifestation of the corporate behaviour an employee deploys while achieving goals and targets, in conformity with approved behaviour,” adds Shermon.
Some companies that have adopted balanced scorecards or other performance management methodologies—such as KPMG’s value-based management, Arthur Andersen’s value dynamics, Stern Stewart EVA—include Coca-Cola India,PepsiCo India Holdings Pvt. Ltd, Godrej and Boyce Manufacturing Co. Ltd, Syngenta India Ltd, Cargill India Pvt. Ltd, eClerx, HCL Technologies Ltd, Satyam Computer Services Ltd, Toyota Kirloskar Motors Ltd, Samsung India Electronics Pvt. Ltd, and public sector firms such as Indian Oil Corp. Ltd and Bharat Petroleum Corp. Ltd.
Explaining the rationale of changing appraisal systems, Sanjay Bali, vice-president of human resources, Samsung India, says: “Measuring the quality of human resources on changing performance parameters in a scientific and unambiguous way is critical since revenues and profitability are so dependent on it.”
Thus, companies are adding and/or modifying more variants, metrics and key result areas to the performance measurement system to bring in objectivity and align individual goals with those of the organization. For example, a sales executive is now evaluated on parameters such as leadership skills and initiative, teamwork and cooperation, people skills and contribution to the overall corporate brand, in addition to key result areas such as sales generated, customer retention and acquisition. The definition of key performance areas is better articulated now and these have become more measurable than before.
For instance, all employees at PepsiCo get rated on business and people results, with 50% weightage on each parameter. People results comprise four key areas—values-based culture, inclusion and diversity, talent management and personal development. PepsiCo India executive director of human resources, Pavan Bhatia, reasons, “The kind of business we are in, it is important that all employees, starting from the frontline staff to the business head, focus on people results.” He adds, “Along with business results, building the capability of the next line of employees is very important.”
The appraisal system, which was put in place in 2006 by PepsiCo India, is now being adopted across the beverages company’s offices worldwide.
As organizations move from the concept of individual business units to entrepreneurial business units, where entrepreneurial capabilities are applied within an organization, people management and leadership skills are becoming key performance areas, even for junior employees. Companies are driving the leadership objective right from the lowest level in an organization.
K.K. Swamy, deputy managing director at Toyota Kirloskar Motors, says: “Employees across levels are measured on leadership competencies, only the weightage on leadership skills increases from junior to senior levels.”
Human resource consultants say the orientation to performance management has changed over the last several years—appraisal systems now play a far greater role in an organization’s overall strategy. “Companies want to get it right not just in terms of measuring current performance, but also measuring an employee’s potential,” says Anita Belani, country head, Watson Wyatt India Pvt. Ltd, a global human resource consulting firm.
Human resource managers say that while it is important to have measures in place, an unbiased, transparent measure mechanism is necessary. While PepsiCo India’s Bhatia has put in place a survey called Connect that tracks whether people results are being fulfilled, Schneider Electric’s Singh has made it known that an appraisal report will not be considered complete till the appraisee and the reviewing manager’s manager, who is often the chief executive, send their comments on the appraisal.
Singh says objectivity is not easily achieved since, culturally, employees in India are not geared to deal with performance rating professionally.
But, it is essential. “Performance management is the big picture of a company’s vision, and (of) how the contribution of individuals, teams, divisions and, ultimately, the organization as a whole can help realize it,” says Navyug Mohnot, chief executive officer of QAI India Ltd, a consulting firm that deploys process improvement and quality initiatives in organizations.