Challenges in Implementing

performance management
• Lack of Alignment to the organization VMVs
(Vision, Mission & Values) -The organisational,
departmental, team and individual objectives
must be aligned to the VMVs.

• Lack of Management & Employee Commitment

- The implementation of the performance
management system has to be supported and
driven by management. In fact, a PMS should be
“Line-Manager Driven” rather than “HR
Department Driven”.
• Poor Communication around its benefits - For
effective implementation, monitoring and
evaluation phases, proper communication should
be required because it create a positive
momentum. Additionally, it is beneficial for
Organisation, Team and Individual.
• Perception of Administrative Hassle - With
the heavy workload on line managers as well
as employees, PMS is often perceived as an
administrative hassle. Line Managers and
Employees are resistant to using the PMS and
consider it as an additional task. To ensure
maximization of this tool, organizations need
to have a well-designed system in place, which
is easily accessible and is user-friendly.
• Lack of Transparency in the System - With the
implementation of any new systems in
organizations, it is crucial that Management
communicates about how the system will be used,
who will have access to the information, how will
the setting and evaluating of objectives take place as
well as what will be done with the results. It is
important for a system to be transparent for all its
users to gain commitment, participation and buy-in.
• Lack of Required Skills to use the System - Both
Appraisers and Appraisees must be trained in Setting
Objectives as well as Monitoring and Reviewing
Performance.
• Many managers have had bad experiences with
Performance Management Systems. This is
understandable as many systems are poorly
designed and do more to demotivate than
motivate employees. A well designed PMS
should enable leaders to attract and retain the
best talents, give employees a reason to
maintain their good performance, as well as
identify poor performers.
• PMS must be considered as a Business System
that ultimately enhances organisational
performance through their most important assets
– their PEOPLE.
Effective implementation of
PMS Strategies
1. Define and Communicate Company Goals and Performance
Objectives
• Your employees cannot meet your performance expectations
or company goals if they are not clearly outlined, making this
our first step toward effective performance management.
Sometimes employers are not as clear as they could be when
outlining their goals or company objectives, and often,
employees do not come forward to ask follow-up questions
when they are confused or unclear about something.

• You can define and outline goals by using a goal-tracking

software, creating a chart within the office, by sending out an
e-mail, holding meetings, or doing each of these things in turn.
When you are outlining goals and objectives, repeat the
message so that it sinks in, offer visuals (such as an office
chart and e-mail) so that employees have a reference, and
most importantly, hold meetings to check in on progress.
2. Utilize Performance Management Software
• If you are not already using a performance management
software, it may be time to consider trying it out. If you do
already use one and it’s not saving you any time, your team
complains about it, or it has low employee engagement, it
may be obsolete and in need of an upgrade. Performance
management software can really streamline your
performance management strategies, making it imperative
that you either begin using one or at least begin looking to
upgrade.
• A good performance management software system is one
that both offers traditional reviews and 360s, is employee-
friendly, has an easy-to-use dashboard interface, allows for
quick and actionable reporting and, of course, fosters
employee development. The software will help both you
and your employees stay on top of things so that your
company is running smoothly and efficiently at all times.
• Example: Synergita ,Bamboo HR ,Trakstar,reviewsnap ,
flowmotor etc.
3. Offer Frequent Performance Feedback
• While clearly communicating company and
individual goals is an essential step for any
business, communication alone is not going to
get you all that far. Your managers will also need
to check in with teams and employees
periodically not only to check progress but also to
provide feedback.
• Timely performance feedback is the best way to
affirm your employees and their work while also
shaping their work effectively. If you have a
performance software now, it should be able to
help you collect frequent feedback. If not, free
tools like Google forms, survey monkey, or even
just a basic e-mail request will get you pretty far.
4. Use Peer Reviews
• Another great way to foster effective
performance management is to utilize peer
reviews, also known as 360-degree
reviews. Again, this is a feature that can be found
on most performance management software
programs. Peer reviews are useful because they
allow co-workers to praise other co-workers and
highlight positive aspects of their performance,
as well as point out where improvements can be
made.
• This exercise helps employees to work together,
build better communication, and assess where
they can improve themselves while watching
their colleagues.
5. Pre-emptive Management and Recognition
• One way to guarantee results in the workplace is
to implement rewards and practice pre-emptive
management. This simply means that your
employees always know what is expected of
them so there is never any guesswork or need for
consequences in the workplace.
• This starts everyone on the same footing, making
a fair playing field where expectations are set and
goals are known. Rewards, or incentives, are also
an effective way to show employees that you
care, that you see their efforts and are pleased
with their performance, and that you want them
to keep up the good work.
6. Set Regular Meetings to Discuss Outcomes and
Results
• Also known as progress reports or progress
meetings, setting aside time to meet with your
team and seeing how things are going with your
set goals and objectives are important for
meeting those goals and objectives.
• These meetings can be held weekly, monthly, or
as often as you see fit. Ensure that your team
knows that attendance is mandatory. This makes
the progress feedback more accurate and allows
you to make plans for moving forward.
 When holding these meetings, be sure to have a
clear idea of what you want to cover. Some
objectives should include:
• Following Up on Peer Reviews
• Discussing Praises and Areas that Need Work
with the Team
• Recognizing Those Team Members Actively
Meeting their Goals and Objectives with Rewards
or Incentives
• Discussing Plans for The Next Phase of Projects
• Discussing Company Data: Revenue, Customer
Involvement, Marketing and Campaign Success,
Etc.
What is performance metrics ?
Employee performance metrics are key to
tracking how well employees are performing.
Implementing them the right way is tricky.
However, when done right, employee
performance metrics benefit both the
organization and the employee.
 There are various kinds of employee
performance metrics. We can split them up
into four main categories.

• Work quality metrics

• Work quantity metrics
• Work efficiency metrics
• Organizational performance metrics
A. Work quality – employee
performance metrics
Work quality metrics say something about the quality
of the employee’s performance. The best-known
metric is subjective appraisal by the direct manager.
1. Management by objectives
A way to structure the subjective appraisal of a
manager is to use management by objectives.
Management by objectives is a management model
aimed at improving the performance of an
organization by translating organizational goals into
specific individual goals. These goals often take the
form of objectives that are set by the employee and
the manager.
 2. Subjective appraisal by manager
In most companies, performance is assessed
several times a year during (bi-)annual
performance reviews. Employees are assessed
on several criteria, the quality of their work
being the most common.
• An adaption of this scheme is the so-called 9-
box grid. The 9-box grid is based on a 3×3
table in which the employee is assessed on
performance and potential. Employees with
high performance but low potential are
perfect for their current function.
• Employees in the top right corner, those who
score high on both performance and
potential, are often designated to quickly
advance through the organizational ranks as
they can add more value higher up the ladder.
• This 9-box grid is an easy way to assess the
current and future value of employees and is a
helpful tool for succession management (i.e.
you want to promote your high potentials).
3. Product defects
It is tricky to measure (production) quality
objectively. An approach often seen by more
traditional manufacturing industries would be to
calculate the number of product defects. Defect,
or incorrectly produced products, are an
indication of low work quality and should be kept
as low as possible.
 4. Number of errors
The number of input errors could act as an
alternative to the previously mentioned product
defects. The same goes for the number of
corrections in written work or the number of
bugs in software code. Especially in computer
programming, a single error can stop an entire
program from working. This can have a major
impact on the business, especially for companies
who release weekly or monthly new software
versions.
• The conciseness of a piece of code is another
important quality factor. If ten lines of code can
produce the same computational result as 100
lines of code, the former is an indication of better
quality.
 B. Work quantity – employee performance
metrics
As quantity is often easier to measure than
quality, there are multiple ways to measure this
employee performance metric.
1. Number of sales
The number of sales is a particularly easy way to
pinpoint a sales employee’s output. This holds
especially true with ‘simple sales’. This means
that, for example, organized street vendors only
steer on the number of sales, because, when
given sufficient time, the people with the best
skills will sell the most in an hour on the same
location. This is an example of an outcome metric.
2. Number of units produced
Different industries have different ways to
express their quantitative output. In traditional
manufacturing, the number of units produced
was often a reliable quantitative metric. In
modern (service) organizations, similar metrics
are still being used. For example, Bloomberg
tracks the number of keys that their 2,400
journalists hit per minute when they are typing
on their keyboard.
3. Handling time, first-call resolution, contact
quality, etc.
We could write a whole article on call center
metrics. Call centers are one of the most
employee performance metrics driven places.
Metrics like average handling time, which is the
average time the customer is on the phone
including when they are on hold, first-call
resolution, which is the number of callers whose
problem is resolved the first time they called,
contact quality, which is the rating a customer
can give on the call and service level, which is a
measure of how many calls are answered in what
time (e.g. 90% of calls are answered in 25
seconds). Check for a full overview of call center
employee performance metrics this blog.
C. Work efficiency – employee performance
metrics
The difficulty of both qualitative and quantitative
employee performance metrics is that they do
not say much on their own.
• work efficiency, as this metric considers the
resources (e.g. time and money: quantity)
needed to produce a certain output (quality).
• It is hard to achieve this balance, which is one of
the reasons a lot of companies struggle with
rating employees and with the performance
review practice itself. Companies like Deloitte, GE,
and Adobe scrapped performance reviews mainly
because of this reason.
D. Organization level employee performance
metrics
Organizations can also use employee
performance metrics to assess their own
competitiveness.
1. Revenue per employee
Revenue per FTE = Total revenue / FTE
This function calculates the revenue per FTE (Full-
time equivalent). This metric gives a ball-park
estimate of how much an individual employee
brings in. Low revenue and many employees give
a lower rating than the combination of high
revenue and fewer employees. This metric can
also be used to benchmark companies
2. Profit per FTE
Profit per FTE = Total profit / FTE
Profit per FTE is a similar metric to the
previous one (1) but focuses on profit instead
of revenue. A company’s profit is its total
revenue minus expenses. A high profit per
employee is a solid metric of an organization’s
financial healthiness.
3. Human Capital ROI
The human capital ROI is a metric that assesses the
value of human capital (i.e. knowledge, habits, and
social and personal attributes). By calculating the
company’s revenue (minus operating expenses and
compensation and benefit cost) and dividing this
number by the total compensation and benefit cost
that the company pays its employees, you can calculate
a human capital ROI.
• This approach is popularized by Jac Fitz in his book The
ROI of Human Capital. However, his approach to
measuring human capital is far from reliable and
subject to major changes. We at analyticsinhr.com
studied his book and tried to calculate the ROI metrics
for a number of major companies in the Netherlands.
The results were disappointing, as the metrics fail to
take important factors into account, like layoffs,
incidental cost, and other non-reoccurring events).
4. Absenteeism Rate
Absenteeism and performance are two highly
correlated constructs. Highly motivated and engaged
employees take in general fewer sick days (up to 37%
less, according to Gallup). Additionally, absent
employees are less productive and high absence rates
throughout an organization is a key indicator of lower
organizational performance.
5. Overtime per Employee
Overtime per FTE = Total hours of overtime / FTE
• The average overtime per FTE is a final employee
performance metrics. Employees who are willing to put
in the extra effort are generally more motivated and
produce more (in terms of work quantity).
 Conclusion
• It is impossible to capture performance in one single
employee performance metric. The best metrics
combine qualitative and quantitative metrics. Most
companies try to do this by asking managers and
colleagues to review people’s performance.
• The best metric is a combination of different
qualitative and quantitative employee performance
metrics, done by multiple people.
• Performance metrics are often combined with
recruitment data to predict which hires are most likely
to be top performers. This is done through comparing
candidates’ profiles with their performance a year
later. Patterns in this data can be used as input to make
better hiring decisions of new candidates.
Characteristics of effective
performance metrics
• 1. Strategic. To create effective performance metrics,
you must start at the end point--with the goals,
objectives or outcomes you want to achieve--and then
work backwards. A good performance metric have a
strategic objective. It is designed to help the
organization monitor whether it is on track to achieve
its goals. The sum of all performance metrics in
organization (along with the objectives they support)
tells the story of the organization’s strategy.
• 2. Simple. Performance metrics must be
understandable. Employees must know what is being
measured, how it is calculated, what the targets are,
how incentives work, and, more importantly, what they
can do to affect the outcome in a positive direction.
Complex KPIs that consist of indexes, ratios, or multiple
calculations are difficult to understand and, more
importantly, not clearly actionable.
• 3. Owned. Every performance metric needs an
owner who is held accountable for its outcome.
Some companies assign two or more owners to a
metric to engender teamwork. Companies often
embed these metrics into job descriptions and
performance reviews. Without accountability,
measures are meaningless.
• 4. Actionable. Metrics should be actionable. That
is, if a metric trends downward, employees
should know what corrective actions to take to
improve performance. There is no purpose in
measuring activity if users cannot change the
outcome. Showing that sales are falling isn’t very
actionable; showing that sales of a specific
segment of customers is falling compared to
others is more actionable.
5. Timely. Actionable metrics require timely
data. Performance metrics must be updated
frequently enough so the accountable
individual or team can intervene to improve
performance before it is too late. Some people
argue that executives do not need actionable
or timely information because they primarily
make strategic decisions for which monthly
updates are good enough. However, the most
powerful change agent in an organization is a
top executive armed with an actionable KPI.
6. Accurate
It is difficult to create performance metrics
that accurately measure an activity. Part of
this stems from the underlying data, which
often needs to be scanned for defects,
standardized, deduped, and integrated before
displaying to users. Poor systems data creates
lousy performance metrics that users won’t
trust. Garbage in, garbage out. Companies
should avoid creating metrics when the
condition of source data is suspect.
 Role of HR professionals in Performance
Management

• Human resource department plays an

important role in designing and
implementing performance appraisals.
Infact, the HR team acts as mediator
between the functional heads or reviewing
authorities and the employee. It is the
human resource team’s responsibility to
ensure a smooth implementation of the
appraisal process.
• The first and the foremost responsibility of
HR team is to design the entire appraisal
process. Make sure the process is simple and
does not take too much time. The HR team
needs to know the responsibilities assigned to
each and every employee for them to create
and design a system where their overall
achievements can be rated with respect to
their key responsibility area.
• The criterion of performance appraisal needs
to be very clear and transparent.
• The HR team also needs to sit with the
reviewing authorities to ensure appraisals are
done on time and only the deserving
employees get the benefits. Appraisals should
not be for everyone but only for those who
have worked really hard all through the year.
You need to help and sometimes also guide
the managers and supervisors so that a fair
appraisal is done and no deserving employee
is at loss.
E-PERFORMANCE MANAGEMENT
• E-performance management is the planning,
implementation, and application of information technology
in managing the PMS. E-performance management is a part
of e-HRM or HR information system (HRIS). Through IT
enabled PMS, it is possible to integrate strategies, policies,
and practices of the organization with the performance
management process. E-performance management is the
relational e-HRM function to support business processes.
Relational e-HRM functions also facilitate training and
recruitment functions of an organization. The other two e-
HRM functions are operational and transformational.
Operational e-HRM accounts for supporting administrative
functions like the payroll, staff inventory, etc.
Transformational e-HRM ...