How To Appraise and Pay Teams

Prepared by: Aditya Sarda 2010SMT6806 Ankur Gupta 2010SMF6765 Navneet Singh 2010SMF6640 Pranshu Srivastava 2010SMT6822 Roopak Jain 2010SMF6754 Suyash Singh 2010SMF6740

Performance Appraisal
Performance appraisal is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding manager or supervisor

How to Appraise teams

Identify KRAs Set targets Determine parameters

Evaluate performance

Communicate results

Measure performance regularly

Indentify individual ratings

Rewards
Rewards are the benefits (monetary and non monetary) given to someone for service rendered or for accomplishing a particular task

Link Rewards to Team Appraisals

Identify benchmarking level

Mandate team performance for rewards

Distribute team award proportionately

Link the individual award to basic pay of team member

Identify reward for each successive target

Some Methods of Performance Appraisal

Critical incident method
Involves recording of specific events by the appraiser. An incident is considered critical when it illustrates what the employees have done or have failed to do The manager writes down positive and negative performance behavior of employees throughout the performance period The manager maintains logs on each employee, whereby he periodically records critical incidents of the workers behavior and performance At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers performance

Weighted checklist method

The Rating Scale is a form on which the manager simply checks off the employees level of performance. This is the oldest and most widely used method for performance appraisal The scales may specify five points, so a factor such as job knowledge might be rated 1 (poorly informed about work duties) to 5 (has complete mastery of all phases of the job).

Some Methods of Performance Appraisal

Essay evaluation method
In this method managers/supervisors are asked to describe strengths and weaknesses of an employees behavior Essay evaluation is a non-quantitative technique This method is usually used with the graphic rating scale method

360 degree performance appraisal

Employees receive anonymous , confidential feedback from people who work around them The feedback is given by subordinates , peers , customers , suppliers etc It measures the following
The persons behaviors and competencies Skills such as listening planning and goal setting Focuses on leadership character and leadership It tells what others think about the particular employee

Some Methods of Performance Appraisal

Performance ranking method
Employee performance is ranked from best to worst Manager compares one employee with another employee rather against a standard measurement The scale of rating is as follows
Much better (5 points) Slightly better (4 points) Equal (3 points) Slightly worse (2 points) Worse (1 point)

Paired comparison analysis

Paired comparison analysis is a good way of weighing up the relative importance of options A range of plausible options is listed. Each option is compared against each of the other options. The results are tallied and the option with the highest score is chosen

Some Methods of Performance Appraisal

Graphic rating scales
The Rating Scale is a form on which the manager simply checks off the employees level of performance This is the oldest and most widely method The scales may specify five points, so a factor such as job knowledge might be rated 1 (poorly informed about work duties) to 5 (has complete mastery of all phases of the job).

Management by objectives
MBO is a process in which managers set objectives for the employee, periodically evaluate his performance, and reward according to the result This method focuses attention on what must be accomplished (goals) rather than how it is to be accomplished (methods) This method is widely used in the industry. It is being used in companies such as Accenture , IBM , Wipro , TCS , Reliance energy , Bharti etc In the coming slides we have explained how this method is used in Accenture along with graphical rating method

Issues with Appraisal

Rating Bias
When managers include non performance factors like race, gender, hair colour, etc. into an appraisal the rating becomes unfair and loses its objectivity

Appraisal Hypocrisy
When managers do not follow stated methods and procedures of the organization

Poor Informal Feedback

When managers do not provide regular feedback to the employee to improve his/her performance and shortcomings

Raters Error
When managers want to avoid conflict and wither give undeserved high ratings (researchers call this leniency tendency) or give ratings (central tendency)

Self Appraisal Mismatch

When managers have to rate some employees as average and below performance an average performance rating conflicts with the supervisors assessment, creating a serious discrepancy

Performance appraisal at Godrej & Boyce

Initially it had a functional structure but later moved to divisional one Problem with functional structure was that, some functional units were getting rewards based on the achievement of their functional goal even if the company was not making profit Under the new system the entire man-power of a business division is considered a team G&B measures the performance of its team on
Volume of business growth Net contribution of the division Net working capital returns

The performance is measured on these parameters using three benchmarks, level 1, level 2 and level 3. Level 3 refers to minimum acceptable performance The actual quantum of team reward varies according the level achieved and the grade of the members

Performance appraisal at Accenture Management by objective(MBO) using Graphic Rating Scales

List of objectives is given to each member of the team at the beginning of the performance evaluation period Members give a self input and justify how they have completed their objectives The members immediate supervisor checks the self input and validates it. He can rate them as met , partially met , not met or exceeded expectation All supervisors of a particular Account group meet and discuss what rating is to be given to which member Members are given the following ratings following a bell curve i.e. if 5% of employees are CVTPG then 5% have to be CBPG in the particular account group
CVTPG Contribution at the very top of peer group (5%) CSAPG Contribution significantly above peer group(25%) CAPG Contribution above peer group(20%) CCPG Contribution consistent with peer group(40%) CBPG Contribution below peer group(10%)

Ethical Issues with performance appraisal at Accenture Favoritism The final rating is in the hands of the supervisor and how he presents his subordinates to the other supervisors, his decision may be biased The Bell Curve If you have people performing at the top of peer group it does not necessarily mean you have people performing below the average peer group performance No comparison of performance across account groups

Performance appraisal at Schneider

5 KPIs are given Employee rated themselves (on a scale of 1 to 5) on each of those at the end of the year Their manager rate them and that is reviewed by his manager Points are given on each KPI and the average is taken Increments are given according to the ratings Increments in different business units are independent

Compensation Policy for Directors and Executive Officers of Nomura

Compensation of Directors and Executive Officers is composed of base salary, cash bonus and long-term incentive plans. i) Base Salary -Determined based on factors such as professional background, career history, responsibilities and compensation standards of related business fields. -A portion of base salary may be paid in equity-based compensation form with a certain non-exercise period to ensure that interests of Directors and Executive Officers are closely aligned with those of shareholders. ii) Cash Bonus -Determined by taking into account both quantitative and qualitative factors. Quantitative factors include performance of the whole Group and business division results. Qualitative factors include achievement of individual goals and subjective assessment of individual contribution. iii) Long-term Incentive Plan -Long-term incentive plans may be awarded to Directors and Executive Officers, depending on their individual responsibilities and performance. -Payments under long-term incentive plans are made when a certain degree of achievements are accomplished. Payments are made in equity-based compensation form with a certain non-exercise period to ensure that their mid/long-term interests are closely aligned with those of shareholders.

Performance appraisal at TCS

Appraisals are based on Balanced Scorecard on the basis of targets at four levels
Financial Customer Internal Learning and growth

Ratings are done on a scale of 1-5, 5 being the highest Appraisal done at the end of year and grade changes accordingly If a member gets a low rating (less than two) in two consecutive appraisals, a warning is given and sometimes exit option may be considered

Performance Appraisal at WAPCOS (Water and Power Consultancy Services)

Appraisal is done on the basis of number of years worked at a particular career level After the completion of the required period employees give a presentation to their supervisor telling them about the work dont by them in the tenure On basis of the presentation and a subsequent discussion by the management appraisal is done

Issues with Appraisal at WAPCOS

Does not distinguish between a high performer and a low performer until an employee has completed a fixed number of years in an organization Managers bias exists No incentive for employees to perform better than his/her peers

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