Comparative Study of Performance Management System of Various Sectors and Its Effectiveness at Tata Steel
Objective:
• To study the Performance Management System existing in various organizations and to do their comparative study.
• To compare the PMS of Tata Steel with other organizations.
• To evaluate the effectiveness of PMS of Tata Steel.
• To summarize these observations and show meaningful conclusions so as to offer suggestion and recommendation to the management for higher effectiveness.
Conclusions:
The total project that I undertook in Tata Steel, Jamshedpur was a learning experience for me. I had the opportunity to get exposed to HR practices of a large company like Tata Steel. A company of this size and profile would have been the best platform for a research work.
It has a huge Human Resource Management wing taking care of HR issues for the whole organization.
The main components of Tata Steel’s vision is to improve the quality of work life of its employees, develop their potential and maximize their productivity. This shows that the company has a well defined and clear human resource policy.
Managing human resource is not an easy task. It is the only function of management which cannot be always seen from a profit and loss point of view. Here the company can think of incurring some loss.
HRD culture in Tata Steel is a proactive culture, where people are free to express their views and opinion. Employees work in teams. There is “We” feeling among the teams but it also depends on the leader. With the concept of suggestion boxes and improvement projects the organizations is known to cash on ideas, views and opinions of employees. The culture encourages open discussion of issues and problems, but it needs to be more formal.
HR professionals have the sense of responsibility, empowering attitude by the field HR, ability to give and receive feedback, perseverance. But at the same time need to master their knowledge in group dynamics and group functioning, conflict management strategies.
Employees identify themselves with the company, but other energy focusing factors such as goal commitment, confidence, and autonomy needs to be enhanced.
Performance management of employees is one of the most important functions of human resource department. My research work revolved around Performance Management System of Tata Steel. This function in TISCO carried by a department called Human Resource Implementation. Here I had to analyze the total system of Tata steel and to find out how effective objectives of Performance management (PM) are achieved.
The PMS of Tata is very good and robust. The system has improved from the past, but there is scope for further improvement. The perception about it needs to be changed. All the probable pros and cons of selecting a particular appraisal technique, feedback system are taken into consideration. But their proper implementation in all departments of Tata Steel is a matter of concern. As it is a human process assessment is Subjective in nature. Online SAP system is used for effective and proper documentation of performance management system.
The objective of the study was to review the concept of PM in context of TISCO. In the study it has been found that PM of Tata Steel was the basis of many other activities of HR like the annual bonus is linked to performance rating of employees, training needs, promotion and job rotation decisions. This is a reason why PM has been given weight age.
If it is not carried out properly it can adversely affect other HR functions.
The ultimate objective of PM is to enhance the performance of its employees and self-development of employees. The company has tried its best to address to these issues but because of high amount of subjectivity and many other major decisions linked to it, self-development issues has received a backseat.
According to Hertzberg’s two factor theory, Fredrick Herzberg has listed two set of factors one leading to job dissatisfaction (hygiene) and one leading to job satisfaction (motivators). Dissatisfies included salary, working conditions, relationship with superior, status, security. Satisfiers include achievement, recognition, growth, work itself etc.
Factors that lead to satisfaction are based on performance management, therefore if appraisal is not done properly, it can lead to serious dissatisfaction.
In Tata Steel, an individual’s achievement against the KRAs are compared to his/her peers performance category in the range from 1 to 5 (major improvement needed to outstanding). 4, 5 are good performers whereas 1, 2 are poor performers. If in two consecutive appraisals if anybody gets low ratings they are asked to leave the
Organization. Category 3 employees are competent who have the potential to do better. As there is a tendency to think negative employees in category 3 are demotivated.
The company also follows the ‘vitality curve’ or normal distribution curve. It is also called Forced Distribution System. In this few employees are graded exceptionally good or marked unsatisfactory, and most are graded good or merely satisfactory. Forced ratings reward only a small population, thereby demotivating others. Forced ranking injects fear into the workforce. Sometimes employees are penalized just for the sake of maintaining the “vitality curve”. Due to this quality and development of employees takes a backseat. It is designed more to facilitate budgeting of salaries than to motivate and reward employees for a job well done.
To avoid the common rating errors like central tendency, leniency, and severity this forced rating system is used by the company.
This system is a talent suppressing system. It discourages team work. In Tata Steel due to this system many employees are rated below what they actually deserve, thereby increasing the number of dissatisfied employees.
The attrition rate in Tata Steel is not very high, though it has increased from the last year. The concern for the company is that people with good potential are leaving the organization. The reasons can be manifold. The reasons for increase in attrition rate according to exit interviews conducted by HR officials are growth opportunities and compensation. Both factors are to some extent related with performance management. Succession planning for employees is done based on performance, potential and seniority. A part of compensation i.e. annual bonus is linked to performance.
The "War for Talent", "Talent Management" & "Managing Human Capital" has all become terms that pepper HR literature, but the definitions of what they consist of are often diverse and sometimes difficult to grasp from a practical and pragmatic standpoint.
Talent Management is everything connected to "optimizing" the People Resource to drive competitive advantage". Failure to manage an organization’s talent effectively will have an immediate and direct impact on the bottom line results in following ways:
- Avoidable replacement costs incurred
- More management time wasted in performance management and development.
Overlay all this information with the economic factors including a declining and ageing national workforce and it turns Talent Management from a "nice to do" into an "essential need" for organizations.
In order to find the root factors which affects the effectiveness of Performance Management system we made a multiple causal diagram .With the help of this diagram we are trying to highlight the areas of Tata Steel’s PMS where there is a need of improvement. By the analysis of the conducted survey and the multiple causal diagram we found some areas where improvement can be made in order to make the system enhanced and more effective.
The areas where we found the weaknesses are-
• Training need analysis
• Personal Development plan
• Linkage of Rewards And recognition with Performance Appraisal
• Methods of Appraisal
• Importance of Timing in Performance Appraisal and Feedback
• Employee involvement in target setting
• Participation of employees in the process
• Safety policies
• Discussion between superior and subordinate
Recommendations:
KRA Settings/Performance contracting:
1. Timely submission of performance contracting has to be ensured. In order to ensure this the HR department should convey the importance of doing performance contracting to the employees.
2. Expectation level for each rating should be clearly mentioned in the performance contract.
3. Prior to submission of performance contract discussion meetings could be held with concerned superior so that both are clear about the targets to be achieved.
4. Both superior & subordinate should maintain a critical incident diary, in which all records of the extra work done would be maintained so that at the end of the year these are considered while rating.
Midyear review:
1. Frequency of review could be quarterly or half yearly. The annual KRA’s can be broken into segments and then reviewed. This would make the mid year review or quarterly review more effective. Here the superior can make a note about to what % the final KRAs are met, and provide the subordinate with proper feedback.
2. The end year review should only be summation of quarterly reviews. This would help in releasing the pressure at the year end.
3. More rigorous implementation in terms of timeliness is required.
Performance dialogue between superior and subordinate:
1. Here the superior should spend considerable time with the subordinate and listen to all he has to say regarding his performance. Open discussion should be done on frequent basis.
2. Superior should also check the means used to achieve those targets. 3. Sometimes manipulations can occur as to the use of means, presented but may not have used.
Talent review:
1. Much time is spent in deciding the ratings. Strengths and weaknesses of every individual should be highlighted and conveyed to them along with the ratings.
2. Officers should be allowed to present their own case in the talent review. The panel members can ask questions. By doing this superiors and subordinates would get to know each other well. This would make the talent review more relevant and acceptable. Ratings:
1. System of group evaluation should be there in departments where team work is necessary. Importance to be given on team building.
(i) Each team can plan its own KPAs and assess their performance.
(ii) Self assessment can be done by the team and passed on to top level for review.
2. Potential rating should also be given proper weight age.
3. There can be a 3 point rating scale instead of a 5 point rating scale. Less categorization of employees would ensure team work. Scope for comparison should be minimized. The bonus differential should also be minimized.
4. In case anybody disagrees with the rating, there should be a formalized appeal process for that.
5. The bell curve should be modified to accommodate good performers in specialist service group
6. If the KRAs are made specific and quantifiable the need for using the forced ratings may be reduced. It is used more to facilitate budgeting of salaries than to motivate and reward employees for a job well done.
Compensation:
1. Bonus should not vary much with the ratings. % of bonus needs to be modified. Dictated by the quota system.
2. Bonus can have two components
(i) Bonus for team Performance.
(ii) Bonus for individual performance
An organization like Tata Steel needs lots of emphasis on team performance. Since variable pay is completely individual in nature, the impact is lopsided.
Feedback:
1. Feedback should be immediate, much before receiving the bonus letters, otherwise it loses its relevance.
2. Superiors should be trained on giving candid feedback along with action plan. It should be substantiated by facts. He needs to spend time with each subordinate.
3. Performance counseling should be done in regular course of performance.
4. 360 degree feedback system to be implemented in departments where officers are required to interact with outsiders and other departments.
Personal Development Plan:
1. It should be properly implemented organization wide.
2. For PDP to be successful, strengths & weaknesses of each individual has to be clearly defined.
3. A mentoring & coaching process can be initiated to bring in a more flexible approach to work.
Training & Development:
1. Training Needs should be assessed properly by giving due importance to both potential and performance of an employee.
2. If provided, there is no systematic process to measure its effectiveness on the job. Training is only effective when it produces results. The results must be in the form of increased skills, knowledge, and ability level. The way to perform a certain task must improve after training is received. So evaluating training effectiveness is very important. This can be done by following methods;
(a) Reaction of participants or managers
(b) Test re test method
(c) Pre post performance method
(d) Rexperimental control method
3. Along with job rotation other off-the-job training methods should also be used. This is very important to retain good performers.
4. In Tata Steel, no formal training for raters were being held. However they were given some training indirectly by way of training in interview skills, competency assessment. Raters should be trained to conduct effective performance appraisals. E.g. training programs designed to eliminate common rating errors, programs focused on observation and recording skills.
Performance assessment system for people in study leave
In Tata Steel officers on study leave are given a rating of 3 i.e. competent. This is done to make the distribution of bonus easy. Therefore an average rating is given for the period he is not working for the organization.
I don’t think its good to rate an employee who is on study leave rating him average 3 because if he would have been on the job he could have performed more better. In fact he had the potential that was the reason the company send him for Management Development Program. So rating average would not justify him and this would demoralize him.
Rating the person on his academic performance is more justified. But again by that how he can implement this knowledge in practical field cannot be judged. It would be better if we can develop a scale through which we can measure the practical implementation capacity of the acquired knowledge.
The institute where the employee is presently studying has a major role to play; they can be instructed to regularly provide feedback about the performance of the employee to the company. The feedback can be regarding regularity, punctuality, active participation in various activities, discipline, positive attitude, performance in various examinations.
A Behaviorally anchored rating scale (BARS) can be used to evaluate their performance. It consists of series of five to ten vertical scales – one for each important dimensions of performance identified. Dimensions in this case can be some of the critical incidents seen during their sabbatical. These incidents are placed along the scale and are assigned point values according to opinion of evaluator. This method is extremely specific to the situation and focused, therefore it is known to reduce probable rating errors. One major advantage of BARS is that personnel outside of the HR department participate with HR staff in its developments. In this case the institute where the officer is sent can participate with HR to develop the rating scale. Officers in study leave would be rated by the institute as they are in constant touch with them.
