This study is aimed at examining the effectiveness of the performance management system and performance enabling system in Dr. Reddy’s Laboratories, CTO Unit VI, pydibheemavaram. A performance management system is an approach to evaluating employee performance. Through this the organization align their mission, goals and objectives with available resources. And additionally added another system performance enabling system known as PES was implemented at the Dr. Reddy’s Laboratories Ltd. PES was developed for the purpose of evaluating employee performance according to their role bands. There was a clear strategy on the use of the results of the PMS for the decision-making purposes, such as on promotion, reward or consequences for non-achievement of targets. Moreover, there was a good feedback on the result of the final performance assessment.
The present study aims to know the effectiveness of the overall implementation of the PMS and PES in Dr. Reddy’s Laboratories, CTO Unit VI, pydibheemavaram. The feedback that is taken from employees is useful for implementing further changes. This study finds out how the performance management system and performance enabling system plays an important role in enhancing the productivity of an organization’s workforce in the competitive edge.
Keywords: Performance Management System and performance enabling system.
In the present competitive and dynamic environment. The competitiveness that would provide them with a sustainable competitive advantage is now becoming important for organizations to create and retain employees. However, in the knowledge age, where human assets are valued more than physical assets, a planned and strategic approach to PMS and PES has been adopted by organizations. PMS has become more important than ever in this direction.
It elaborates how the organization aligns the PMS with the organizational system and articulates the company business objectives to the individual goals. This paper deals with the effectiveness of PMS & PES. The result of the study shows that it acts as a strategic tool and a powerful foundation for the employees to achieve their ambitions and organizations to achieve their key financial goals.
Dynamic and growth-oriented companies recognize that an important aspect of organizational activity is the performance management system. No organization in a hypercompetitive business will lose long if it has no trouble keeping up with emerging market trends and technological change. Thus, PMS plays an essential role in improving the overall performance of the organisation.
Objectives of the study
- To study the effectiveness of performance management system and performance enabling system in Dr. Reddy’s Laboratories, CTO Unit VI, Pydibheemavaram.
- To analyse the awareness level of performance management system and performance enabling system methods among employees.
- To analyze the impact of PMS & PES on employee performance.
Performance management system process and plans in Dr. Reddy’s laboratories
The performance management process is a systematic process of managing and monitoring the employee's performance against their key performance parameters or goals. It is regarded as a process for driving individual and organizational performance management. The PMS is a systematic activity performed to improve the performance, skills, attitudes and behavior of an employee to accomplish goals. There are 4 steps in the process.
Performance planning/goal setting in Dr. Reddy’s:
Planning is simply referred to as the process of formulation of future courses of action. Plans and objectives on which they are based give purpose and direction to the organization.
The appraiser has to plan for the performance appraisal meeting before it is conducted and communicate to the appraisee in time. This gives the appraisee time to prepare well for the appraisal process. The organization scorecard will be prepared by the leadership team with inputs from strategy and corporate finance. The scorecard will have clear KPIs, targets and weights and will be tracked on a regular basis. This will help us calibrate our performance throughout the year. While the scorecards will identify the priorities and targets at the BU/function level, we would need to define the goals at an individual level which will essentially articulate targets and accountability for each individual. For the individual goal setting, the manager (L+1) and the employee should meet to clarify expectations from their key customers/stakeholders and each other. This input should be converted into performance goals to be met during the review period.
Measurement criteria are for tracking performance against the goals. The manager (L+1) and employee must freeze the criteria as relevant to their work. Possible criteria may be quantity (Tons produced, Units sold), Quality (Number of defects, Service levels), Cost (Unit cost, Cost reduction targets), Time (Leadtime), Human Reaction (Feedback) and Compliance.
Performance coaching in Dr. Reddy’s:
Performance coaching is an ongoing process and is a result of continuous dialogue between the manager (L+1) and employee regarding performance. The manager (L+1) and employee should meet periodically to review performance, learnings and progress against set goals. Regular dialogue enhances employee engagement and is the foundation of coaching.
Performance review in Dr. Reddy’s:
Performance review is a process of working with and through others to achieve organizational objectives in a changing environment. Through the review process, the appraisee tends to evaluate the appraiser to ascertain whether the intended organizational objectives are meant through an effective and efficient manner.
Performance is formally reviewed twice a year.
a) Half Yearly Review:
A formal half yearly review is important for the manager (L+1) and employee to take a stock of the progress made and to make course corrections. The focus during the review should primarily be on overcoming constraints and planning for the rest of the performance cycle. The manager (L+1) collects feedback from the customers, suppliers and peers and collates this feedback. The manager calls project managers to the review if the employee has project goals. The manager (L+1) is expected to give feedback on achievement of goals and behavioural aspects for the period under review. Employees are also provided with an opportunity to give their feedback and seek clarifications from the manager. In addition to these regular discussions, the manager (L+1) may need to conduct and document an interim review if the employee is being transferred to another department. This must also be done if the employee demonstrates any extreme performance.
b) Annual Review:
The manager (L+1) will conduct the Annual Review at the end of the year with the employee, based on the metrics defined at the time of goal-setting.
Rating Methodology & Differentiation in Dr. Reddy’s:
The appraisal rating is based on a Three Point rating scale A+, A and Z, where A+ is a top performer and Z would be a bottom performer. There is a flexibility to differentiate widely among 'A+' and ‘A’ rated employees by using the point range. A manager is expected to differentiate performance of employees in A+/A category by using the point scale range. (The point factor should be rounded off to the nearest decimal 0.05). (A+ - 1.25 to 1.50, A – 0.6 to 1.2, z – 0).
Feedback and Consequence Management in Dr. Reddy’s:
feedback is a communications process. It should be ongoing meaning as adjustments are made based on the information exchanged between manager and team member. There should be regular follow up dialogue to determine success. Feedback is designed to note where things are going right and where they are going wrong. This means that leaders may need to be patient as new habits get developed and the learning curves for new skills are overcome. Effective and timely feedback is a critical component of a successful performance management program and should be used in conjunction with setting performance goals. If effective feedback is given to employees on their progress towards their goals, employee performance will improve.
Review of Literature
- Study by DDI (1997), Performance Management Practices is the most recent performance management study. It proves that successful organizations realize that performance management is a critical business tool in translating strategy into results. The CEOs in the majority of the 88 Organizations surveyed say their performance management system drives the key factors associated with both business and cultural strategies. Performance management systems directly influence five critical organizational outcomes: Financial performance, productivity, product or service quality, customer satisfaction & employee job satisfaction. When performance management systems are flexible & linked to strategic goals, organization are more likely to see improvement in the five critical areas: team objectives, non- manager training, appraiser accountability & links to quality management are the specific practices most strongly associated with positive outcomes.
- The article of Javed Iqbal, Samina Naz, Mahnaz Aslam, Saba Arshad (2012), offers a survey of selected literature on performance management. The purpose is to identify key themes that govern the topic in the contemporary turbulent economic and business environment where employees are more uncertain than anything else because every day they face downsizing, volunteer retirement and “golden hand shakes’’ to get rid of them. Under these circumstances, it is worthwhile to look into the ways by which they can be motivated to work under hard conditions. It is found that performance management processes, evaluation, its impact and factors are key themes. Researchers apply popular research approaches for data collection analysis and communication.
- The paper of Akua Asantewaa Aforo and Kodjo Asafo-Adjei Antwi (2012) shows that academic libraries have a performance appraisal system comprising setting of goals, feedback, participation and incentives for performance. This study aimed at evaluating the performance appraisal system in the KNUST and GIMPA libraries in Ghana and give recommendations on improving the system. Questionnaires were randomly administered to 46 staff members of these libraries.
- The paper of Jawaria Andleeb Qureshi, Asad Shahjehan, Zia-ur-Rehman and Bilal Afsar (2010) notifies that many organizations install Performance Management Systems (PMS) formally and informally in their organizations, with the motivation to achieve better organizational results. In practice, organizations have difficulty in implementing a performance management system because its different dimensions are not taken into consideration enough. This article describes the findings of comparative analyses conducted between a standard performance management model and performance management systems as applied by Local Development Organization (LDO). Data was collected from 50 employees of the organization with a Cronbach Alpha (0.935). Results identified barriers to implementation of effective PMS, also recommendations and viable solutions are presented.
- (Gratton 1996) There has been a change in scope of the appraisal process in recent years, with an increasing focus on employee development, as more and more businesses focus on how targets are achieved rather than just the achievement itself. This has led to a combination of both objectives (outputs) and competencies (inputs, Taylor, 2005) and the recognition that personal development planning (PDPs) are a fundamental part of a PMS. By offering employees the opportunity of enhancing their skills through training, levels of self-confidence will improve and performance will be enhanced (White 1999).
Collection of the data is essential in the research process and it has both primary and secondary data. The information is being taken from the respondents by using questionnaire. Data that has been collected for the research helped in the development of findings and used for the proper development of research process.
Tools for data collection:
By keeping the objectives of the study in mind and towards the execution of the objectives of the research, a study of the Human Resource Department has been undertaken and research process begin by conducting surveys, and gathering data from the primary and secondary data.
· Primary data:
The primary data is already existed data that has already been collected by some individuals, at some time for their purpose. Primary data means the original information which was taken from the employees of the organization by conducting a questionnaire.
· Secondary data:
The secondary is collected from the research articles, journals, reports and internet sources.
Stratified random sampling technique is being implemented to create a limit for samples. To obtain the information with the stratified sampling method we have to use primary and secondary data.
Analysis of data:
The data that was obtained by using various aspects was interpreted and analysed. Simple percentile method has been used in this study for the analysis of the data.
Tabulation is the final stage in the acquiring of data which is used for the statistical treatment.
Data analysis and interpretation
1. Are you aware of the performance management system methods being followed by your organization?
From the above graph it was observed that majority 95% respondents are having awareness towards the performance management system methods followed by the organization and only 5% respondents are not aware of the performance management system methods of the organization.
2. After introducing performance enabling system, is there any change in your ratings?
From the above graph it was observed that majority i.e., 68% respondents says there was change in their rating after introducing performance enabling system, 32% respondents says that there is no change in their ratings.
3. which of the following rewards are given by your organization after performance review?
INTERPRETATION: From the above figure it was obtained that majority 54% respondents are getting both intrinsic and extrinsic rewards, 41% intrinsic rewards, 5% are getting extrinsic rewards from the organization.
4. Do you think performance management system, motivates and improves performance of employees?
From the above graph it was identified that majority 82% respondents feels performance management system improves their performance, 18% feels performance management system don’t improve their performance.
5. Does the superior give feedback, recognition and appreciation towards task achievements?
Not at all
From the above table and chart we found that 71% of respondents felt that employees can be appraised based on his/her performance if he does a very good job, 29% felt sometimes and none of them felt not at all.
- The above observation, it confirms that the majority of employees aware of the performance management system methods used by the organization.
- It is observed that, the majority of the employees felt that PMS & PES is to evaluate the employee performance.
- The majority of employees believe that PMS functions fairly / equitably.
- The majority of the employees have endorsed that PMS improves their performance and motivates them to reach their targets.
- From the above basis it is clear that after the completion of the performance management system feedback session will be conducted to manage consequences.
- The majority of the employees have endorsed satisfaction with respect to PMS & PES. And agreed the effectiveness of the performance management system & performance enabling system.
The above analysis concludes that the performance management system and the performance enabling system are more or less identical to the performance standards of Dr. Reddy's Laboratories Ltd, CTO Unit VI, Pydibheemavaram. The performance management system is not only a performance evaluation process with the final result as a reward/punishment. In fact, its goal is to coordinate and improve an individual's production to achieve overall organizational goals. In this phase, highlights the strengths of employees and define the areas for improvement so that they can focus on and set broader goals for future reviews. This will allow employees to contribute to the long-term success of the organization by offering valuable ideas that will improve the quality of the results obtained. The organization creates a culture of collaboration by implementing PMS. The performance review will inspire the employee who felt there was no progress in the business using PMS and serves the employee growth goal, so that it can be used as an important tool for career planning. The effective implementation of PMS and PES within the organization will play an invaluable role in achieving the vision of the organization.
- Cheng, M-I, Dainty, A & Moore, D 2007, ‘Implementing a new performance management system within a project-based organization: a case study’, International Journal of Productivity and Performance Management, vol.56, no. 1, pp.60 – 75.
- Armstrong, M. (2004); Handbook of Human Resources Management Practices (9th Edition) London: Kogan Page.
- Clause, TS, Jones, KT & Rich, JS 2008, ‘Appraising employee performance evaluation system’, CAP Journal, vol. 78, pp. 64 – 67.
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- Sahu R.K. (Performance Management System) 2007 edition.