Subir Verma, Head HR - Business, Tata PowerOnce upon a time, there was a King. King was brave, intelligent, popular and had all qualities of a perfect King. Few months after becoming King, he got married and was living happily. He had everything except an own child. King initially did not give too much importance to the issue. As time passed by, people close to King told him about importance of his own child. King too realized that a succession planning is very important for long term sustainability. King started spending more time with Queen and Queen was pregnant.

King was happy as well as nervous. King wanted perfection in everything. Time passed by quickly and there came time of delivery. Queen developed few complications. King ordered to find the best doctor in the entire kingdom. Doctor was presented to the King. King told Doctor that if something happens to Queen or Child, Doctor will be given death sentence. Finally came the moment of truth. Queen was going through unbearable pain to give birth to the future of the kingdom. Doctor was under tremendous pressure, making sure that the delivery is smooth, in order to save his own life. Queen and Doctor put more than their 100% and Prince was born. Hearing that, a Maid went running to the king to tell him the good news. King was thrilled to hear the news. King took out his golden necklace and rewarded the maid.

This is a usual story which is seen and heard ample number of times. In this story, all the pain, effort and pressure was managed by the Queen and the Doctor. However, when the task was delivered, Reward was given to the maid who contribution was nil in the process except for breaking the news to the King.

This hello, recency effect and rewarding pep talker in place of hard worker, is taking away the importance and seriousness of performance appraisal system in most of the organizations.

April to June is time for performance appraisal. Every employee think (some extrovert type “Talk” and most, introvert type, “Think”) about it in these 3 months till the process gets over. And, after 3 months when process gets over, 20-25% celebrates because they got the best rating and remaining 75% sulks because they think their rating is lower than what they thought it should be and feel “Cheated”!!
Most of employees start thinking and imagining about all the adjectives, Biasness, Politics, Victimisation, Halo effect, Horn effect, Spillover, Recency etc etc about his manager, HR and the organization. Whereas, poor manager, HR and the organization have the best possible intention in his mind for the employees. After all organization can growth only when employees perform and are happy.
All stakeholders, Employee, Manager and Organization have right intention for each other, still most research reflects different story,

1. Productivity across company goes down during PMS time
2. More number of employees are demotivated than motivated!
3. Attrition post appraisal is higher than other months (highest in Pharma, Retail, Telecom and IT companies)
Can organization achieve it goal without these 60-70 percent employees who are bucketed in so called average rating and are top performers happy with 2-4 percent higher increase than average performer? Is appraisal process and the manner it is done, achieving its objective?

Business environment, Technology, work force demographics, Culture, Workplace environment, Career orientation and aspiration, outlook towards life of the employees have changed and distinctly different than what it used to be 10 years back. Most appraisal system if not completely irrelevant but surely it needs a much-needed change. Here are few innovations which is needed for make appraisal system more relevant,

• Focus on whole employee, not just performance & potential - Physical, emotional and mental well-being are, unfortunately, are bigger problem than ever, but play significant role in performance and productivity.

• Know and Assess what matter to employee - A large Middle Eastern technology company recently conducted a study on what motivates employees, looking at combinations of more than 100 variables including compensation and benefits, location, team size, tenure and performance rating. The company found that meaning—seeing purpose and value in work—was the single most important factor, accounting for 50 percent of all movement in the motivation score. It wasn’t compensation. This may be different for each company and hence, it is critical to know what motives employees first and focus on those during assessment.

• Manager Serve the employees - Employees (line people) are more important than the managers in most companies. We need to invert, understand and include that “managers serve the employees”.

• Feedback to be supported by actionable Coaching - Quantity of feedback is not a silver bullet that will magically produce a workforce of engaged and productive employees. To achieve performance gains, frequent feedback needs to be backed by regular coaching using it to sharpen strengths and improve weakness. This is a well established technique in sports can be used in PMS process.

• Artificial Intelligence (AI) in Performance Management - AI to draw out themes from large amounts of qualitative data being gathered from feedback, goals and conversations. This can be used to coach employees and managers in real-time based on the feedback being received, and perhaps even predict future high performers based on data and patterns.

• Creating Employee Experience through Personalization – Think and invest in creating personalised employee experience like company do for customers. A one-size-fits-all management approach can’t bring out the best in employees because like each customer, every employee is different.

• Keep compensation out of process - To pay Ram X percent and Shyam Y percent, the manager must rate Ram exceeds expectations and that Shyam meets expectation. That kind of reverse engineering of ratings often plays out over several performance cycles and lead to cynical outcomes — “last year, I looked out for you; this year, Shyam, you will have to take a hit for the team”. Research of Nobel laureate Daniel Kahneman suggests that employees may worry excessively about the pay implications of even small differences in ratings, so that the fear of potential losses, however small, should influence behavior twice as much as potential gains do. Offer a competitive base salary and peg bonuses to the company’s overall performance and special rewards, including discretionary pay, to truly outstanding performers. Companies can remove a major driver of anxiety for majority of employees.

• Finally, Keep Things Simple - Don’t let feature creep make these too hard and time consuming to use. An investment of thousands of man hours across the company may not fit in to business competitiveness anymore. Today more than 85 percent of stock market capitalization is intellectual property, brand, services, and software so every person and every hour matters. Ultimately, organizations will not just produce positive business outcomes; by helping their employees realize their best selves but they will create a more positive impact for customers, managers, investors, and for the world at large.