CAIIB ABM Module B Unit 5 : Performance Management

CAIIB ABM Module B Unit 5 : Performance Management (New Syllabus) 

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2024. Following the format of the current exam, CAIIB 2024 will have now four papers. The CAIIB Paper 1 (Advanced Bank Management) includes an important topic called “Performance Management”. Every candidate who are appearing for the CAIIB Certification Examination 2024 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Paper 1 (ABM) Module B (HUMAN RESOURCE MANAGEMENT) Unit 5 : Performance Management, Aspirants must go through this article to better understand the topic, Performance Management and practice using our Online Mock Test Series to strengthen their knowledge of Performance Management. Unit 5 : Performance Management

Introduction

Heyel defines performance appraisal as ‘a process of evaluating the performance and qualifications of the employees in terms of requirements of the job for which they  are employed, for the purposes of administration including placement, selection for promotions, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally.’

Appraisal Systems

Performance appraisal is an organizational necessity. Various appraisal systems have evolved over a period of time. These systems vary from simple to complex, from vague to objective, from unstructured to structured and from confidential to open.

An organization has the option to device its own system or can adopt, with certain modifications, some other’s system. What system one should choose will depend on whether it fulfills the objectives the organization wants the system to serve.

Objectives of Performance Appraisal System

  • Judgemental – for salary increases, transfers and promotions;
  • Developmental – telling an employee how is he doing and suggesting changes in his skills, attitudes, behaviour;
  • Counseling by superior – for giving feedback and understanding problems for poor performance.

Uses of Performance Appraisal

  • It rates all the employees in a unified manner by using the same rating scales and thus making them comparable on a common footing.
  • It provides information which could be critical while deciding on promotion, pay increases, transfers, training, etc.
  • It provides information about the areas of weaknesses of the employee to enable initiation of corrective steps.
  • It improves the quality of supervision as the supervisor becomes a keen observer.
  • The system, if implemented with openness and trust, ensures better interpersonal relations between the employee and his supervisor.

Performance Appraisal Process

There are following steps in the evaluation process:

  • The process begins with the organization setting the ‘performance standards‘ in advance. These standards should be clear, realistic and measurable. It is advisable to involve the line managers in the exercise as they understand the nuances and nitty- gritty of the job.
  • The performance standards then are required to be communicated to the employees.
  • The next stage is to measure the performance. It can be done through the data available with the department, personal observations, and feedback from the appraises.
  • Performance level of the employee is then compared with the benchmark or standard already established. Deviations are discussed and the reasons for deviations are noted.
  • The outcome is discussed with the employee, emphasising the strong points and counselling him on the weak points.
  • The last step is to initiate corrective measures and act on the positive performance by deciding on various incentives like increments, promotions, training needed, etc.

Performance Appraisal Methods

Traditional Methods

  • Free Form Essay Method
  • Straight Ranking Method
  • Comparison Method
  • Grading Method
  • Graphic or Linear Rating Scales
  • Forced Choice Description Method
  • Forced Distribution Method
  • Group Appraisal Method

Modern Methods

  • Assessment Centre Workshops
  • Management by Objectives
  • Human Asset Accounting Method
  • Behaviourally Anchored Rating Scales
  • 360 Degree Appraisal Method

Management By Objectives (MBO):

This method attempts to minimise external controls and emphasises on the motivation levels of the employees. This is sought to be achieved through joint goal setting  and the employee participation in the decisions that directly affect him. The objective of the MBO is  to change the behaviour and attitude in respect of getting the results. It is a result-oriented system. The  system emphasises on goal achievement rather than the method involved.

MBO Process

  • The organisational goals are first set and are clearly stated in measurable targets. These goals have to be realistic and achievable, although challenging.
  • The goal setting process is a joint process. The short-term performance goals are set jointly by the employees and their superiors.
  • There are frequent reviews of performance through one to one meetings.
  • Sharing of feedback in such meetings helps in altering the course of action, if required. It acts as a motivating factor as one gets to know where he stands through the feedback session.

Advantages of MBO

  • It involves participative approach in goal-setting.
  • It enhances the motivational levels of the employees.
  • It creates an atmosphere of competition within the organisation for enhanced performance.
  • It provides objective appraisal method.
  • Problems can be identified in the early stages through reviews and feedback sessions.
  • It is an effective tool for identifying the training and development needs.

Disadvantages of MBO 

  • It is a system which concentrates on results and not on the process.
  • It may lead to unhealthy competition amongst the employees.
  • It may create a conflicting situation when it comes to goal-setting.
  • Sometimes, very soft targets are set to show higher performance achievement.

Performance Appraisal versus Confidential Report

In a large number of organizations the annual performance appraisal exercise is carried out as a confidential activity. In fact, the form in which the performance of the employee is evaluated and reported is called confidential report.

Merits and Demerits of performance appraisal system

Advantage 

  • It reveals a concern for performance and creates an atmosphere of openness and trust in the organization.
  • Gives feedback to the employee and ensures that corrective steps are taken in time.
  • It raises the general motivation level of the employees if implemented properly.

Disadvantage 

  • The halo effect — a tendency to allow one trait or characteristic of an employee to influence the assessment. The halo is to rate an employee consistently high or low.
  • The leniency or strictness tendency of the superior interferes with the appraisal and accordingly the assessment gets influenced. The superior is unable to come out of these tendencies.
  • The central tendency problem refers to assigning average ratings to all the employees without properly evaluating each aspect of appraisal carefully and fearlessly.
  • Similar error is the tendency of comparing the employee with oneself on various traits and parameters. Those who show the similar characteristics are normally rated high.

Characteristics of a Good Performance Appraisal System 

A good performance appraisal system should essentially possess the following characteristics:

  • Objective
  • Transparent
  • Provide timely feedback
  • Provide opportunity for self-appraisal
  • Identify the potential and needs of employees
  • Discriminate between high and low performers
  • Perceived as an effective tool for enhancing employees’ potential
  • Identify impediments for low performance

Common Errors in Performance Appraisals

  • Halo Effect
  • Horn Effect
  • Central Tendency
  • Strict Rating
  • Lenient Rating
  • Status Effect
  • Spillover Effect
  • Initial Impression
  • Latest Impression (Recency Effect)
  • Same as Me
  • Different from Me
  • Performance Factor Order
  • Sympathy Effect

Giving Feedback

Giving a feedback without hurting a person’s feelings is an art.  The points covered above in respect of appraisal interview are also relevant for giving feedback to the employee. To give feedback, it is necessary to arrange the meeting in a congenial environment. After carefully listening to the employee, the appraiser should take command of the situation and give an honest feedback to the employee with an objective to help his development. The following points are crucial for giving feedback:

  • The feedback should be objective and should help employee in reaching appropriate level of performance in future.
  • The feedback should be suggestive in nature rather than Judgemental and  should focus on the training and developmental needs of the employee.
  • The superior should adopt a problem-solving approach and  not  fault-finding  approach. The trust of the employee will be reinforced if a sincere attempt is made in giving feedback with an intention to help him.
  • The superior should never lose sight that his aim is to improve the performance of the appraisee and not to criticize him.

Do’s and Don’ts

Based on what has been discussed above, the DO’s and DON’Ts of  the  appraisal interview and giving of feedback can be easily summarized:

Do’s

  • allow the employee to do the maximum talking,
  • encourage him to describe his success and failure,
  • create an atmosphere where he will open up.
  • praise him for his achievements.
  • tell him honestly what you think where he could have done well,
  • ask him what kind of help he expects from you.
  • extend to him all that you can do for him.

Don’ts

  • arrange a meeting when you are unable to devote time undisturbed.
  • allow any kind of disturbance once the meeting starts,
  • adopt judgmental role,
  • criticize him for his failures.

Counselling

The prime purpose of counselling is to communicate to employee the feedback of the performance and expectations and, help the employee to understand the areas of concern with the sole objective of improvement of his performance. If the feedback system is effective, the employee not performing up to the mark gets to know clearly where he stands against the set benchmarks.

The following could be considered as counselling skills:

  • It is essential to follow the stages mentioned earlier in respect of appraisal interview and feedback session. It helps in creating conducive atmosphere. The appraiser should realize that it is a common human tendency to react negatively to the feedback process, and particularly to the counselling process.
  • The process should start by communicating the purpose of the counselling.
  • The appraiser should be specific and descriptive when he is evaluating the performance.
  • Appraiser should avoid commenting on the person and centre his discussion on the issues related to performance.
  • His intention should be to assist the employee to overcome his problems. With this prime objective, even when he is criticizing the behaviour (and not the person)  he  should do it carefully. Criticizing without crippling should be the motto.
  • He should listen to the employee and try to help him.
  • He should offer workable solutions and act where the appraises can initiate improvement.
  • Appraiser should not have any prejudice about the employee and try to evaluate the employee’s version objectively.
  • Successful counselling is effective listening.

Competency Mapping And Assessment Of Competencies

Every employee in an organisation has to be competent and to perform in order to retain his job and expect to grow in the organisational hierarchy. In a dynamic environment with the explosion of new knowledge and technology, one has to acquire knowledge and skills on an on-going basis to remain competent and competitive.

The past performance does not guarantee future success.  In simple words, Competency is a knowledge, skill or attitude (KSA). You could have multiple derivatives from this definition as well. Competency is a set of demonstrable characteristics and skills that enable, and improve the efficiency of, performance of a job.

Some of the useful definitions of the competency are as follows:

  • Competency is an underlying characteristic of an individual that is related to effective and/or superior performance in a job situation. (Spencer and Spencer 1993)
  • A cluster of related knowledge, skills and attitude that affect a major part of effective and/or superior performance in a correlates with performance on the job, can be measured against well-accepted standards, and that can be improved via training and development. (Lucia and Lepsinger 1999)
  • Competency is underlying characteristics required to perform a given task, activity or role. Competency has the following forms correlates with performance on the job, can be measured. (Gomes 2007)
  • Competencies as the key components of performance related to “clusters of life outcomes”. They can be interpreted as broad as any kind of psychological or behavioural characteristics related to success in a person’s life. (McClelland 1973)
  • Competencies are a set of interrelated knowledge, skills and attitudes that represents a key component of a person’s job role and responsibility, that associates with performance in a job, that can be measured against well-established standards, and that can be reinforced through training and development. (Parry 1996)

‘Competence’ vs ‘Competency’ 

  • A review of literature suggests that ‘competency’ and ‘competence’ are two distinct ‘approaches’ in the context of HRM. The first one i.e., ‘Competency’is person-oriented behavioural approach. This approach commonly uses the term ‘competencies’ to refer to the behaviours or personal attributes supporting an area of work.
  • The second one i.e., ‘Competence’is task-oriented functional approach. This approach, on the other hand, uses the term ‘competence’ more frequently for describing an area of work tasks or job outputs. However, it is argued that both ‘competency’ and ‘competence’ complement each other.‘Being competent’ as achieving the job demands or roles while ‘having competencies’ as demonstrating the  essential behaviours for effective work performance.

The broad differences between ‘Competence’and ‘Competency’ are:

Competency Levels 

Acommon competency may be required at different level for different job. Organisationstypically define in their competency profiles the levels of performance (proficiency) to be attained for each competency.  These are often driven by the use to be made of the competency profiles. For example:

  • At Entry Level: It is the standard expected of employees on entry into a role. This is often used when the new entrant must learn or be trained to be able to perform to the standards required within the role of a new employee
  • Fully Effective Level: It is the level required of experienced employees who are performing at the expected standard for their role
  • Stretch/Mastery Level: It is typically displayed by employees who have mastered their role. These employees are often sought out by other employees and supervisors to provide advice or assistance

Assessment Centres

  • The origin of the Assessment Centre (AC) goes back to its use by the Office of Strategic Services (OSS) during the Second World War of work simulations to identify potential agents. However, the use of multiple exercises and simulations and the assessment of performance by multiple observers have its origin in pre-war German military effortsto identify leadership potential.
  • The British War Office Selection Board used this method during Second World War for military usage conducted by the Army, Navy and Air Force It was also used by British public sector selection procedures and the police.

Process of Designing an Assessment Centre 

The Task Force on Development of AC Standards (1979) set up to establish good practice in this area lays down the following seven conditions that needs to be met if an Assessment Technique wishes to be regarded as an Assessment Centre. (Technique is the standardised evaluation of behaviour.) – Seven Essential Elements of Assessment Centre: 

  • Multiple Assessment Technique There should be multiple assessment techniques out of which atleast one must be a simulation exercise designed to elicit behaviours related to dimensions of performance on the job and must be parallel or resemble stimuli in the work situation, e.g., In-basket exercise, Group Discussions, Fact finding exercise, etc.
  • Multiple Assessors The number of observers/assessors must be proportionate to the participants, 3-4 participants per assessor. Each participant must be assessed by more than one assessor for every activity to reduce the bias of assessment. The assessors must be experts in the assessment techniques and should receive training, briefing prior to participating in the Assessment/Development Centre.
  • Pooling of information Judgments resulting in an outcome or feedback must be based on pooled information from the assessors. Wide variations in the evaluation must be sorted out through discussion between the assessors. Each assessor is required to record the critical incidences while assessing the candidates. These notes help in resolving the assessment disparities between the assessors.
  • Time of Observation An overall assessment of behaviour must be made by the assessors at a separate time from the observation of behavior after compiling the entire data received from all the sources.
  • Design of Exercises The exercises for assessing various competencies should be designed carefully by ensuring their reliability and validity to assess those competencies. The help of experts should be sought to ensure their relevance and effective use. The readymade tools available off the shelf should be thoroughly validated and customised to meet the requirement of assessment centre purpose. the simulation exercise like in-basket exercise, business games, etc., are designed/developed to tap a variety of pre- determined behaviour.
  • The dimensions, attributes, characteristics or qualities evaluated by the Assessment Centre are determined by the thorough analysis of relevant job behaviours.
  • Techniques used are designed to provide information which is used in evaluating the dimensions, attributes or qualities previously determined.

Tools used in Assessment Centres 

A number of exercises/tools or simulations are designed to replicate the tasks and demands of the job for which a candidate is being assessed. These exercises are individual as well as group exercises and the candidates are observed by assessors while they are doing the exercise.

The main exercises done in Assessment Centres are

  • Leaderless Group Discussion’
  • ‘Psychometric Tests’,
  • In Basket or In Tray’ exercise,
  • Case Study/Analysis’
  • ‘Role Play’ exercises,
  • Business Games, Presentations, etc.

Behavioural Event Interview (BEI)

  • Behavioural Event Interview (BEI) is a structured interview technique that is used to collect information about past behavior. It is a technique based on the premise that the best predictor of future behaviour is the past behavior. It attempts to ask open-ended questions that require the interviewee to describe in detail past experiences which demonstrate his ability to perform a job. Each question helps the interviewer learn about interviewee to describe in detail past experiences which demonstrate purpose.
  • The Behavioural Event Interview is the heart of the Job Competency Assessment process. BEI data are the richest source of data about competencies that predict superior or effective job performance. The basic principle why it is used for competency assessment is that what people think or say about their motives or skills is not credible. Only what they actually do. The purpose of the BEI method is to get behind what people say they do to find out what they really do. his is accomplished by asking people to describe how they actually behaved in specific incidents.

Limitations of BEI 

  • Since the interview method relies on the recall of the respondent, only information that the respondent happens or chooses to remember is presented in the interview.
  • This can result in self-serving, biased information. A second limitation arises from the fact that the interviewer asks for decisions, actions, thoughts, and feelings, but not for knowledge or specific information that was the basis for decisions, thoughts, or actions. Therefore, the interviews are not considered adequate sources for determining the specialised knowledge needed by managers to perform their functions.
  • Finally, the interpretation and pattern finding from the answers solely reside on the interviewer who may or may not be an expert in Behavioural interview. This may lead to guess work and personal judgment of the interviewer.

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