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Sunday, December 12, 2010

Employee Performance Management System

Managing performance of its employees is central to an organization's success. All organizations, large and small, in all sectors of the economy have some sort of Employee Performance Management System in place.

Elements of Effective Employee Performance Management System

An effective Employee Performance Management System is supposed to consist of the following elements:
  • Grading of employees in certain categories (Separating Wheat from the Chaff) - high-performing, performing, under-performing, or something on similar lines
  • Identifying top talent (the Queen Bee) - recognizing high performance and rewarding it through steep hike in compensation (salary, stock options, etc.) or promotion
  • Identifying average talent (the Worker Ants) - recognizing desired and better than desired performance and rewarding it through normal salary hike (just beating the inflation!)
  • Identifying poor performers (the Dead Ants) - setting action plan for performance improvement and tracking the action plan to improved performance or in extreme cases, employment termination 
Business Value of  Employee Performance Management System
    In real sense, an effective Employee Performance Management System is intended to address the following business needs:
    • Improving collective performance of the organization vis-a-vis its competition
    • Improving organizational skills and competencies for staying in business and getting better at it
    • Retaining high and average performers and removing poor performers
    • Developing, stabilizing and maturing skills and competencies that have strategic value for the business and phasing out non-strategic skills and competencies. This may require re-skilling existing employees or laying off existing employees and going for fresh hiring for the needed skills and competencies

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