PERFORMANCE MANAGEMENT SYSTEM

*Performance refers to the degree to which an individual, team, or

organization achieves its goals and objectives. It is a measure of efficiency,
effectiveness, and productivity in accomplishing tasks and delivering
results.
Definitions by Different Authors:
Richard L. Daft
“Performance is the actual output or results of an organization as measured
against its intended goals or objectives”.
Robinson & Judge [2017]
“Performance is the accomplishment of a task measured against preset
known standards of accuracy, completeness, cost, and speed”.
Bernardin & Russell [1993]
“Performance refers to the outcomes or results of an employee's work that
are influenced by the effort, skills, and abilities they bring to the job”.
Performance in management reflects how well an individual, team, or
organization executes its tasks, meeting or exceeding the standards set to
achieve organizational objectives
*Management involves coordinating people, resources, and activities to
achieve organizational goals. It is a systematic process that includes
planning, organizing, directing, and controlling to ensure optimal
performance and achievement of objectives.

Planning: Planning forms the bedrock of successful management. It

involves the meticulous process of defining goals, anticipating future
trends, and formulating strategies to achieve desired outcomes. This crucial
function requires careful consideration of various factors, including
internal strengths and weaknesses, external opportunities and threats, and
the competitive landscape. Through thorough analysis and strategic
thinking, managers develop comprehensive action plans that outline the
steps necessary to achieve organizational objectives.

Organizing: Once a plan is in place, the organizing function comes into

play. This involves structuring resources and activities in a way that
maximizes efficiency and effectiveness. This may involve designing the
organizational structure, defining roles and responsibilities, allocating
resources effectively, and establishing clear lines of communication. The
goal of organizing is to create a well-defined framework within which
individuals and teams can work together seamlessly to achieve common
objectives.

Controlling: Controlling is an ongoing process that ensures that

organizational activities stay on track and align with the established plan. It
involves monitoring performance, comparing actual results with
predetermined standards, and identifying any deviations from the desired
course of action. Through regular evaluations, feedback mechanisms, and
corrective actions, managers can identify potential roadblocks, address
emerging challenges, and ensure that the organization remains on course
to achieve its goals.

Directing: Directing involves the essential task of leading and motivating

employees to work towards organizational objectives. This function
requires strong leadership, effective communication, and the ability to
inspire and motivate individuals. By fostering a positive and supportive
work environment, providing clear guidance, and empowering employees
to take ownership of their work, managers can unlock the full potential of
their team and drive collective success.

Definitions by Different Authors:

Harold Koontz
“Management is the art of getting things done through and with people in
formally organized groups”.
George R. Terry
“Management is a distinct process consisting of planning, organizing,
actuating, and controlling, performed to determine and accomplish stated
objectives with the use of human beings and other resources”.
Fayol [1916]
“Management is to forecast and plan, to organize, to command, to
coordinate, and to control”.
Management is how businesses organize and direct workflow, operations,
and employees to meet company goals. The primary goal of management is
to create an environment that empowers employees to work efficiently and
productively. A solid organizational structure guides employees and
establishes the tone and focus of their work.
*System in the context of management refers to a set of interrelated
components or elements that work together to achieve a common purpose
or goal. It involves inputs, processes, outputs, and feedback mechanisms
that are organized in a structured way to deliver desired results. A system
in management can pertain to an organization, a business process, or a
project, where different parts interact to achieve overall efficiency and
effectiveness.
Definitions by Different Authors:
Ludwig von Bertalanffy
“A system is a set of elements standing in interaction. A system is
characterized by a structure (the way elements are arranged), a process
(the interaction of these elements), and a function (the result of the
interaction)”.
Kast & Rosenzweig [ 1972]
“A system is a set of interacting elements or components that form a
unified whole. These elements are organized to achieve certain goals, and
any change in one part of the system can affect the entire system”.
Warren Bennis
“A system is a group of related and interdependent elements that function
together to achieve a common goal”.
From a management perspective, a system is a set of interconnected
components that work together in an organized manner to achieve a
specific goal. Systems theory emphasizes the interdependence of these
elements and their collective contribution to the success of the overall
objective.
*Performance Management System refers to a comprehensive process
used to align an organization's goals with individual performance, ensuring
that employees' efforts contribute to the overall success of the
organization. It involves setting objectives, monitoring progress, providing
feedback, and evaluating performance to enhance productivity, efficiency,
and growth.
A performance management system is a tool used by HR teams to measure
and analyze employee performance. Organizations use this system to help
their workforce enhance productivity by improving their performance over
time. Performance management systems typically cover performance
appraisals and employee development.
Employee performance is critical to any company's success. But to enable
that an employee performs to his/her potential, a company must ensure
that it plays it part in providing employees with everything they need. Clear
objectives and goals have to be established, the employee’s tasks should be
mapped to his/her skills, timely guidance and help in terms of learning and
development resources must be provided, performance must be monitored
regularly so underperformance issues can be identified and fixed.
Performance management systems are exceptionally useful to get all this
done. HR managers can use a good performance management system to set
clear performance expectations, define goals and objectives, provide timely
feedback, and grant rewards based on those expectations. They can help
monitor and manage performance, conduct appraisals and provide
continuous feedback. Performance management systems have helped
several organizations streamline and improve their performance
management processes.
These systems measure employee performance and make sure it aligns
with the organization’s goals and vision. Performance management is
critical to businesses as these tools are the best way to streamline the
process and give fair and periodic appraisals to make it easier and
straightforward.
Definitions by Different Authors:
Aguinis [2009]
“Performance Management is a continuous process of identifying,
measuring, and developing the performance of individuals and teams, and
aligning performance with the strategic goals of the organization”.
Armstrong & Baron [2004]
“Performance management is a strategic and integrated approach to
delivering sustained success to organizations by improving the
performance of the people who work in them, and developing the
capabilities of teams and individuals”.
A Performance Management System (PMS) is a structured process that
integrates various activities to manage and improve employee
performance. This includes goal setting, continuous feedback, performance
appraisals, and aligning individual achievements with organizational
objectives. It is aimed at enhancing individual, team, and organizational
performance for sustained success.

What Is the Importance of a Performance Management System?

A good performance management system will help increase overall
organizational performance by managing the performance of each
individual to ensure that the organization's aspirations and targets are met.
The system makes measuring your employees' growth, as well as their
need for assistance, easier and faster.
The day-to-day HR processes are more consistent and structured when
performance management tools are used. A performance management
system:

 Aids in efficient decision-making, particularly regarding decisions on

promotions, salary, transfers, or layoffs.
 Boosts employee performance by offering necessary guidance and
action plans regularly.
 Assists in developing better and more personalized training plans for
employees basis performance review results.
 Allows for faster course correction through frequent discussions of
goals and priorities, the development of project plans, and the
periodic assessment of progress.
 Helps in developing a better retention strategy and plan for
succession.

 Enables setting smart goals that fulfil the employee’s career

aspirations, taps into his strengths, and meet the organization’s
goals.
 Fosters a cordial and harmonious relationship between the employer
and the employee.
Performance management systems have been around for a while now, and
they eliminate traditional impediments to effective performance
management, resulting in increased productivity, faster growth, and access
to actionable insights.

APPROACHES OF PERFORMANCE MANAGEMENT

SYSTEM
Irrespective of the model you adopt, there are multiple ways to approach
the design and execution of performance management. Each approach
would involve different steps and elements but having a progressive
mindset that involves combining multiple approaches will help improve the
efficiency of today’s agile and cross-functional teams.
1. Objectives and Key Results (OKR)

In this performance management framework, company objectives are

drawn out, key results are decided, and the deadlines for achieving these
objectives are set. OKRs are essentially broad objectives broken into
measurable and achievable key results that the team/employee must work
towards. In this framework, not only do employees have a list of goals and
milestones to be achieved, they also have a charted course of action to
achieve the goals.

Objectives are qualitative descriptions of what you want to achieve. They

should be:

 Memorable: Easy to remember and understand.

 Inspirational: Motivating and challenging.
 Engaging: Inspiring the team to work towards a common goal.

Key Results are specific, measurable outcomes that indicate progress

towards achieving the objective. They should be:

 Specific: Clearly defined and easy to understand.

 Measurable: Quantifiable and trackable.
 Achievable: Challenging but realistic.
 Relevant: Aligned with the overall objective.
 Time-bound: With a specific deadline for completion.

Objective: Increase customer satisfaction

Benefits of using OKRs:

 Alignment: OKRs help align teams and individuals towards a

common goal.
 Focus: They help teams focus on what matters most.
 Transparency: They make goals and progress visible to everyone.
 Motivation: They motivate teams to achieve ambitious goals.
 Accountability: They hold teams accountable for their results.

Tips for setting effective OKRs:

 Start with a few key objectives: Don't try to do too much at once.
 Make your key results specific and measurable: Use metrics that
are easy to track and understand.
  Set challenging but achievable goals: Don't be afraid to stretch
your team, but make sure your goals are realistic.
 Review and adjust your OKRs regularly: Don't be afraid to change
your OKRs if needed.
 Celebrate your successes: Recognize and reward your team's
achievements.

2. BARS ( Behaviorally Anchored Rating Scale )

The Behaviorally Anchored Rating Scale (BARS) is a performance appraisal

method that aims to provide a more objective and accurate evaluation of
employee performance by focusing on specific behaviors and actions.

Core Concept

BARS combines elements of traditional rating scales with critical incidents.

Instead of using vague terms like "excellent" or "needs improvement,"
BARS uses specific examples of behavior to anchor the rating scale. These
examples illustrate different levels of performance, making the evaluation
more concrete and less subjective.

Key Features

 Focus on Behavior: BARS emphasizes observable behaviors and

actions rather than personality traits or characteristics.
 Specific Examples: The rating scale is anchored by specific examples
of behavior that represent different levels of performance.
 Clear Performance Standards: BARS provides clear and detailed
descriptions of what constitutes different levels of performance,
reducing ambiguity and subjectivity.
 Job-Specific: BARS are typically developed for specific jobs or roles
within an organization, ensuring that the evaluation is relevant and
accurate.

How BARS Works

1. Identify Key Job Dimensions: The first step is to identify the key
dimensions or aspects of performance that are critical for success in a
particular job. These dimensions might include things like
communication skills, problem-solving ability, teamwork, or
customer service.
2. Generate Critical Incidents: Next, gather examples of critical
incidents, which are specific instances of effective or ineffective
behavior related to each job dimension. These incidents can be
collected through observation, interviews with job incumbents and
supervisors, or from performance records.
3. Develop the Scale: The critical incidents are then used to develop a
rating scale for each job dimension. Each point on the scale is
anchored by a specific behavioral example that illustrates that level
of performance.

Advantages of BARS

 Improved Accuracy: By focusing on specific behaviors and

providing clear examples, BARS can reduce rating errors and
improve the accuracy of performance evaluations.
 Increased Objectivity: BARS provides a more objective and
standardized approach to performance appraisal, reducing the
impact of personal biases.
 Clearer Feedback: The specific behavioral examples provide
employees with clear and actionable feedback on their performance.
  Better Understanding of Expectations: BARS helps employees
understand what is expected of them and what constitutes good
performance.

Limitations of BARS

 Time-Consuming to Develop: Developing BARS can be a time-

consuming and resource-intensive process, especially for
organizations with many different jobs.
 May Not Capture All Aspects of Performance: BARS may focus too
narrowly on specific behaviors and fail to capture other important
aspects of performance, such as creativity or initiative.

In summary, BARS is a valuable performance management tool that can

improve the accuracy, objectivity, and clarity of performance evaluations.
However, it is important to be aware of its limitations and to use it in
conjunction with other performance management methods to get a
complete picture of employee performance.

3. Balance score card

The Balanced Scorecard is a strategic performance management tool that

goes beyond traditional financial measures to provide a more holistic view
of an organization's performance. It was developed by Robert Kaplan and
David Norton in the early 1990s. A balanced scorecard (BSC) is a strategic
framework that helps organizations measure and monitor their
performance and progress towards strategic goals. It's a performance
management tool that provides a holistic view of an organization by
incorporating both financial and non-financial measures

Core Concept

The Balanced Scorecard translates an organization's strategic objectives

into a set of interconnected performance measures. It balances financial
measures with other key perspectives, providing a more comprehensive
and balanced view of performance.

Four Perspectives

The Balanced Scorecard typically considers four perspectives:

1. Financial Perspective: This perspective focuses on traditional

financial measures such as profitability, revenue growth, and return
on investment. It addresses how the organization looks to
shareholders.
2. Customer Perspective: This perspective focuses on customer
satisfaction, market share, and customer retention. It addresses how
the organization looks to customers.
3. Internal Business Processes Perspective: This perspective focuses
on the efficiency and effectiveness of internal processes that create
and deliver value to customers. It addresses what the organization
must excel at.
4. Learning and Growth Perspective: This perspective focuses on
employee skills, knowledge, and organizational capabilities that drive
future performance. It addresses how the organization can continue
to improve and create value.

Key Features

 Strategic Focus: The Balanced Scorecard is directly linked to the

organization's strategy, ensuring that performance measures are
aligned with strategic objectives.
 Balanced Measures: It balances financial measures with non-
financial measures, providing a more complete view of performance.
 Cause-and-Effect Relationships: The scorecard emphasizes cause-
and-effect relationships between different perspectives, showing
how improvements in one area can lead to improvements in others.
 Actionable Insights: It provides actionable insights that can be used
to improve performance and achieve strategic goals.
How the Balanced Scorecard Works

1. Define Strategic Objectives: The first step is to define the

organization's strategic objectives for each of the four perspectives.
2. Develop Performance Measures: For each strategic objective,
develop specific and measurable performance indicators (KPIs).
3. Set Targets: Set targets for each performance measure, defining the
desired level of performance.
4. Develop Initiatives: Identify specific initiatives or actions that will
be taken to achieve the targets.
5. Monitor and Evaluate: Regularly monitor performance against
targets and evaluate the effectiveness of initiatives.

Advantages of the Balanced Scorecard

 Improved Strategic Focus: It helps organizations to focus on their

strategic priorities and align their activities accordingly.
 Better Performance Measurement: It provides a more balanced
and comprehensive view of performance, going beyond traditional
financial measures.
 Enhanced Communication: It improves communication and
understanding of strategic objectives throughout the organization.
 Improved Accountability: It clarifies responsibilities and
accountabilities for achieving strategic goals.

Limitations of the Balanced Scorecard

 Difficulty in Implementation: Implementing a Balanced Scorecard

can be challenging and require significant effort and resources.
 Potential for Overcomplexity: The scorecard can become too
complex if too many measures are included.
 Need for Regular Review: The scorecard needs to be regularly
reviewed and updated to ensure that it remains relevant and aligned
with the organization's strategy.

In summary, the Balanced Scorecard is a powerful tool for strategic

performance management. By balancing financial measures with other key
perspectives, it provides a more holistic view of performance and helps
organizations to achieve their strategic goals.
4.360 - Degree Feedback

360-degree feedback is a performance evaluation method that gathers

feedback from multiple sources around an employee, providing a well-
rounded perspective on their performance. It's also known as multi-rater
feedback, multi-source feedback, or multi-source assessment.

Core Concept

Unlike traditional performance reviews where feedback comes primarily

from a supervisor, 360-degree feedback incorporates input from various
people who interact with the employee in their work environment. This
includes:

 Supervisors: Providing feedback on overall performance, goal

achievement, and work quality.
 Peers: Offering insights into teamwork, collaboration, and
interpersonal skills.
  Subordinates: Giving feedback on leadership, communication, and
guidance.
 Customers (internal or external): Sharing perspectives on service,
responsiveness, and professionalism.
 Self-Assessment: The employee also evaluates their own
performance, providing a point of comparison with the feedback
from others.

Key Features

 Multiple Perspectives: Gathers feedback from a variety of sources

for a holistic view.
 Focus on Behaviors: Emphasizes specific behaviors and actions
rather than personality traits.
 Anonymity: Responses are typically anonymous to encourage honest
and candid feedback.
 Development-Oriented: Primarily used for employee development
and improvement rather than performance-based decisions like
promotions or raises.

How 360-Degree Feedback Works

1. Select Participants: Determine who will provide feedback for each

employee based on their interactions and roles.
2. Design Questionnaire: Create a questionnaire with specific
questions or statements related to key competencies and behaviors.
3. Collect Feedback: Distribute the questionnaire to participants and
collect their responses, ensuring anonymity.
4. Compile Results: Aggregate the feedback into a report for the
employee, summarizing the key themes and areas for development.
5. Provide Feedback: Deliver the feedback to the employee in a
constructive and supportive manner, focusing on development and
improvement.
6. Create Action Plan: Work with the employee to create an action
plan for addressing the feedback and improving their performance.

Advantages of 360-Degree Feedback

 Comprehensive View: Provides a more complete and balanced view

of performance than traditional methods.
 Increased Self-Awareness: Helps employees understand how
others perceive them and identify their strengths and weaknesses.
  Improved Development: Provides specific and actionable feedback
for development and improvement.
 Enhanced Teamwork: Promotes better communication and
collaboration within teams.
 Reduced Bias: Minimizes the impact of individual biases in
performance evaluations.

Limitations of 360-Degree Feedback

 Time-Consuming: Can be a time-consuming process to administer

and collect feedback.
 Potential for Bias: While it reduces individual bias, there's still
potential for collusion or leniency among raters.
 Requires Trust and Openness: Requires a culture of trust and
openness for honest and constructive feedback.
 Can Be Overwhelming: Receiving feedback from multiple sources
can be overwhelming for some employees.

Best Practices for 360-Degree Feedback

 Clearly Define Objectives: Establish clear objectives for the 360-

degree feedback process and communicate them to all participants.
 Ensure Anonymity: Guarantee the anonymity of responses to
encourage honest feedback.
 Provide Training: Provide training for both raters and recipients on
how to give and receive feedback effectively.
 Focus on Development: Emphasize the developmental purpose of
the feedback and avoid using it for performance-based decisions.
 Follow Up: Follow up with employees to track their progress and
provide ongoing support.

In summary, 360-degree feedback is a valuable tool for employee

development and organizational improvement. By gathering feedback from
multiple sources, it provides a more comprehensive and balanced view of
performance, leading to increased self-awareness, improved development,
and enhanced teamwork.
5. KRA (Key result area) and KPI ( Key performance indicator)

Key Result Areas (KRAs) and Key Performance Indicators (KPIs) are both
performance metrics used to assess an employee's performance, but they
have different purposes and focuses:
KRAs
Define the scope of a job role, including the broader responsibilities and
expected outcomes. KRAs are qualitative and can be difficult to
quantify. They should be specific, measurable, achievable, realistic, and
timely (S.M.A.R.T.).
KPIs

Measure an employee's progress toward their KRAs. KPIs are quantifiable

metrics that provide clear insights into performance. They are often used
for benchmarking.

KRA: Key Result Areas

 Focus: What needs to be done. They define the "what" of a job.

 Nature: Generally qualitative and descriptive. They define the scope
of the role.
  Examples:
o For a Sales Manager: "Revenue Generation," "Customer
Relationship Management," "Team Leadership"
o For a Software Engineer: "Software Development," "Code
Quality," "Technical Innovation"

KPI: Key Performance Indicators

 Focus: How well something is done. They define the "how" of

measuring success within a KRA.
 Nature: Quantitative and measurable. They use numbers,
percentages, or other metrics.
 Examples:
o For a Sales Manager (related to the "Revenue Generation"
KRA): "Achieve 10% year-over-year sales growth," "Generate
$1 million in new sales," "Increase average deal size by 5%"
o For a Software Engineer (related to the "Code Quality" KRA):
"Reduce bug reports by 20%," "Achieve 95% code coverage
with unit tests," "Maintain a code defect density below 1%"

The Relationship Between KRAs and KPIs

KRAs and KPIs work together to provide a comprehensive framework for

performance management. KRAs set the overall direction and define the
key areas of responsibility, while KPIs provide the specific measures to
track progress and evaluate success within those areas.

Benefits of Using KRAs and KPIs

 Clarity and Focus: They provide clear expectations and focus efforts
on key priorities.
 Measurable Progress: They allow for objective measurement of
progress and performance.
 Improved Accountability: They establish clear accountability for
results.
 Data-Driven Decision Making: They provide data to inform
decision-making and drive continuous improvement.
 Performance Management: They provide a basis for performance
reviews, feedback, and development.
In Conclusion

KRAs and KPIs are essential tools for effective performance management.
By clearly defining responsibilities and establishing measurable metrics,
organizations can ensure that individuals and teams are aligned with
strategic goals and contributing to overall success.

6. CAM (Cost Accounting Method)

Cost accounting methods play a crucial role in performance management

systems by providing valuable insights into an organization's cost structure
and operational efficiency. By accurately tracking and analyzing costs,
businesses can identify areas for improvement, allocate resources
effectively, and make informed decisions that drive performance.

Key Approaches of Cost Accounting in Performance Management:

1. Cost-Benefit Analysis:
o Evaluating the costs and benefits of different initiatives or
projects.
o Identifying the most cost-effective options.
o Ensuring that the benefits outweigh the costs.
2. Variance Analysis:
o Comparing actual costs to budgeted or standard costs.
 o Identifying significant deviations and their underlying causes.
o Taking corrective actions to improve performance.
3. Activity-Based Costing (ABC):
o Allocating overhead costs to products or services based on the
activities that consume those costs.
o Providing a more accurate picture of the true cost of products
or services.
o Identifying areas where costs can be reduced or eliminated.
4. Target Costing:
o Setting a target cost for a product or service based on the
desired selling price and profit margin.
o Working backward to determine the allowable costs for each
component or process.
o Driving continuous improvement efforts to reduce costs and
achieve profitability goals.
5. Life-Cycle Costing:
o Tracking and analyzing costs over the entire life cycle of a
product or service.
o Identifying opportunities for cost reduction and improvement
at each stage of the life cycle.
o Making informed decisions about product development,
manufacturing, and marketing.

Benefits of Using Cost Accounting in Performance Management:

 Improved Decision Making: Cost accounting provides accurate and

timely information that supports informed decision-making at all
levels of the organization.
 Enhanced Operational Efficiency: By identifying and addressing
cost inefficiencies, businesses can improve their overall operational
efficiency and reduce costs.
 Increased Profitability: By optimizing cost structures and pricing
strategies, businesses can increase their profitability and achieve
sustainable growth.
 Improved Accountability: Cost accounting helps to track and
measure performance at all levels of the organization, promoting
accountability and ownership.
 Enhanced Competitiveness: By understanding their cost structures
and identifying areas for improvement, businesses can gain a
competitive advantage in the marketplace.
By effectively integrating cost accounting methods into their performance
management systems, organizations can gain a deeper understanding of
their operations, identify areas for improvement, and make informed
decisions that drive sustainable growth and success.

7. Management Of Objective

The Management by Objectives (MBO) approach to performance

management is a structured and strategic framework where both managers
and employees collaboratively define, align, and evaluate goals. Developed
by Peter Drucker in the 1950s, MBO focuses on achieving clearly defined
objectives that contribute to organizational success. Here's a detailed
breakdown:

Core Principles of MBO

1. Goal Clarity and Alignment

o Objectives are specific, measurable, achievable, relevant,
and time-bound (SMART).
 o Goals set at individual, team, and departmental levels align
with the organization's overarching strategy.
o Employees understand how their contributions drive
organizational success.
2. Collaborative Goal Setting
o Managers and employees work together to define objectives.
o This joint process increases ownership, accountability, and
motivation.
o Employees gain clarity on what is expected of them.
3. Performance Monitoring
o Progress toward goals is regularly reviewed.
o Feedback is provided continuously, ensuring alignment and
timely adjustments.
4. Appraisal and Evaluation
o Performance is assessed based on the achievement of
predefined objectives.
o Success is not measured solely by effort but by outcomes.
o Constructive feedback and recognition are part of the
evaluation process.
5. Continuous Improvement
o Post-assessment, lessons learned are discussed.
o The organization uses insights to refine future objectives and
improve processes.

Advantages of the MBO Approach

 Alignment: Ensures all employees work toward common objectives.

 Clarity: Provides a clear understanding of what success looks like.
 Motivation: Encourages employee engagement and accountability.
 Focus on Results: Emphasizes outcomes over activities.
 Adaptability: Allows for goal adjustments in response to changing
circumstances.

Challenges of the MBO Approach

1. Time-Consuming: Requires significant time for goal setting and

regular reviews.
2. Overemphasis on Quantifiable Goals: May neglect qualitative
factors like teamwork or creativity.
3. Rigid Framework: Inflexible goals may not adapt well to rapid
changes.
 4. Potential for Conflict: Disagreements on objectives or evaluations
may arise.
5. Requires Skilled Managers: Success depends on managers’ ability
to set effective goals and provide constructive feedback.

Best Practices for Implementing MBO

1. Ensure top-down support and alignment with the organization's

vision.
2. Train managers and employees on goal-setting techniques.
3. Use tools or software to track progress and streamline feedback.
4. Foster a culture of transparency and continuous learning.
5. Regularly review and refine the MBO process.

By fostering alignment and accountability, MBO drives both individual and

organizational performance, making it a popular approach in performance
management systems.
 ABOUT THE COMPANY : GAIL (INDIA)

GAIL (India) Limited is India’s leading natural gas company with diversified
interests across the natural gas value chain of trading, transmission, LPG
production & transmission, LNG re-gasification, petrochemicals, city gas,
E&P, etc. It owns and operates a network of around 16240 km of natural
gas pipelines spread across the length and breadth of country. It is also
working concurrently on execution of multiple pipeline projects to further
enhance the spread. GAIL commands ~66% market share in gas
transmission and has a Gas trading share of over ~ 54% in India. GAIL and
its Subsidiaries / JVs also have a formidable market share in City Gas
Distribution . In the Liquefied Natural Gas (LNG) market, GAIL has
significantly large portfolio.

GAIL is also a pioneer in using gas for producing petrochemicals and has an
integrated 810 KTPA gas based petrochemical complex in Uttar Pradesh.
GAIL is co-promoter of two other petrochemical plants including 280 KTPA
BCPL Complex in Assam and 1.1 MMTPA OPaL project in Gujarat. Further,
GAIL has acquired JBF Petrochemicals Limited (JBFPL) of 1.25 MMTPA
Purified Terephthalic Acid (PTA) through Corporate Insolvency Resolution
Process (CIRP). JBFPL has been renamed as GAIL Mangalore
Petrochemicals Limited (GMPL) and is now a wholly owned subsidiary of
GAIL.GAIL holds participating interest in 10 domestic E&P blocks, 2 E&P
blocks in Myanmar and 1 shale gas asset in US.

GAIL is also the promoter of Konkan LNG Private Limited which operates
LNG regasification terminal at Dhabol with design capacity of 5 MMTPA.
GAIL is a pioneer in City Gas Distribution business in India with 8 JVs and 3
subsidiaries in India for its CGD business, notably Indraprastha Gas Limited
(IGL) in Delhi and Mahanagar Gas Limited (MGL) in Mumbai. GAIL group
companies are authorized in 72 GAs across the nation out of the total 308
GAs. GAIL cater to communities across the country summing up to the
mammoth number of approximately 82 lakh PNG customers (65
%) and 2600+ CNG stations (40%) of the country’s share.

GAIL has successfully commissioned India’s First Project for blending of

Hydrogen in City Gas Station, at Indore. GAIL has installed its first Green
Hydrogen Plant at GAIL Vijaipur in Madhya Pradesh of 10 MW capacity to
produce 4.3 TPD of Green Hydrogen. GAIL is also expanding its presence in
renewable energy like Solar, Wind and Biofuel.
Mission: “Enhancing quality of life through clean energy and beyond”.

Vision: “Be the leader in natural gas value-chain and beyond, with global
presence, creating value for stakeholders with environmental
responsibility”.
 HISTORY OF THE ORGANISATION

The Gas Authority of India Ltd. was incorporated in August 1984 as a Public
Sector Undertaking (PSU) of the Government of India under the Ministry of
Petroleum & Natural Gas (MoP&NG) to build, operate and maintain HVJ gas
pipeline. The 1,750 km long pipeline was one of the largest natural gas
pipeline projects in the world and was built at a cost of ₹17
billion (US$200 million).[9] Construction began in June 1987 and was
energised by July 1989.

In November 1988, GAIL received approval to build a ₹3

billion (US$36 million) LPG extraction plant in Vijaipur with a capacity of
400,000 tpa. Phase I of the plant, with a capacity of 200,000 tpa was
commissioned in 1990-91, eight months ahead of schedule. Phase II was
commissioned in February 1992.

GAIL entered into a joint venture agreement with British Gas on 6

December 1994 to create Mahanagar Gas Limited to implement the
Bombay City Gas Distribution project. GAIL was awarded Navratna status
by the Indian government on 1 January 1997, in acknowledgement of its
"excellent track record" and "potential to become a global giant" and
providing it with greater autonomy. Later in 1997, GAIL began its city gas
distribution pilot project in New Delhi by setting up nine compressed
natural gas (CNG) stations. In 1998, GAIL entered into a joint venture with
the Bharat Petroleum and the Government of Delhi to create Indraprastha
Gas to implement the Delhi gas distribution network.

In March 2000, GAIL commissioned a petrochemical plant with a capacity

to process 300,000 tonnes of ethylene to produce 260,000 tonnes
of HDPE and LLDPE in Pata, Auraiya district in Uttar Pradesh. The plant,
connected to the HVJ pipeline converts natural gas to petrochemicals. In
2016, the plant capacity was doubled to produce 400,000 tons of PE per
year.[10] In 2019, In 2018-19, the plant's capacity was doubled to 810,000
tonnes per year.[11] In April 2020, during the COVID-19 pandemic in India,
lack of market demand caused GAIL to shutdown the plant.[12]

GAIL commissioned the 1,269 km Jamnagar-Loni LPG pipeline. It was the

world's longest LPG pipeline when commissioned and supplied 1.7 million
TPA to Northern India.

To secure gas for its mainstream business, the Exploration and Production
department was created. Today GAIL is a partner in the Daewoo-OVL-LED
consortium in two offshore blocks in Myanmar. The bulk of its blocks is
located in India, in the areas of the Gulf of Khambhat, the Assam-
Arakan basin, the Mahanadi River Basin, the K-G (Krishna Godavari) basin,
and the Kaveri river basin.

GAIL has diversified into petrochemicals, telecom and liquid

hydrocarbons other than gas infrastructure. The company has also
extended its presence in power, liquefied natural gas (LNG), regasification,
city gas distribution and exploration & production through participation in
equity and joint ventures. Following these additional ventures, the Gas
Authority of India was renamed GAIL (India) Limited on 22 November
2002.

Growth of GAIL (India) Limited

1. 1984: Incorporation
o Established with an initial authorized capital of ₹300 crore.
2. 1986: HVJ Pipeline Commissioning
o Constructed a 1,750 km long Hazira-Vijaipur-Jagdishpur (HVJ)
pipeline, the first cross-country natural gas pipeline in India.
3. 1990s: Expansion
o Added LPG production units with an annual capacity of 1
million tonnes.
4. 2000s: Network Expansion
o Natural gas pipeline network grew to 7,000 km by 2010.
o Launched 6 CGD projects in key cities.
5. 2012–2015: Infrastructure Growth
o Commissioned 4,500 km of additional pipelines.
o Expanded city gas distribution to 15 cities.
6. 2018: Market Leadership
o Operated a natural gas pipeline network of over 11,000 km.
o Transported more than 100 MMSCMD (Million Metric
Standard Cubic Meters per Day) of natural gas.
7. 2020: Renewable Energy Investments
o Achieved 130 MW of renewable energy capacity (solar and
wind).
8. 2023: Pipeline and Revenue Milestones
o Total pipeline network surpassed 14,500 km, connecting
major industrial regions.
o Revenue exceeded ₹1 lakh crore (~$12 billion).
o Expanded CGD projects to 230+ cities under partnerships and
subsidiaries.
 9. 2024: Current Statistics
o 70% of India’s natural gas transmission capacity is managed
by GAIL.
o Handles 55% of the country’s natural gas market.
o LNG import capacity exceeds 20 million tonnes per annum
(MTPA).
o Operates 2 petrochemical plants with a combined production
capacity of 810 KTPA (kilo tonnes per annum).

Human Capital of GAIL ( INDIA )

GAIL India Limited, a leading natural gas company, prioritizes a skilled and
engaged workforce. GAIL's HR policies focus on performance, offering
competitive remuneration and benefits. The company fosters a culture of
learning and open communication, with accessible senior leadership. While
GAIL boasts a young and highly qualified workforce with cross-functional
expertise, a significant gender disparity exists, particularly in management
and non-management roles.
GAIL India recognises that the human resource function is one of the major
drivers of business value. GAIL has been proactively taking up numerous
initiatives like Wellness Hour– Spandan, project Samanvaya to improve the
effectiveness of HR services and enhance employee experience, youth
Engagement platform – ‘OJAS’ to promote engagement and development of
young executives, ‘GAIL Abha’ an entrepreneurial platform for spouses of
employees.

VALUE CREATION :
INPUT
FINANCIAL CAPITAL :-
*Capex of `11,426 crore
* Paid up Equity `6,575.10 crore

MANUFACTURING CAPITAL
*16,243 km of Natural Gas Pipeline Network
*Owns and operates 2,040 km LPG pipeline network
*118 MW of wind and 17 MW of solar power capacity.

INTELLECTUAL CAPITAL
*250.20 crore investment in R&D

HUMAN CAPITAL
*Total number of employees 5,038 (including Board of Directors)
*Total hours of training given 1,78,283 man hours
*Average spent on training and development of FTEs `33,812.38
SOCIAL AND RELATIONSHIP CAPITAL
*175.71 crore CSR
*Spend Conducted 16 Vendor Development programs across various work
centres
*Targets 25% of procurement from MSEs
*Carries out Customer Value Management (CVM)

NATURAL CAPITAL
*5,09,12,004 GJ of Total Energy Consumption
* Water consumption of 22.49 million m3

OUTPUT
FINANCIAL CAPITAL
*1,30,638 crore revenue from operation
*11,555 crore Profit before tax
*13 earning per share

MANUFACTURING CAPITAL
*Gas transmission of 120.46 MMSCMD
* LPG throughput of 4.369 MMTPA
* Total liquid hydrocarbon production of about 0.99 Million MT from GPUs

INTELLECTUAL CAPITAL
*Collaborative research work mainly on emerging areas such as Green
Hydrogen, CO2 utilisation

HUMAN CAPITAL
*Achieved 80% coverage of employees training programme with a training
efficacy score of >93%
*Employee turnover rate is 3.49%
*HSE Score of 95.4% in FY 2023-24, surpassing the Excellent Target of
93.5%.

SOCIAL AND RELATIONSHIP CAPITAL

*More than 13,34,034 beneficiaries through CSR program
*`1,963 crore procurement from MSEs (56.51% of the total eligible value)
* Customer satisfaction score is 91%
* `2,704 crore procurement from Government e-Marketplace (GeM)

NATURAL CAPITAL
*Total operational GHG emission of 3,33,62,900 tCO2e
* Target to achieve Net zero Scope 1 and Scope 2 GHG Emission by 2035
* Target to achieve 35% GHG Scope 3 emission reduction by 2040
Representation of Priority Section : Our Company has been complying with
the Presidential Directives on Reservation and other instructions/guidelines
issued from time to time pertaining to Policies and Procedures of Government
of India. Group wise details with regard to total number of employees and the
representation of Scheduled Castes, Scheduled Tribes, Other Backward
Classes, Economically Weaker Sections, Persons with Benchmark Disabilities
amongst them as on 31st March, 2024.
A total of 384 new employees joined your Company during the FY 2023-24.
Total Manpower of the Company as on 31st March, 2024 stood at 5038
(including CMD, Whole-time Directors & CVO) with 16% of its employees
belonging to the SC category, 7% to the ST category & 26% to the OBC
category. Further, out of total employees-7.46% belong to the Minorities and
2.1% of the total workforce belong to the Persons with Benchmark Disabilities
(PwBDs) category. Your Company's workforce is comprised of 344 women
employees (i.e. 6.83% of its employees) as on 31st March, 2024. The
Company’s attrition rate is 0.85%, which is a testament to its strong human
capital.

CAPABILITY DEVELOPMENT
Human Capital
As on 31st March, 2024, your Company had 5038 (including Whole-time
Directors and Chief Vigilance Officer) employees on its roll. Your Company
understands that more investment a Company makes in human capital, the
chances of its productivity, innovation and success become higher.Your
Company has dedicated resources to develop its human capital through
training and mentoring. Some of the important initiatives taken by GAIL
towards this end includes:
i. OJAS, a Young Executive platform was created for executives of 35 and
below years of age, to provide them with opportunity to connect, engage and
develop their capabilities. The platform enables to launch targeted
engagement initiatives towards Millennial and Gen Z employees.
ii. Spandan, an innovative initiative entails observance of a "Monthly Wellness
Hour," a distinctive practice wherein employees, across all locations, convene
to dedicate time towards enhancing their physical, mental, and emotional
well-being through a spectrum of activities.
iii. Project Samanvay, a part of HR outreach efforts, wherein HR
representatives from Delhi/NCR offices visited various sites/plants to
understand the pressing HR issues/matters and gather employees’ feedback/
opinions to improve HR service delivery.
iv. Aarohan, an initiative focused on skill development of Young HR
Professionals through interactive mutual learning and expanding their
knowledge base to new approaches in their tasks, and improved performance.
v. Introduction of enhanced healthcare provisions under GAIL Medical
Attendance Rules. Cashless Medicine Delivery Facility at all major work
centres across the country has been rolled out.
vi. Townhall Meetings, held with employees of work centres, led by Director
(HR), marks a pivotal steptowards facilitating open dialogue and constructive
engagement of employees.
Your Company has a well-defined policy for allowing leave for study purposes,
which facilitates employees with 5 years or more experience to go on
sabbatical for study purposes. Regular performance feedback is one of the key
aspects through which performance culture is achieved. A focused emphasis
has been given on the “Art of giving feedback’ through workshops.
Townhall Meeting led by Director (HR). A major deciding factor in improving
human capital is improving the quality of life being offered at various work
locations through the quality of infrastructure provided to the employees and
their families. The Company puts this aspect on high importance and makes
sure that employees have access to the best of facilities like Township,
Hospital, School, Clubs, Sports facilities etc. The maintenance of the
infrastructure is taken care at local level by HR Department.
Your Company's focus with regard to human capital management is to provide
a safe and healthy work environment to deliver the performance required for
business continuity while pursuing individual aspirations. Through strategic
and targeted development programmes and employee engagement initiatives,
your Company is building an employee base that can leverage their potential
and talents to create a world where access to clean energy is given in an
affordable manner.
Value added per employee for 2023-24 was `358.58 lakh. Value Added per
Employee reflects its emphasis to make the optimal & productive use of the
available resources and business opportunities.

Leadership Development Program

Taking cognizance of the challenges of coming years, the Company has defined
its business strategy till 2030 to continue the unstinted growth pattern. The
new projects will need to be spearheaded by leaders who have the fortitude to
act entrepreneurially by actively looking and advocating for new
opportunities for the Company. The Board has approved Succession Planning
Policy to be followed for executives at 3 levels below the Board. The policy
lists out in detail the approach and methodology to be adopted for the
Succession Planning Process. It identifies Unique Role (UR) between E-7 to E-
9 grade. For URs in the said levels, specification in terms of essential and
desired qualification and experience has been prepared.
Succession and Staffing for all the identified critical Roles in E-7 to E-9 grade is
conducted through extant Career Progression/ Departmental Promotion
Committee (DPC) and Placement/ Annual Placement Exercise (APE) Policy
Framework. Role Specifications for each of the target UR will be referred to
assess readiness level of the potential successor at the time of APE/ DPC.
Your Company believes that capacity building and enhancing the competency
of employees is the key to the successful execution of its strategic plans. As a
part of preparednessfor coming challenges, your Company has put an
Integrated Leadership Development Framework and Succession Planning
Framework for facilitating leadership development and career planning.
The Development strategy comprises of multi-pronged Talent Development
Interventions which includes:
*360 Degree Feedback Exercise
* Senior Management Development Centre (SMDC) Exercise
* Focused development programmes
360 Degree Feedback is aimed to provide an effective feedback to the
concerned executive(s) via his/her peers, subordinates, and seniors. Senior
Management Development Centre (SMDC) exercise has been undertaken for
senior executives in Chief Manager (E-5) Grade & above. SMDC is an aid to
ensure better and inspiring leadership in the organization. Based on the input
of SMDC exercise, the executives are provided competencyspecific training in
leading institutions & premier B-schools and supplemented with books & e-
learning modules. Additionally, a structured Management Development
Program is also imparted to all newly promoted General Manager/ Chief
General Manager (E-7 and E-8) level Executives. Your Company is grooming
the senior-level executives of GAIL at the level of Executive Director and Chief
General Manager for the Board Position through capability building programs
like Master Class for Directors and Board Room Effectiveness.
Learning and Development:-
GAIL Training Institute (GTI) has extended its wings to cater to the
requirement of the Human Resource development and professional training,
to the entire Oil & Gas fraternity especially in the domain of Gas
Transmission and Distribution, City Gas Distribution, Gas Processing,
Petrochemicals and LNG.
GTI conducted and organized the training programs in physical mode during
April 2023 to March 2024. GTI (Noida and Jaipur) conducted about 292
training programs based on the Training Need Assessment (TNA) of the
employees and covered more than 4,565 employees under these training
programs during the FY 2023-24.
A special initiative was taken to conduct program on Vigilance Awareness
through Case Study at various work centres in view of the intricacies of
handling business through public money in a Public Enterprise setup. During
the year 2023-24, program on vigilance awareness including Public Interest
Disclosure and Protection of Informers (PIDPI) were organized at various
work centres/offices of GAIL covering more than 700 Executives. Senior and
middle level executives were nominated to various conferences and seminars
to update their knowledge with current trends and to overcome the future
challenges.
GTI has imparted training to the executives of various organizations in the
field of Oil & Gas including Bharat Petroleum Corporation Limited, Indian Oil,
Indraprastha Gas etc. and various participants from across the globe. GTI
partnered with Ministry of External Affairs in India's Development
Partnership through Capacity Building Initiative under ITEC (Indian
Technical and Economic Cooperation) Program organized for Developing
and Neighboring Countries and conducted a training program on Financial
Audit in SAP Environment during January 2024 through International Centre
for Information Systems and Audit (ICISA). As a part of Knowledge
Management initiative, the 16th Knowledge & Experience Sharing Seminar
was organized during 4th - 5th January 2024. GAIL ABHA, an initiative for
Educating, Mentoring and Hand Holding on Entrepreneurial ventures for
spouses of GAIL Employees posted at remote locations of GAIL at Pata &
Vijaipur is being driven by GTI, Noida by engaging team from IIT, Madras.

Skill Development programs

Your Company is also playing a proactive role to support the Skill India
Mission through active participation of Hydrocarbon Sector Skill Council
(HSSC) and other Sector Skill Councils for providing Skill Trainings at Skill
Development Institute (SDI) at Raebareli, and GAIL Institute of Skills at Guna
and Nagaram. Another GAIL Institute of Skills was also setup at Amravati
during the year 2023-24.
A large number of youths were trained in various job roles during FY 2023-24
for getting gainful employment at various GAIL Institute of Skills (Guna-408
nos., Nagaram-133 nos. & Amravati-177 nos.).
Skill Development Institute (SDI), Raebareli has been registered and approved
as Government Training Partner (GTP) with NSDC for skill training under
Pradhan Mantri Kaushal Vikas Yojna 4.0 Scheme, in a step towards self-
sustainable model. The institute is accredited and affiliated with 5-star rating.
A total of 536 nos. of youths (including 146 female) were skillfully trained for
gainful employment during the FY 2023-24.
TO STUDY THE EXISTING PERFORMANCE MANAGEMENT SYSTEM IN
GAIL