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Hello Raksha,
Thank you for initiating a discussion on a challenge which I believe a lot of our other participants must also be facing.I have answered the query leveraging my own experience of implementing a performance management system and also assisting other organisations to do so.
I would request your attention and patience as the response is detailed.
Hope this gives you a comprehensive insight on how to establish a performance management system and appraisal process in startups.
For the sake of convenience I have divided it into 2 activities:
• SETTING UP OF PERFORMANCE MANAGEMENT SYSTEM
• IMPLEMENTATION OF PERFORMANCE APPRAISAL
You may set up the above up following these steps. Please ignore the step if it’s already done.
SETTING UP OF PERFORMANCE MANAGEMENT SYSTEM
Step 1: Define the vision, mission and value system of your organisation. This is extremely important before you do anything else. This has to be done with the founders and other members of the leadership team.
In this discussion, you should also discuss the performance management system that should suit your organisation. Generally startups believe in faster growth and acceleration on business goals. Please remember to align this system with the culture of the organisation. You may either chose MBO or Balanced Scorecard or any other performance management system.
Step 2: Define the timespan after which the appraisal will be carried out. You should also decide on the appraisal method. Ensure that the method that you chose is easy to understand, implement and calculate. A suitable method for startups would be to have a 180 degree review between the manager and subordinate and a 360 degree feedback for each member.
The score/ratings achieved after 180 degree review will be used for promotions, salary hikes, etc.
The scores/ratings achieved after 360 degree will be used for creating developmental or learning initiatives for individuals.
Step 3 : Now set the goals that must be achieved within the decided time frame. Please remember that while doing so, the mission can be further broken down to create yearly achievable business objectives and targets.
Step 4: The goal setting activity must align to the performance management system chosen by your organisation. You can either chose between Smart Goals or OKRs. Try and make goal setting a collaborative effort that involves the participation of the managers and the team members.
Step 5 : The goals should be set in the following order: Departmental Goals cascaded to form Team Goals(if applicable).The ownership of these Team goals is further distributed among the team members to form Individual Goals.
Step 6: Each goal must be measured through a metric i.e Key Performance Indicator(KPI).The KPI will present the actual movement on the achievement of the goal to the team and individual. Remember to derive the KPI from the goals set only. Please refrain from using any unrelated metric to measure the progress on the goals.
Step 7: Implement periodic feedback sessions between the manager and the team members. It is good to standardise the frequency for such sessions in teams. As a HR, you must be aware of this frequency and accordingly initiate the conversations at the stipulated time.
The goals that must be discussed must be left to the discretion of the respective managers and their team members.
Step 8: As the HR you must also discuss the rating criteria and rating scale with the leadership team and the HODs. The corresponding action for each rating must also be finalised on in that discussion.
Step 9 : You as the HR must then create a performance management policy for the organisation including the above. This must be communicated to all the employees.
IMPLEMENTATION OF PERFORMANCE APPRAISAL
Step 1: Create the feedback forms for managers, individuals and peers. Create sections for evaluating KSA as required for different roles and departments. Please discuss this with the reporting managers and the HODs and get the list of the KSA required for evaluation.
The statements in the manager and individual feedback form should be the same. The only difference will be the way it is written.
Let’s say that the criteria for evaluation is target achievement.
In the manager’s evaluation form for the team member it would say, The team member has been able to achieve the set targets consistently.
In the Self individual form, the same evaluating criteria must say ,I have achieved the set targets consistently.
Step 2 : Create a timeline for the entire appraisal process. This timeline should include the milestones and the dates. Have a gap of minimum one month between the commencement and completion of the entire process.Some of the milestones that can be tracked on this timeline can be
• Submission of the completed feedback forms by all
• Appraisal discussion between manager and subordinates
• Collation of Data
• Calculation of Data
• Mapping of appraisal data with rating metric
• Discussion with respective reporting managers
• Discussion with the leadership
• Announcement of results
This timeline will be used for internal tracking and adherence. It needn’t be shared with the all.
Step 3: Inform the employees about the commencement date and the completion date of the appraisal cycle at least a month before the date of implementation.
Step 4: Circulate the feedback form a day before the commencement of appraisal. Please also send out a communication to all regarding how to fill the appraisal forms. Share the feedback forms in the following manner
• For Managers – Self and Team
• For Team Members – Self, Manager, Peers
Step 5: Ensure that the timelines of the appraisal cycle is adhered to.
Step 6 : Collate the data and calculate the individual scores.
Step 7 : Create department/team wise scores and map it to the rating metrics. Then identify the applicable action for each score.
Step 8 : Discuss this data with the respective team managers. Post this share this data with the leadership team.
Step 9 : Announce the results for everyone individually and the effective date for the application of the promotions, salary hikes, PIP as the case may be.
Step 10: As the HR you must create a SOP for better speed and efficiency in the entire process.
There are a number of PMS(Performance Management System) that are available but I would suggest that you should initially use Excel to implement the Performance Appraisal method primarily for two reasons:
1. It is a tool everyone is familiar with and hence it would be easy for everyone to use it properly.
2. As your organisation matures, everyone will gain a better of the business goals and identify how to measure the progress on that. It would be cost effective to opt for a PMS then.