Monday, February 19, 2007

Performance Ethics in Indian Companies

McKinsey and Company ( has a proprietary Performance Ethic framework with which it establishes the differentiating characteristics of hi-performance organizations. I have been following the study with keen interest and inspired by Mckinsey , last year (2006) launched a study of my own called “Performance Ethic Survey” of Indian companies. I worked on the premise that there are two key levers of a hi-performance culture which are:

Performance Differentiation – The existence of processes which can identify superior performers consistently and reward them differentially. Here rewards includes both cash and non –cash rewards
Managing Underperformance – Ability to deal with underperformers either by weeding underperformers or developing underperformers.

The scope of my study was to understand how Indian organizations were managing underperformance and also differentiating performance. This study covered a healthy mix of real economy and services companies ( 17 in all , of which 8 were from services ) and the key findings from the survey data were as follows,

a) Distinct and evident shift towards differentiation either in application of bell curve or forced ranking. This is a trend across sectors
b) Old Economy companies generally have a lower percentage of their workforce as their top performers
c) Old economy , conservative companies are also moving from undifferentiated remuneration to higher levels of differentiation
d) Most companies do have Performance Improvement Plans ( PIP’s) , some PIP processes are mature , but as a trend most companies ensure that separation occurs if the PIP process fails (typical timelines are 6-12 months)
e) Large conglomerates like Tata’s and others recognize that superior performance needs to be rewarded differentially ,some companies within the conglomerates are already doing sharp differentiation ,while others are evolving in the space. Older entities like Tata Steel, VSNL, Indian Hotels, Tata Motors are also making a philosophical shift in this direction.

When I started designing my survey, I was expecting that real economy companies are still tentative about the issues of performance differentiation, but I was pleasantly surprised when the HR Heads of these companies repeatedly told me that for their companies to survive in this competitive world it was imperative for them to establish processes of accountability to the last man. They felt that Performance Management was a key tool to make things work for them, so there has indeed been a lot of emphasis on performance management processes in the last few years.

Traditionally, Performance Management has always been equated with the Performance Appraisals, in the course of my survey discussions not one HR Head spoke about the process of performance appraisals; their responses were much more broad-based and issues of development, managing talent, aligning organization and individual goals were of great relevance to them.

What was more encouraging for me was that there was a higher level of recognition of the fact that people need to be rewarded and managed differently. This was evident across all the sectors that I studied, particularly in the financial services industry the process of differentiation was really stark.
From a social perspective, India is a very indirect society and Indians find it difficult to confront each other with data and facts, least we end up offending each other. This behavior is manifested in organizations through the process of performance management as well. Managers find it difficult to give meaningful feedback on face to face conversations with their direct reports, this is a phenomenon that I have grappled with for the last few years and any amount of appraiser training does not seem to help. As part of the survey I found out that this behavior of managers (inability to call a spade a spade) is also changing.

In conclusion these changes augur well for India’s competitiveness, but the journey has just begun and as HR professionals we need to be at it with missionary zeal! (Continue to improve Performance Management processes)

1 comment:

Shreyasi Deb said...

Wonderful post!
One hardly gets to see attempts on individual research efforts without ulterior motives.
Will wait for greater data post publication and other information sharing norms