Performance Management System (PMS)

Definition: Performance Management System is a continuous, systematic and integrated process of defining, measuring, developing and aligning employee performance with organizational goals. Unlike Performance Appraisal (annual event, past-oriented), PMS is forward-looking, continuous and strategic.

According to Armstrong, “Performance Management is a process which contributes to the effective management of individuals and teams in order to achieve high levels of organizational performance.”

Features: Continuous cycle, links individual goals to organizational strategy, emphasizes development and coaching, involves planning-reviewing-rewarding, focuses on future potential.

PMS Cycle: Performance Planning (KRA/KPI, MBO) → Performance Coaching/Mid-year Review → Performance Appraisal → Rewarding & Development Planning.

Different Methods of Performance Appraisal (Components of PMS)

A. Traditional / Trait-Based Methods

1. Graphic Rating Scale: Traits rated on scale (5-point). Simple but prone to halo/horn error.
2. Ranking / Paired Comparison: Employees compared and ranked best to worst.
3. Forced Distribution: Employees forced into bell curve (10-20-40-20-10) to avoid leniency.
4. Checklist & Weighted Checklist: Yes/No on statements.
5. Critical Incident Method: Recording exceptional good/bad incidents.
6. Essay Method & Field Review: Narrative description by superior/HR expert.

B. Modern / Result and Behaviour-Based Methods (Preferred in PMS)

1. Management by Objectives (MBO): Joint goal setting by manager-subordinate, periodic review of achievement. Objective, participative.

2. 360-Degree Appraisal: Feedback from superior, peers, subordinates, customers and self. Holistic view, used for leadership development.

3. Behaviorally Anchored Rating Scales (BARS): Vertical scale with actual job behaviours as anchors (e.g., 7 = Handles customer complaint proactively). High validity.

4. Assessment Centre: Series of simulations – in-basket exercise, role-play, group discussion – evaluated by trained assessors for potential.

5. Cost Accounting / HR Accounting Method: Evaluates performance by monetary value of contribution.

6. Psychological Appraisals & Competency Mapping: Tests for potential, emotional intelligence and competencies for future roles.

Conclusion: In PMS, modern methods like MBO, 360-degree and BARS are preferred because PMS is development-oriented. Effective PMS is not just rating but managing performance through continuous feedback, coaching and linking rewards to achievement.