PMS & V-Pay

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Performance

ManagementSystem & V-Pay

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Performance Road Map

No formal employee

evaluation system

Confidential employee

evaluation system

Individual attribute

based PMS

Individual Key Result

Area based PMS

Linking organization &

individual goals usingScore Card

Transparency

Complexity

Linkage to organizations performanceChoice of a

system

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BALANCED SCORE CARD (BSC)

1. BSC arose from research that 90% of companies

that can formulate Strategy can not implementthem.

2. Complements the Financial Measures of past

performance with the measures of the drivers offuture performance.

3. It clarifies the Vision/ Mission and Operationalises

it.

4. It Validates existing Business Strategy or

formulates new Business strategy covering

Financial , Customer, Internal Process,

Organizational Learning and Growth areas.

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5. It helps to deploy strategy successfully.6. It is an Enterprise Performance Management

System

7. Creates a PMS for all its staff aligned toEnterprise Management System (BSC).

8. Focus on the support functions to address the

needs of the business.9. Improves Communication of the strategy

across the organisation.

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10.Managers are working hard to be sure things

are done right.They hardly have time to

decide if they are doing right things. It helpsin doing the right things

11. It helps organizations to be both strategically

and operationally excellent.

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The Balanced Score Card is a multi-

dimensional frame work that gives top managers

a fast but comprehensive view of the business.

The BSC allows CEOs to look at the business

from four important perspectives:

1. Financial Perspective- To satisfy shareholders,

what financial objectives must we accomplish.?

2. Customer Perspective-To achieve Financial

objectives, what customer needs must we serve?

Balanced Score Card

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3. Internal Process Perspective- To satisfyshareholders and customers in which internal

processes must we excel?

4. Innovation and learning perspective- Toachieve our goals, how must our organisation

learn and innovate?

t

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Approach followed for Goal Setting is top-down

Business plan approved by Board & communicated to HODs.

Department heads to then make plan for department and set

department specific targets.

Key Result Areas, Targets and Weightages decided during the one-

to-one discussion with the Reporting Officer.

Goal Setting ProcessPre-Assessment Assessment

-

A

s

s

e

s

s

m

e

n

t

t-

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Goal Setting Process

Pre-Assessment Assessment

-

A

s

s

e

s

s

m

e

n

t

KRA Should be SPECIFIC

MEASURABLE

ACHIEVABLE

RELEVANT

TIME BOUND

FunctionalKRAs should

be cascaded from the

Organisational Goals.

One or more KPI can be

used for each KRA.

Weightage to be assigned

based on the importance /

impact/ time spent for theKRA.

-A

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Key Result Areas

Accountability statements expressing areas of

outcomes/ outputs the job holder is expected

to achieve Help in aligning roles to organizations

business/ strategic plans

Focus on resultsrather than activities

Must be SMART:

(Specific Measurable Achievable Realistic

Time bound)

Measuring Performance

Key Performance Indicators

Quantifiable measurements of the

improvement in performing an activity that

is important to the success

of a business

Tangible, relevant, easy to understand,repeatable,

and reliable

Drive management action and guide

decision-making

Generally no more than two measures per

objective


A

s

s

e

s

s

m

e

n

t

-A

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Targets

Very specific, expressed in terms of numbers or percentages within a specific timeframe Aggressive, yet achievable

Reflect either expected achievement or relative position compared to industrybenchmark

Weights

Weightage given by appraiser on the basis of impact / importance / time spent on a

target

Sum of weights assigned to the KRAs must equal 100%

Rating Scale

Can be Numeric, Descriptive or Numeric Descriptive Points on the scale map to different target achievement levels of appraise

Measuring Performance

Performance Measures Target

Cost Reduction 10%

10% 12% 15%5% 8%

1

Significantly

below target

2

Below target

3

Meets target

4

Exceeds target5

Significantly

exceeds target


s

s

e

s

s

m

e

n

t

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Principles of KRASetting

Linking Strategic Goals with Individual Roles.

Identifying and Measuring Performance Using

What, How Much and When.

Differentiating Priorities Over and Above the

Routine Work.

Involvement of Both the Superior and the

Subordinate.

Continuous Monitoring and Coaching throughFeedback and Discussion.

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Assigning Weightage

Understanding the Relative Importance ofEach Key Result Area.

Understanding the Difficulty of Each KRA.

Understanding Superiors Perspective.

Discussing Weightage with the Superior.

Convert the Weightage of Each KRA for the

Different Levels of Performance.

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Standards of KRAs Numeric

Any Number, % etc Deadline/Timeline

Projects, Clearance, Maintenance, Land Acquisition,

Accounts Closing, Budgets Allocation, Completion of

Engineering Design, Consulting Work

Negative

Complaints, Grievance, Accidents, IR problems, man days

lost, Rejection, etc.

Quality

Customer Satisfaction

Change Management

Team Work/People Development

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Individual Score: 3.66

Utilization of the maintenance

budget (Signalling &

Telecommunications, Loco, Wagon)

for the department

Rs. (in

Crores)20% 0.1 1.2 1.4 1.6 1.8 2 2.6 8.00 1.600

Vendor satisfaction indexRating

out of 1010% 0.1 5.6 6.3 7 7.7 8.4 6 1.57 0.157

Specific fuel consumption per rake Litres 25% 0.05 181.5 173.25 165 156.75 148.5 165 3.00 0.750

Average time taken for Drawn out to

placement timeHours 20% 0.1 3 2.75 2.5 2.25 2 2.5 3.00 0.600

Wagon derailment Number 5% 0.1 4 3 2 1 0 2 3.00 0.150

Number of locomotive failures of

each locomotive% 15% 0.5 4 3 2 1 0 3 2.00 0.300

Number of SOPs developed Number 5% 1 1 2 3 4 5 2 2.00 0.100

Rating on

Scale of 5

WeightedScore

(Weightage X

Rating)

Weightage Factor

(x)1 2 3 (Target) 4 5

Actual

Achievement

Individual Scorecard

Calibration of the Rating ScalePerformance Measure Unit

Step 1: At the start of the performance cycle, identify individual performance measures basisorganizational and departmental scorecardStep 2: Set weightages and targets for the measure. These are decided based on the targets set forthe department and the managerStep 3: During year end performance appraisal, mention the actual target achievement. The

individual score would be the weighted score of all performance measures

Scorecard Illustration

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Calibration

The target (T) is calibrated to a rating of3 (giving scope for exceeding the targetand achieving up to a rating of 5)

The corresponding targets for otherratings (such as 1, 2, 4 and 5), giventhe target for 3 is computed by using adifferential factor of X as below: Target for 1 = (1-2X)T

Target for 2 = (1-X)T

Target for 4 = (1+X)T

Target for 5 = (1+2X)T

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ompe ency o e orOPGCL

Task Cluster

People

Cluster

Thinking

Cluster

PeopleManagement

Team Work &PartnershipManagement

AchievementOrientation

OperationalExcellence

Analysis &DecisionMaking

BusinessOrientation

T k & P t hi

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Competency Strand

Teamwork & PartnershipManagement

Ensures and drivescollaboration withinand between teams

and effectiverelationships with

stakeholders/partners ensuring a win

win situation

Working withothers

PartnershipManagement

Competency

DefinitionStrand

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Competency Strand

Achievement Orientation

Displays and

drives initiative,accountability anda drive for results

in theorganization

Initiative

Accountability &Drive for

Results

Competency

DefinitionStrand

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Competency Strand

Operational Excellence

Delivers highquality work

through

systematicplanning,resource

utilization andprocess efficiencyensuring speedand accuracy

SystematicPlanning

Process Focus

Competency

DefinitionStrand

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Competency Strand

People Management

Drivesperformance by

providingdirection andnecessary

support; providesregular feedbackand coaching for

development

Measuring andMonitoring

Performance

Inspiring andMotivating

Others

Competency

DefinitionStrand

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Competency Strand

Business Orientation

Displays the abilityto understand ownrole and business

scenario andensures alignmentof own work to the

organization'sbusiness objectives

BusinessAwareness

Competency

DefinitionStrand

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The model has been designed keeping thefollowing broad grade mapping in mind

Grade E6-7A : Proficiency Level III(Shaping)

Grade E 5 : Proficiency Level II(Guiding)

Grade E1-E4 : Proficiency Level I(Executing &Applying)

All roles in a particular grade (e.g. Grade E 4),would be mapped to Proficiency Level I,

irrespective of function

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Weighted sum of the Scores obtained for each component Organisation Level Performance Function / Department Level Performance Individual Level Performance

As we move to higher grades, the weightage for organisation level performance increases andfor individual performance decreases.

Computation of Cumulative Score for anEmployee

Grade Organisation LevelPerformance

Function LevelPerformance

Individual LevelPerformance

E-7 & above 85% 10% 5%

E-5 & E-6 65% 25% 10%

E-3 & E-4 60% 25% 15%

E-1 & E-2 60% 25% 15%

Supervisory 100%Workmen 100%

Grade wise Weightage for Level of Performance -Year 1

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The final cumulative score for each employee is then obtained by computing theweighted sum of scores for Organisation level, Function level and Individual levelPerformances as indicated below.

Weighted Function

Rating

Organisation

PerformanceWeightage

Rating for

OrganisationPerformance

Rating for

Function

Performance

X

X

=

=

Function

Performance

Weightage

+

Weighted

OrganisationRating

Total Score for

the employee

WeightedIndividual Rating

Rating forIndividual

PerformanceX

=Individual

Performance

Weightage

+

Computation of Cumulative Score for anEmployee, Cont....

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Variable Pay Computation

Grade DesignationRecommended Variable Pay (V) as

% of Total CTC = Fixed + Variable)

E8 Director 27%

E7A Sr GM 26%

E7 GM 23%

E6 DGM 20%

E5 SM 18%

E4 Manager 16%

E3 DM 14%

E2 Sr AM 12%

E1 AM 10%

E0 8%SG 5%

S1 5%

S2 5%

W4 5%

W3 5%

W2 5%

W1 5%

The Variable Pay that the employee will beentitled to on achieving the target will vary

depending on the category to which he / shebelongs as indicated below.

Every employee shall be paid a Variable Pay (V)on achieving a cumulative performance score of

3 out of 5. This variable Pay (V) is defined as a% of CTC (Fixed + Variable Pay) and shall bepaid out as per the following table.

Classification ofemployees in eachgrade based on score

Category

%Differentialin VariablePay

Top 20% A V + 15%

Next 50% B V

Next 20% C V 25%

Bottom 10% D V 50%

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The Cumulative performance score is linked to % of Variable Pay as per the scale given below:

Rating

% of Variable

Pay

1 20%

1.5 40%

2 60%

2.5 80%

3 100%

3.5 105%

4 110%

4.5 115%

5 120%

For example,If an individual A has a Variable pay of INR 2 Lakhsand his / her cumulative performance score(considering Organisation + Function + IndividualLevel performances) is 3.5, he / she will get 105% of INR2 Lakhs (= INR 2.1 Lakhs) as payout.

5. Threshold Level of PerformanceAn employee is eligible for any Variable Pay only if the Organisation Score AND the Individual Score is atleast 2 or more.

6. Eligibility & Period for Variable PayEligibility: All regular employees (Executives & Non Executives) of OPGCVariable pay period:1 April to 31 March)Payout will be on prorated basis for actual days worked by the employee in the period underconsideration. Days of training and Casual Leave (up to the maximum limit of 10 days) will be counted asactual days worked. In the case of death, retirement, leave of absence, leave exceeding beyond 10 days ofCasual Leave, the pay out will be on prorated basis. In the case of resignation or termination, no pay outshall be made after the date of resignation/ termination.

7. Payout Frequency: 50% of target variable pay will be paid as equal monthly installments and remainingis adjusted at the end of the year based on actual pay out decision.

. Level of Performance, Eligibility, Period of pay & Pay outFrequency

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Step 1 Step 2 Step 3

Identification of performanceobjectives (KRAs) andperformance measures (KPIs)

for OPGC employees

Target setting and calibration oftargets for OPGC employees

Year end performance appraisal

To be identified by TopManagement for OrganisationLevel

To be discussed with Heads ofFunctions and agreed upon for

Functional Level Heads of Functions shall

discuss the same with allindividuals in their teams andfinalise the individual KRAsand KPIs

To be identified by TopManagement for OrganisationLevel

To be discussed with Heads ofFunctions and agreed upon for

Functional Level Heads of Functions shall

discuss the same with allindividuals in their teams andfinalise the individual Targets

At the end of the year, based onactual achievementOrganisation & FunctionalScores to be computed

Individual Scores to be

computed during thePerformance Discussionbetween Appraiser andAppraisee

Process for Implementation of PMS

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The variable Pay for the Year 2009-10 has been computed based on thepre-revised cost to company (CTC). It was decided to make this payment ofVariable Pay for 2008-09 over and above the generation incentive amountalready paid for the year 2008-09.

Variable Pay for2008-09

It was decided to pay 50% of the Variable Pay amount, based on CTC for2009-10, which was drawn as a corollary to the principles of PerformancePay adopted for 2008-09. The payout has been made after adjusting 50% ofthe provisional generation incentive of 2009-10. The balance 50% of theVariable Pay amount shall be paid based on actual performance score as

per PMS 2010-11 along with the annual Variable Pay amount for year 2010-11 during April-June 2011.

Variable Pay foryear 2009-10

The gradations for earlier years has been considered & Provisional

Variable Pay for 2010-11 is calculated based on the actual CTC for2010-11, and accordingly 50% of the V-pay is being paid out onmonthly basis w.e.f April 2010 and rest 50% will be paid at the yearend basing on the Scorecard according to the V Pay policy.

50% of the Generation Incentive hitherto paid has been recoveredwith a proviso to recover the balance 50% of Generation Incentive infuture. Future Generation Incentive to executives is being stopped

forthwith as per the extant policy.

Monthly VariablePay for year

2010-11

V Pay released for 2008-09, 2009-10 & 2010-11

2008-09

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Future Action Plan for 2010-11

The V Pay for the years 2008-09 & 2009-10 has been fixed according to the grades

(A, B, C or D) which was finalized from the weighted average score obtained from

the marks in the dimensions of Committee Evaluation, Previous Performance &

Potential Assessment.

Now for the year, 2010-11, the process of functional scorecard development and

collection from the several team leaders has already initiated.

The timelines to be adhered to are:

Finalisation of Functional Scorecards: 25thSeptember, 2010

Finalisation of Individual Scorecards: 1stOctober, 2010

Mid-year Review:15th-30thDecember, 2010 Final Appraisal at the Level of HODs: 15th-30thMarch, 2011

Normalisation: 1st-15thApril, 2011

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Thank You

Documents

PMS & V-Pay