Hey people,
I'm doing my MBA and currently pursuing my summer training in a Public Sector bank. The project is on "Differential Pay Linked to Performance."
Normally, PSU banks have a very structured pay scale wherein every employee gets paid according to these scales. There is no differentiation in the compensation of the employees regardless of their performance. A performer as well as a non-performer is paid the same. But with the recent autonomy given by the government, some large PSU banks can go in for a differential pay system but within the pay scale. Now, my Bank wants me to study the Differential pay existing in companies and in turn develop a model for them.
I've targeted a few private organizations and some private sector banks, but it is very difficult to get information regarding the existing differential pay systems, especially in private banks. :roll:
Simultaneously, I've studied the current performance appraisal system in my Bank and, keeping in mind their appraisal system constraints, I've decided to develop a model only for the branch heads as they have quantifiable business targets and specific KRAs. Likewise, I've started collecting data from some branch heads about their views and what they would want to incorporate into a differential pay system.
Just want an opinion if my approach is right and if anyone has any ideas on how I can get information about performance-linked pay systems at private banks.
Thank you,
Anjali
From India, Agartala
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I'm doing my MBA and currently pursuing my summer training in a Public Sector bank. The project is on "Differential Pay Linked to Performance."
Normally, PSU banks have a very structured pay scale wherein every employee gets paid according to these scales. There is no differentiation in the compensation of the employees regardless of their performance. A performer as well as a non-performer is paid the same. But with the recent autonomy given by the government, some large PSU banks can go in for a differential pay system but within the pay scale. Now, my Bank wants me to study the Differential pay existing in companies and in turn develop a model for them.
I've targeted a few private organizations and some private sector banks, but it is very difficult to get information regarding the existing differential pay systems, especially in private banks. :roll:
Simultaneously, I've studied the current performance appraisal system in my Bank and, keeping in mind their appraisal system constraints, I've decided to develop a model only for the branch heads as they have quantifiable business targets and specific KRAs. Likewise, I've started collecting data from some branch heads about their views and what they would want to incorporate into a differential pay system.
Just want an opinion if my approach is right and if anyone has any ideas on how I can get information about performance-linked pay systems at private banks.
Thank you,
Anjali
From India, Agartala
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Anjili,
This is a tragedy within most of our Public Sector Organizations, where employees are given increments or pay raises irrespective of their performance. Good workers and below-average performers are treated equally in terms of salary if they are working within the same pay scale or pay group.
What you need to do is to analyze whether all tasks are quantifiable or not. In a Pay for Performance System, we have to quantify each task and then assign a grade to it.
I think you are heading in the right direction by focusing on the Senior level initially. This approach will help you shape a reasonable Performance Management System that can be extended down the line.
Saleem
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This is a tragedy within most of our Public Sector Organizations, where employees are given increments or pay raises irrespective of their performance. Good workers and below-average performers are treated equally in terms of salary if they are working within the same pay scale or pay group.
What you need to do is to analyze whether all tasks are quantifiable or not. In a Pay for Performance System, we have to quantify each task and then assign a grade to it.
I think you are heading in the right direction by focusing on the Senior level initially. This approach will help you shape a reasonable Performance Management System that can be extended down the line.
Saleem
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Dear Anjali,
First of all, let me assure you that your approach is correct. A variable (Performance Related) salary structure is possible only when you have defined parameters and benchmarks to measure performance. Organizations often set benchmarks and KRAs, but their feedback and measurement mechanisms are not that strong and are mostly dependent on self-appraisal and review. We need to incorporate systems like 360-degree feedback in KRA appraisals. Sales companies have variable salaries even at the lowest levels and often have the most objective performance measurement systems. Some components with a "range or scale" can be incorporated even at the lower levels, depending on the most critical performance factor for that level. For a bank, it can be in the form of a "Customer Satisfaction Incentive" or "Response time Incentive" for frontline staff, with defined parameters for achievement and measurement.
All the best for your project.
Mohit Mathur
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First of all, let me assure you that your approach is correct. A variable (Performance Related) salary structure is possible only when you have defined parameters and benchmarks to measure performance. Organizations often set benchmarks and KRAs, but their feedback and measurement mechanisms are not that strong and are mostly dependent on self-appraisal and review. We need to incorporate systems like 360-degree feedback in KRA appraisals. Sales companies have variable salaries even at the lowest levels and often have the most objective performance measurement systems. Some components with a "range or scale" can be incorporated even at the lower levels, depending on the most critical performance factor for that level. For a bank, it can be in the form of a "Customer Satisfaction Incentive" or "Response time Incentive" for frontline staff, with defined parameters for achievement and measurement.
All the best for your project.
Mohit Mathur
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I find your project interesting and also the difficulty in incorporating the information regarding differential pay scales. I can suggest you study the appraisal systems followed in SMEs (small and medium-scale companies), as they don't have any entry restrictions and issues regarding confidentiality. This would render you greater assistance in doing the project with ease.
I am doing a project on 360-degree appraisal and one step ahead of it. If you can email me the Key Result Areas (KRAs) you have taken into consideration, that would help me a lot as I am struggling in designing the parameters. Thank you.
Raaj
Email: raajanand83@yahoo.com
From India, Hyderabad
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I am doing a project on 360-degree appraisal and one step ahead of it. If you can email me the Key Result Areas (KRAs) you have taken into consideration, that would help me a lot as I am struggling in designing the parameters. Thank you.
Raaj
Email: raajanand83@yahoo.com
From India, Hyderabad
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Hi,
Thank you a lot for your replies. I really appreciate them. I am still a little perplexed about how to structure the project. I think only if I study the existing performance pay system in private banks, I will get a clearer picture. Though again, it may not be very prudent to compare a private sector bank system with a public sector bank. Anyways, any info at this stage, I guess, will take me further...
Right now, what I have decided is to shortlist 4-5 KRA's (Key Result Areas) like the total number of deposits, total advances given, reduction in NPA (Non-Performing Assets), customer satisfaction decided by the number of complaints received, etc. As much as possible, I'm trying to keep them quantifiable.
But I still have to decide how should I decide the quantum of the amount to be given as performance pay. I have to keep in mind the approximate cost this performance pay will garner to my bank. Should it be:
1. A certain fixed percentage of profits earned by the bank in the year
2. On an annual basis, the bank can decide what part of the profits should be given as performance pay
3. Based on the performance parameters and the grades received thereof, I can suggest cash figures (for example, if you get Grade 2 = Rs. 5000, Grade 3 = Rs. 7000, etc.)
Or some other scheme. Please give your views...
Another question I have is, since the banking sector is one that requires a team effort for it to be a success, if initially introducing the scheme only for the branch heads will demotivate the other employees or make them indifferent, causing the scheme to fall flat on its face...
I know I'm raving and ranting, but I have so many questions!
As for your query, Raaj, I'd suggest going through some performance appraisal forms of organizations similar to the one you are doing the project for. Moreover, there are loads of books on performance management that will give you a clearer picture about performance appraisal and KRA's. They will have examples of KRA's... You could try the books authored by T. V. Rao.
If you need anything else, let me know.
- Anjali
From India, Agartala
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Thank you a lot for your replies. I really appreciate them. I am still a little perplexed about how to structure the project. I think only if I study the existing performance pay system in private banks, I will get a clearer picture. Though again, it may not be very prudent to compare a private sector bank system with a public sector bank. Anyways, any info at this stage, I guess, will take me further...
Right now, what I have decided is to shortlist 4-5 KRA's (Key Result Areas) like the total number of deposits, total advances given, reduction in NPA (Non-Performing Assets), customer satisfaction decided by the number of complaints received, etc. As much as possible, I'm trying to keep them quantifiable.
But I still have to decide how should I decide the quantum of the amount to be given as performance pay. I have to keep in mind the approximate cost this performance pay will garner to my bank. Should it be:
1. A certain fixed percentage of profits earned by the bank in the year
2. On an annual basis, the bank can decide what part of the profits should be given as performance pay
3. Based on the performance parameters and the grades received thereof, I can suggest cash figures (for example, if you get Grade 2 = Rs. 5000, Grade 3 = Rs. 7000, etc.)
Or some other scheme. Please give your views...
Another question I have is, since the banking sector is one that requires a team effort for it to be a success, if initially introducing the scheme only for the branch heads will demotivate the other employees or make them indifferent, causing the scheme to fall flat on its face...
I know I'm raving and ranting, but I have so many questions!
As for your query, Raaj, I'd suggest going through some performance appraisal forms of organizations similar to the one you are doing the project for. Moreover, there are loads of books on performance management that will give you a clearer picture about performance appraisal and KRA's. They will have examples of KRA's... You could try the books authored by T. V. Rao.
If you need anything else, let me know.
- Anjali
From India, Agartala
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Hi Anjali,
Nice project and I think you're on the correct path.
I believe it's fine to begin with the seniors for appraisals and any subsequent revisions. As for the juniors, how would you conduct a performance appraisal for a junior clerk? It's not that you can't – you definitely can and have to. Divide the staff into categories and approach it category-wise; that should make it easier, I suppose. It's not necessary to start with the seniors; you can choose any category, whether it's cashiers or managers. Conduct a dry run of the performance appraisal on one category, adjust your Key Performance Areas (KPAs) and Key Result Areas (KRAs) for the next, and continue this process. It may be somewhat lengthy, but you will obtain the desired results for streamlining the entire system by consolidating the outcomes.
For managers, the right KRAs would involve NPA, Deposits, Interest Earned, Assets Acquired, Loans Given, FDs Issued, and so on.
Regarding Cashiers, consider Time taken to serve individual customers, behavioral attitude (which can be evaluated by customer surveys), Numerical proficiency, Efficiency with MICR Machinery, Punctuality, and more.
For Front Desk Staff, the focus should be on behavioral and psychological aspects such as attitudes, customer interactions, providing service with a smile, problem-solving, addressing queries, and the time taken to resolve each issue.
Therefore, in general, link each individual or employee category with their behavioral and technical skills to define their KRAs.
Hope this guidance is beneficial.
Chow,
Junaid
From India, Mumbai
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Nice project and I think you're on the correct path.
I believe it's fine to begin with the seniors for appraisals and any subsequent revisions. As for the juniors, how would you conduct a performance appraisal for a junior clerk? It's not that you can't – you definitely can and have to. Divide the staff into categories and approach it category-wise; that should make it easier, I suppose. It's not necessary to start with the seniors; you can choose any category, whether it's cashiers or managers. Conduct a dry run of the performance appraisal on one category, adjust your Key Performance Areas (KPAs) and Key Result Areas (KRAs) for the next, and continue this process. It may be somewhat lengthy, but you will obtain the desired results for streamlining the entire system by consolidating the outcomes.
For managers, the right KRAs would involve NPA, Deposits, Interest Earned, Assets Acquired, Loans Given, FDs Issued, and so on.
Regarding Cashiers, consider Time taken to serve individual customers, behavioral attitude (which can be evaluated by customer surveys), Numerical proficiency, Efficiency with MICR Machinery, Punctuality, and more.
For Front Desk Staff, the focus should be on behavioral and psychological aspects such as attitudes, customer interactions, providing service with a smile, problem-solving, addressing queries, and the time taken to resolve each issue.
Therefore, in general, link each individual or employee category with their behavioral and technical skills to define their KRAs.
Hope this guidance is beneficial.
Chow,
Junaid
From India, Mumbai
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Hi Anjali,
In our organization, we have KPA, i.e., Key Performance Areas, where an employee will fill in this KPA for every quarter on his/her own. They will outline what they plan to do in the upcoming quarter, set their goals, and the management will then assess the perceived goals versus the actual achievements. Performance is judged based on this comparison, and incentives are awarded accordingly.
Thanks,
Promila
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In our organization, we have KPA, i.e., Key Performance Areas, where an employee will fill in this KPA for every quarter on his/her own. They will outline what they plan to do in the upcoming quarter, set their goals, and the management will then assess the perceived goals versus the actual achievements. Performance is judged based on this comparison, and incentives are awarded accordingly.
Thanks,
Promila
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Hi Promila,
First, I would like to thank you for your reply.
With respect to your query regarding an MBA in HR, please don't get disheartened by the MAT scores. In fact, there are plenty of good institutes that have their own private exams or separate screenings. You could definitely try them (some like Wellingkars have no written tests, only GD and PIs). One such option being TISS (as you are interested in HR). However, I must warn you, you'll have to start your preparations for TISS very soon.
If you are based in Maharashtra, you could try CET. You have plenty of time to prepare for it (if I've got it right, it's post-April).
All the very best. Let me know if you need any more help.
Warm regards,
Anjali
From India, Agartala
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First, I would like to thank you for your reply.
With respect to your query regarding an MBA in HR, please don't get disheartened by the MAT scores. In fact, there are plenty of good institutes that have their own private exams or separate screenings. You could definitely try them (some like Wellingkars have no written tests, only GD and PIs). One such option being TISS (as you are interested in HR). However, I must warn you, you'll have to start your preparations for TISS very soon.
If you are based in Maharashtra, you could try CET. You have plenty of time to prepare for it (if I've got it right, it's post-April).
All the very best. Let me know if you need any more help.
Warm regards,
Anjali
From India, Agartala
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Dear Anjali,
I have some reservations about the practical implementation of Performance Linked Pay. I have also posted the same on this site. You can go through it if it will be of any help.
Regarding performance in the Banking Sector, I believe that with the Regulatory Authorities in place and the social obligations (e.g., Rural Schemes) our PSU Banks carry out, I don't think it is advisable to link Performance to Pay for PSUs.
Many people start comparing PSU Banks with Private Sector Banks. I feel it is not fair because of the following reasons:
1) Look at the difference in the Minimum Balance you need to keep for Savings Accounts. Does it cater to our majority customers?
2) Private Sector Banks do not have branches in most parts of rural India, but the PSUs have to operate whether they incur profit or loss because of our Government Policy.
3) Think of the Political influences it has regarding Credit and Debt Facilities like Agricultural Loan, Krishan savings, waiving of Debts, Self-Employment Schemes, etc.
4) You must have come across incidents where Private Sector Banks employ Strong-Arm tactics to get back their loans if the Lender fails to pay. PSUs cannot do that because of their socialistic nature.
5) It is very easy to talk about Performance and Pay when you are dealing with the urban and semi-urban class. But when you have instructions from the Government to give loans to farmers who you know will not be able to pay you back as part of your social or other obligation, the whole concept of performance and pay becomes irrelevant.
6) Last but not least, the Board that determines Pay for PSU Banks has some of the Best Minds of the Country. But while determining the Pay, they have to look at a wide range of factors and not only Profit and Customer base factors that our Private Banks look into.
Regards,
SC
Think of a sector working with all these restraints.
From India, Thane
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47I have some reservations about the practical implementation of Performance Linked Pay. I have also posted the same on this site. You can go through it if it will be of any help.
Regarding performance in the Banking Sector, I believe that with the Regulatory Authorities in place and the social obligations (e.g., Rural Schemes) our PSU Banks carry out, I don't think it is advisable to link Performance to Pay for PSUs.
Many people start comparing PSU Banks with Private Sector Banks. I feel it is not fair because of the following reasons:
1) Look at the difference in the Minimum Balance you need to keep for Savings Accounts. Does it cater to our majority customers?
2) Private Sector Banks do not have branches in most parts of rural India, but the PSUs have to operate whether they incur profit or loss because of our Government Policy.
3) Think of the Political influences it has regarding Credit and Debt Facilities like Agricultural Loan, Krishan savings, waiving of Debts, Self-Employment Schemes, etc.
4) You must have come across incidents where Private Sector Banks employ Strong-Arm tactics to get back their loans if the Lender fails to pay. PSUs cannot do that because of their socialistic nature.
5) It is very easy to talk about Performance and Pay when you are dealing with the urban and semi-urban class. But when you have instructions from the Government to give loans to farmers who you know will not be able to pay you back as part of your social or other obligation, the whole concept of performance and pay becomes irrelevant.
6) Last but not least, the Board that determines Pay for PSU Banks has some of the Best Minds of the Country. But while determining the Pay, they have to look at a wide range of factors and not only Profit and Customer base factors that our Private Banks look into.
Regards,
SC
Think of a sector working with all these restraints.
From India, Thane
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Dear Anjali,
I am an HR professional working in Bangalore. I am also working on developing a performance-linked pay system for my company. The approach that you have taken is 100% correct, but what I feel from your post is that you know what to do but not how to go about doing it. I think the first step in your project should be to define performance in terms of what it means to the people in your company. Have a focus group discussion with the senior and middle management of your company and let them debate and decide the performance definition and performance measures. I would also suggest that you try to understand the performance management system of the company because it forms the backbone of a strong variable pay system.
Well, it would be helpful if you keep me updated about the developments in your project.
Regards,
Ashish
Email: ashishmusaddi@yahoo.com
From United Kingdom,
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I am an HR professional working in Bangalore. I am also working on developing a performance-linked pay system for my company. The approach that you have taken is 100% correct, but what I feel from your post is that you know what to do but not how to go about doing it. I think the first step in your project should be to define performance in terms of what it means to the people in your company. Have a focus group discussion with the senior and middle management of your company and let them debate and decide the performance definition and performance measures. I would also suggest that you try to understand the performance management system of the company because it forms the backbone of a strong variable pay system.
Well, it would be helpful if you keep me updated about the developments in your project.
Regards,
Ashish
Email: ashishmusaddi@yahoo.com
From United Kingdom,
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TEACHER PERFORMANCE APPRISAL SYSTEM.zip
Performance Management System.doc