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Continued from Previous……
In the last two parts, we have seen brief description of major Performance Appraisal Tools. The question arises here as to which tool is better than the other if it is.
The answer is that no tool can be categorically labeled as ‘better’ than the other. The choice depends upon the organizational infrastructure, requirement, and stage of evolution.
Statistics say that over 80% businesses start as family businesses world over. Later, even when they become big and public, the family may retain control in several ways. It could be high number of shares, or specific clauses in the charter that may give long term control to family.
There are no statistics to show how many family-owned businesses become public and go out of family control. For Pakistan, we have a fair idea of what happens.
Going public is not favored in Pakistan. Companies doing billions of rupees business choose to remain privately owned/family owned. Based on my interactions with business owners, there are several reasons for this thinking. For some entrepreneurs, only one business is a lifetime achievement, and they would rather leave it to their children and not the public. Concealing the difference between actual accounts and the taxable accounts is another reason. Possessiveness is yet another reason, and the list goes on. Most such companies do not encourage development of infrastructure; the last to come is HR. Performance is considered a given, while loyalty takes precedence over everything else. Performance is not even a criterion for growth; discretion is.
For years, HR department has been entrusted with maintaining employee files only. They do the documentation for hiring and separation, but they don’t have any say in the selection criteria or in the process. The HR is not involved in performance management in majority of companies, even many reasonably big-size companies.
Performance management is not on the priority list of most organizations. On close examination, we realize that the growth opportunities do not exist in most companies. The only growth is increase in salary, and that is also minimal. There is no defined hierarchy and people are supposed to work on the same position all their lives.
In this background, discussion on various performance appraisal tools appears irrelevant. Having said that, Pharma industry does carry a hierarchy in some form, and people have the opportunity to move from one position to next.
My preliminary recommendations for choice of Performance Appraisal tool are as follows.
- MBO is better – If the organization age is less, infrastructure is still evolving, and the HR function is elementary. MBO is a simple method, and it can be applied in simple ways. It does not require elaborate documentation and is easy to monitor. The other important element is the desire to grow in the marketplace. Ambitious growth is usually coupled with talent acquisition and management, which in turn leads to more elaborate performance management.
- KPI is appropriate – If the organization has attained a reasonable size in business, market, infrastructure, manpower, hierarchy, and expertise. Such organizations are active competitive players. They hunt talent and acquire it to increase their expertise and skills. They can pay better and can spend money on areas which support business but are not directly business. KPI tool is more complex, involves finance and aligns with the corporate objectives. This is the reason that many such organizations are opting to use KPI appraisal system.
- OKR is great – If the organization is very sharply focused on rapid market dominance and growth. Pharma Pakistan is not a suitable candidate for this system, but IT, Technology and some consumer companies may find it fit for them. OKR is quite tempting in theory, but it would be tough in implementation.
- OGSM sounds good – but it would be more beneficial for the organizations with multiple operating units in various geographies and countries, and where decentralization may be mandatory.
- Balanced Scorecard was much talked about few years ago – but it appears to have lost steam. Some finance companies may be using it.
Performance Appraisal must get the place it deserves. It is the most effective tool to ensure good performance as it keeps filtering low performers and separates them from high performers.
The cost incurred on Performance Appraisal is a very wise investment and must be considered by all organizations aiming at growth.
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