Electronic copy available at: http://ssrn.

com/abstract=1714182
PERFORMANCE MANGEMENT SYSTEM: A CASE STUDY OF NTPC
KANIKA GOYAL
Lecturer in Commerce & Management, Hindu Girls (PG) College,
Jagadhari (Haryana), email:kanika_1284@yahoo.com

DR ASHOK KHURANA
Associate Professor, PG Department of Commerce, Guru Nanak Khalsa College,
Yamunanagar,email:khuranaa17@yahoo.co.in

ABSTRACT
The performance management system has an intrinsic
motivational significance that facilitates learning and
brings about role clarity which helps people focus on
performance development. It is a continuous process to
understand the employees ability, competencies, relative
merits and worth of the organization. The present study
explores performance management system (PMS) of
National Thermal Power Corporation Limited (NTPC), a
leading public sector organization in the power sector. It
is descriptive in nature, and based on information
obtained from secondary as well as primary source. The
study observed that NTPC believes in achieving
organizational excellence through human resource. The
organizations system is based upon the four building
blocks i.e. competence building, commitment building,
culture building, and systems building. At NTPC,
performance management system evaluates five
components namely performance, competencies, values,
potential appraisal, performance and potential appraisal.
The study observed that the performance management
system in the organization is capable to specifically
address the developmental needs in order to overcome
competency gaps in the employees under appraisal.

Key Words: competencies, descriptive, public sector
organization, satisfied.

1. INTRODUCTION
The establishment of a framework necessary for planning,
supervising, and revising, what an organisation does
towards attaining the objective of improvement can be termed
as performance management system. It is such a process
which helps in efficaciously managing both the individuals
and the teams to attain the goal of achieving very high levels
of organisational performance. Performance management
system establishes shared understanding about what is to be
achieved and an approach to leading and developing people
which will ensure that it is achieved. Performance
management in other words can also be termed as a
continuous business cycle. This approach should cater to all
the requirements of the organisation and take a holistic view
by shunning the approach of isolation. The aim of the
organisation should be to evolve a culture with high standards
and excellence in quality of service. For the improvement of
the performance level there is an abundant demand of
demonstrating improvements both in private as well as public
sector organisations. To ensure that the aims set forth by an
organisation are achieved appropriate actions in this direction
can be undertaken by understanding the chronological profile
of a particular organisation in terms of its performance in the
part or its present status of performance level. In brief,
performance management can be identified as a corrective
approach by properly understanding the actual performance
with a view to make a laudable performance which is in much
demand in the present twenty first century.
Under this system for effective execution and reaping the
bumper benefits, an organisation can direct, monitor, refine,
an employees performance by establishing good
communication with him and with his free will and consent to
contribute to any sector of business organisation for its
improvement and success. In present context and keeping in
Electronic copy available at: http://ssrn.com/abstract=1714182
mind the cut throat competition at the global level in the
market, an organisation must equip itself with employees
who are able to work in the changing scenario of market
where a highly professional approach is the prerequisite to
deliver the best performance. The old beliefs and values
concerning organisations have become obsolete and
outdated in the present context. Therefore, management
alone cannot attain the goal of achieving high level of
performance. Here, performance management system is
an absolute necessity for carving a niche for itself by the
organisation in view of stiff competition faced by the
management of an organisation. It is also helpful that
some values which are not only superior but also deluxe
in terms of offers are made to the stakeholders. The role
of the employees in present set up of organisations has
assumed all the more importance particularly because
today the employees need to respond to the issues of the
day and above all in this arena where the whole focus has
been laid on the performance culture. Hence, a good
performance management system is indispensable in
modern times.
2. REVIEW OF LITRATURE
Neeraja Sharma & Aman Sharma (2009) examined the
Employers Perspectives Regarding Performance
Appraisal and Reward Philosophy in Insurance Sector in
Haryana. This paper studies the employers perspectives
regarding performance appraisal and reward philosophy
and the effect of demographic variables on it. The sample
is selected on the basis of convenient sampling method.
This study is based on the hypothesis that demographic
variables and employers opinions are independent of
each other.
Anthony McDonnell & Patrick Gunnigle (2008)
conducted a study on Performance management, a
strategically oriented concept, i.e. where it plays an
integral role in the formulation and implementation of
strategy (Scott-Lennon, 1995). It is this strategic impetus
which differentiates it from performance appraisal.
Performance management seeks to align a number of
processes (e.g. performance related pay systems) with
corporate objectives (McKenna and Beech, 2008).
Theoretically it involves a shared process between
managers, individuals and teams where goals are agreed
and jointly reviewed. Further, corporate, divisional,
departmental, team and individual objectives should all be
integrated. Performance appraisal is a crucial element of
the performance management process, involving a formal
review of individual performance. It is contended that
performance management represents possibly the greatest
opportunity for a human resource (HR) system to make a
telling contribution to organisational performance (Sparrow
and Hiltrop, 1994). It represents a system that can inform how
the firm's human resources contribute to the organisation's
strategic objectives. Unfortunately the extent to which it is an
effective and useful system in practice remains open to
question. For example, the high use of various facets of
performance management does not always correlate with high
results regarding perceived effectiveness (CIPD, 2005). The
study considers the performance management process by
applying a critical lens to some of the main approaches set out
thus far. Following this, they consider the primary tool in
performance management systems, namely performance
appraisal. The discussion is more contemporary development
including the use of 360-degree feedback and forced
distribution, before concluding.
Vivek Wadhwa (2008) explained A Disciple Becomes the
Guru. Despite its low rates of postgraduate science and
engineering graduation, India is rapidly becoming a global hub
for R&D, with a momentum and scale similar to those it
accomplished in IT services. If engineering education is so
critical to global competitiveness, how is India succeeding? To
answer this, a meeting has been conducted with the CEOs,
human-resource directors, R&D leaders, managers, and
employees, and visited the R&D and training facilities of 24
leading companies in India in this study. These were in rapidly
growing emerging sectors, including IT services, business-
process outsourcing, semiconductors, pharmaceuticals,
financial services, retail, hospitality, and education - all of
which have managed to grow and innovate despite skills gaps
and talent shortages. In this study seven key areas in which
Indian companies have developed innovative practices:
employee recruitment, new employee training, continuing
employee development, managerial training and development,
performance management and appraisal, workforce retention,
and education upgrades.
Angelo S. DeNisi & Robert D. Pritchard (2006) examined a
motivational framework on Performance Management and
Improving Individual performance. This research has resulted
in very few specific recommendations about designing and
implementing appraisal and performance management systems
whose goal is performance improvement. We believe that a
reason for this is that appraisal research became too interested
in measurement issues and not interested enough in ways to
improve performance, although some recent trends in the
area have begun moving the field in the right direction.
We review these trends and their genesis, and propose a
motivational framework as a means of integrating what
we have learned and generating proposals for future
research that focus on employees performance
improvement.
Michelle Brown & Jhon S. Heywood (2005) conduct a
survey on Performance Appraisal Systems: Determinants
and Change in context of Australian Workplace
Industrial Relations, this paper estimates the determinants
of performance appraisal systems. The results indicate
that performance appraisal is associated with workers
having shorter expected tenure and greater influence over
productivity and those circumstances in which the net
benefits of performance appraisal are likely to be greatest.
It indicates the complementary human resource
management practices, such as formal training and
incentive pay, are associated with an increased likelihood
of performance appraisal, but that union density is
associated with a reduced likelihood of performance
appraisal.
Michelle Brown & Jhon Benson (2003) conduct a study
on Rated to Exhaustion- Reactions to Performance
Appraisal Processes. It evaluated performance appraisal
within the organization to enhance employee commitment
and productivity. This paper examines the consequences
of three aspects of a performance appraisal system
(distributive justice, procedural justice and the
performance rating) on the level of emotional exhaustion
reported by employees in a large public sector research
organization.
3.OBJECTIVES OF PMS OF NTPC: The Company
has introduced performance management system to
achieve the following objectives:
i. To accomplish organizational goals through a
system of performance assessment linked to
company's objectives.
ii. To encourage a two-way communication process
between the Appraisee and the Reporting Officer
for bringing objectivity in Performance Appraisal
System.
iii. To evaluate the potential of the executive to
assume higher responsibilities along the
hierarchy.
iv. To involve the Appraisee through various stages of
Performance Management, thereby reducing the
Performance gaps.
v. To map competencies and potential of executives for
enabling the organization to source the talent
generally from within the company for meeting
organizational growth.
vi. To involve the executive to share the responsibility
and become accountable for efficient management of
the business for result oriented performance through
mutual involvement.
vii. To provide a transparent system to help each
executive to evaluate his own performance and
develop himself with the help of Reporting Officer To
provide for removal of differences, if any, in
performance appraisal through intervention of the
Reviewing Officer.
4. NTPCs HR Vision
To enable our people to be a family of committed world class
professionals making NTPC a learning organization.
4.1Human Resources
NTPC believes in achieving organizational excellence through
Human Resources and follows "People First" approach to
leverage the potential of its 24,500 employees to fulfill its
business plans. 'People before PLF (Plant Load Factor)' is
the guiding philosophy behind the entire gamut of HR policies
at NTPC. NTPC are strongly committed to the development
and growth of all our employees as individuals and not just as
employees.
4.2Elements of HR Strategy
Competence building, Commitment building, Culture building
and Systems building are the four building blocks on which
our HR systems are based.

4.3 HR as a Strategic Business Partner in NTPC
To actualize HR Vision & the Corporate Vision, an integrated
HR model has been developed by NTPC. As per the model, at
the periphery lies the role of HR to facilitate the
organization in fulfilling its Corporate Social
Responsibility & facilitate good governance practices.
Within this framework, lies the role of HR to establish
good customer relationship.
At the centre of the Model, lies the role of HR to create a
Learning Organization based on four building blocks i.e.
building Competence, Commitment, Culture and Systems.
All these HR roles are performed by a dynamic
mechanism namely as Systems Designer, Internal
Consultant, Systems Monitor and Impact Assessors.
5. PERFORMANCE MANAGEMENT SYSTEM
OF NTPC
The focus of the Performance Management System for
senior executives is to appraise them on different
components of managerial responsibilities, consisting
of Performance, Generic Managerial Competencies,
Values and Potential, totaling to 100 marks. The
Performance Component as identified and measures
evolved would have 50% weightage in total appraisal.
Generic Managerial competencies exhibited by an
Appraisee while discharging duties have been given
20% weightage in appraisal. The Companys
concern for actualization of organizational Core
Values is reflected in the Performance Management
and is assigned a weightage of 15% in appraisal. The
Performance Management System provides for
appraisal of the executives Potential to assume higher
responsibility and has a weightage of 15% in
appraisal. The Performance Management System
brings to focus important managerial attributes and
strikes a balance between Performance and other
aspects of managerial talents/skills. Executives will
have a set of Key Performance Areas to be identified
through discussion and achieve them during the
performance period. The system is to develop the
competencies by involving the executive in setting
targets and identifying Key Performance Areas. The
System aims to bring the concept of ownership and
accountability on both Appraisee and Appraiser to
create mutual trust and confidence. To utilize the
Performance Management System for facilitating
individual career development and bring organisation-
wide HR intervention at senior levels to bridge
competency gaps.
6. PERFORMANCE MEASURES OF NTPC:
Performance management system at NTPC comprises
appraisal of 5 components:
PART 1 PERFORMANCE
PART II COMPETENCIES
PART III - VALUES
PART IV POTENTIAL APPRAISAL
PART V PERFORMANCE & POTENTIAL APPRAISAL
6.1 PERFORMANCE: At NTPC, the performance is
evaluated at two intervals i.e. first half year performance
appraisal, and second half performance appraisal.
6.1.1 FIRST HALF PERFORMANCE:: The System
provides for the Reporting Officer (Appraiser) and the
executive (Appraisee) to identify through discussion and
agree upon a set of Key Performance Areas (KPAs) in brief
at the beginning of the first half-year. While identifying
KPAs, actual Measures for each KPA is defined in written.
The KPA Targets are given different weightage and limited
to 8 Key Performance Areas only. The idea is to enable the
executive to focus on given deliverables and not miss
important critical areas. The KPAs are determined using
SMART approach i.e. Specific, Measurable, Agreed
(mutually arrived at by the Appraiser and the Appraisee),
Realistic and Time-Bound. The Appraiser and Appraisee
jointly evolve KPAs, define measures and allocate marks for
each KPA at the beginning of first half-year in April. The
Performance under Part IA is jointly reviewed and
performance evaluated at the beginning of 2nd half year. At
the time of joint review, actual achievement is briefly
recorded against each KPA and marks obtained w.r.t. each
KPA is indicated in relevant column. The aggregate of marks
obtained for different KPAs is worked out and indicated as
aggregate of IA. Both the Appraisee and the Reporting
Officer sign the Part IA.
6.1.2 SECOND HALF PERFORMANCE: The System
helps to review the Key Performance Area Targets for the
Second Half-Year based on the evaluation of 1st half-year
KPAs depending on actual achievements. The reworked
KPA targets are briefly recorded, Measures for each
KPA defined and Marks allocated. KPAs which extend
beyond the 1st half year may be re-recorded in the targets
of the 2nd half-year.
6.1.3 COMMENTS ON PERFORMANCE
Reporting Officer completes the performance report at the
end of Appraisal year. In Part IC the Reporting Officer
offers comments w.r.t. KPAs, Measures, Achievements
and sums up in brief the Performance profile of the
appraisee in writing.
6.2 COMPETENCIES AND EVALUATION: To
reward Appraisees not solely on the performance but also
on the competencies, as performance may be influenced by
several other factors on which executive has no direct
control. Competency based evaluation would help the
organisation to take systematic steps for bridging the
competency gaps.
6.2.1 COMPETENCES: There are 8 competencies
assessed and rated at NTPC. These competencies are
technical Knowledge, Business Attitude, Strategic
Thinking, Resources Management, Communication
Skills, Systematic Thinking, Interpersonal
Competence, and Empowering Skills.
6.2.2 RATINGS OF COMPETENCIES:
The competencies are evaluated annually on a five-point
rating scale-1,2,3,4 & 5 - the rating 1 being the lowest end
of the scale and 5 being the highest on the scale. Based on
the competencies observed, the Reporting Officer
classifies each competency on a scale of 1 to 5. The
Reporting Officer discusses each competency (A to H)
with the Appraisee and plot the rating. The
competencies all together have a weightage of 20% in the
total Performance Appraisal. The aggregate of the rating
of each competency is to be arrived at the bottom of the
ratings column. Thereafter the aggregate rating is to be
converted to marks out of 20 using the Conversion
formula (based on the maximum attainable marks of 40
i.e. 8 competencies x 5 maximum rating = 40). The Part II
is duly signed by the Appraisee and the Reporting Officer.
The review of competencies and completion of Part II for
the previous appraisal year is done at the end of Appraisal
year, not later than 15th April.
6.3 VALUES: Adoption of the Companys Core Values
in the business dealings is one of the essential duties of
employees at all levels. Especially Senior Executives
who occupy leadership positions in the Company, have a
major role in the actualisation of Core Values by being
Role Models in observing and practising them and
thereby leading by example. Hence due emphasis
is laid on the Core Values demonstrated by the executive
in his day-to-day business dealings and 15% weightage
has been ascribed in the Performance Appraisal to the
process of Value actualisation exhibited by the executive.
6.3.1 COMPANY VALUES: The Corporate Values
COMIT and the indicative observable behavior in
respect of each value is Customer Focus, Organisational
Pride, Mutual Respect and Trust, Initiative and Speed,
Total Quality
6.3.2 RATINGS
Each value has to be evaluated through discussion on a
rating scale of 1 to 5 the rating 1 being the lowest and 5
being the highest. The Reporting Officer would evaluate
the Appraisee on each of the Value and mark the rating
for each value. The ratings are then aggregated at the
bottom of the rating column out of maximum of 25. The
ratings so obtained would be converted to 15 marks by the
conversion formula given. The marks obtained out of 15
marks is written in the Box. The Part III is signed jointly
by the Reporting Officer and the Appraisee. The
evaluation of Values and completion of Part III for the
previous appraisal year is done at the end of Performance
Appraisal Year, not later than 15th April.
6.4 POTENTIAL APPRAISAL: Potential is a component
related to Competencies. It seeks to achieve one of the
major objectives of the Performance Appraisal System,
namely evaluating the suitability of the executive to assume
higher responsibilities along the hierarchy.
In due course of time, the appraisal of Potential Component
may be done through Assessment Centre or with the help of
such other means, to make the appraisal more broad-based.
The personality profile of each individual based on the
Assessment Centre or with the help of other process can
become available to the Reporting Officer to enable him to
evaluate potential of the appraise with more objectivity. The
Reporting Officer would objectively evaluate the potential of
the assessee based on factual information observed during
assessment year.
6.4.1 POTENTIAL EVALUATION CRITERIAS: There
are 4 generic competencies i.e.Team Building, Conceptual
Ability, Strategic Vision, and Leadership Abilities are covered
for potential evaluation of Executives.
6.4.2 RATING OF POTENTIAL EVALUATION:The
evaluation of Generic Competencies for potential Appraisal
is done through discussion on a rating scale of 1 to 5. Rating 1
is the lowest and rating 5 being the highest. The evaluation of
potential is done on each competency and rating given against
each in the rating column by the Reporting Officer. The
aggregate of all the comptencies A to D would be arrived at by
totalling all the ratings. This would be out of 20 marks. The
Potential Appraisal has a weightage of 15% in the total
Performance Appraisal. The rating on potential out of 15
marks is obtained by using the Conversion formula at the
bottom of Part IV. The marks so obtained out of 15 marks is
written in the Box.The Part IV is jointly signed by the
Reporting Officer and the Appraisee at the bottom of the
page. The appraisal of this Part for the previous appraisal year
is done at the end of Performance Appraisal year, not later
than 15th April.
6.5 PERFORMANCE AND POTENTIAL PROFILE: The
Part V would sum up all marks scored for the Performance
Appraisal year. The marks scored for Part I, Part II, Part III
and Part IV is transferred to this section and entered against
respective item. The aggregate of the marks scored is arrived
at by adding all marks scored for different components. This
would form the Final score of Performance & Potential
Appraisal rating of the executive out of 100 marks.
7. CONCLUSION & SUGGESTION: The Performance
Management System is a tool to be utilised for identifying the
developmental needs of the appraisee. It is observed that
performance management system of NTPC clearly establishes
an understanding about what is to be achieved and developing
the people to ensure that how it is to be achieved. With
absolute clear vision and strong HR strategy, its
performance management system evaluates its human
resources on different components of managerial
responsibilities, consisting of Performance, Generic
Managerial Competencies, Values and Potential, The
Reporting evaluates Performance, Competencies, Values
and Potential. Hence, it is clear on the basis of study and
evaluation of PMS system that the companys appraisal
system is strong enough to identify and specifically
address the developmental needs in order to overcome the
competency gaps in its human resources.

REFERENCES

1. Brown, Michelle and Benson, John, Rated to
Exhaustion? Reactions to Performance Appraisal
Processes. Industrial Relations Journal, Vol. 34, pp.
67-81, March 2003. Available at SSRN:
http://ssrn.com/abstract=416626
2. Brown, Michelle and Heywood, John S.,
Performance Appraisal Systems: Determinants and
Change. British Journal of Industrial Relations, Vol.
43, No. 4, pp. 659-679, December 2005. Available at
SSRN: http://ssrn.com/abstract=856614 or
doi:10.1111/j.1467-8543.2005.00478.x
3. DeNisi, Angelo S. and Pritchard, Robert D.,
Performance Appraisal, Performance Management
and Improving Individual Performance: A
Motivational Framework. Management and
Organization Review, Vol. 2, No. 2, pp. 253-277,
July 2006. Available at SSRN:
http://ssrn.com/abstract=913135 or
doi:10.1111/j.1740-8784.2006.00042.x
4. McDonnell, Anthony and Gunnigle, Patrick,
Performance Management (September 12, 2008).
Available at SSRN: http://ssrn.com/abstract=1267160
5. Sharma, Neeraja and Sharma, Aman, Employers
Perspectives Regarding Performance Appraisal and
Reward Philosophy in Insurance Sector in Haryana
(May 4, 2009). The Icfaian Journal of Management
Research, Vol. VIII, No. 4, pp. 67-86, April 2009.
Available at SSRN: http://ssrn.com/abstract=1398564
6. Wadhwa, Vivek, A Disciple Becomes the Guru
(October 15, 2008). Harvard International Review,
Fall 2008. Available at SSRN:
http://ssrn.com/abstract=1349457
7. www.ntpc.com









































AUTHORS:
1. DR ASHOK KHURANA
ASSOCIATE PROFESSOR
P.G. DEPARTMENT OF COMMERCE
G N K COLLEGE, YAMUNANAGAR (HARYANA)
2. KANIKA GOYAL
LECTURER IN COMMERCE&MANAGEMENT
HINDU GIRLS (P.G.) COLLEGE
JAGADHRI (HARYANA)