Rules for Building a Fair Performance Management System

product, design and development, product release. Social and regulatory processes of state agencies and enterprises need to pay attention to the environment, health and safety, employee policies and community investment.

Develop objectives for the learning and growth perspective: Objectives in this perspective support objectives in other perspectives of the Balanced Scorecard. The organization needs to focus on three important factors: people, information, and organization. Human capital helps the organization to flexibly align people with the strategy. Objectives in human capital include: closing the skills gap in strategic positions, training for success, recruitment, retention, and succession planning.

B4. Identify key performance indicators (KPIs)

KPI is a measurement tool to evaluate the performance of an organization, functional department or individual through quantitative indicators. Key Performance Indicators (KPI) are quantitative measures that an organization uses to evaluate or compare the performance between the results of its activities and its goals. Setting KPIs is the quantitative interpretation of the goals in the Strategy Map through specific measures. These measures are the bridge between the very abstract strategy and the clear and specific daily activities of the business. To measure the implementation of strategic goals, the business identifies and develops KPIs for each aspect of finance, customers, internal business activities, learning and growth.

B5. Set up targets

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The indicators make the results of the measurement index meaningful and clearly show how the employees in the enterprise are working, good or bad at what level. To exploit the effectiveness of the indicators, the BSC group must base on the development orientation of the enterprise in each stage to have corresponding indicators.

Long-term goals: These are big, bold, and audacious goals. They shake up an organization by presenting it with a huge challenge that cannot be achieved through business as usual. Achieving them requires a huge amount of effort. Long-term goals typically take ten to thirty years to achieve. The long time frame ensures that executives do not sacrifice long-term results for the sake of a short-term goal.

Medium-term targets: These are stretch targets, usually set for 3 to 5 years. To demonstrate effectiveness, stretch targets must represent a big challenge but must be based on reality.

Short-term indicators: These are incremental indicators, which can be monthly or quarterly, and if achieved, will lead to the completion of medium-term and long-term indicators. Incremental indicators act as an early warning system, providing quick feedback to help managers make timely changes so that the business can achieve its desired long-term goals. Based on past analysis results, businesses can see future trends, which is also an important source of information for setting and selecting indicators. In addition, sources of information for indicators include executive interviews, internal and external assessment data such as SWOT analysis, Michael Porter's 5 competitive forces analysis, feedback from customers and other stakeholders, industry averages, and indicators of the best companies in the industry.

B6. Propose initiatives and develop action programs

Propose Initiatives: Goals can provide much-needed motivation, but achieving goals requires launching specific initiatives. Initiatives represent the projects, processes, and activities an organization undertakes to ensure measurable success.

Develop Key Action Plans (KPAs): Key Action Plans (KPAs) are specific activities, programs, projects, or actions that help the company achieve its strategic goals. The steps are to conduct an inventory of current programs, map KPAs to strategic goals, eliminate and develop missing KPAs, and prioritize strategic KPAs.

1.2.2.5 Rules for building a fair performance management system

Consistency: Appraisal procedures should be consistent over time and for all employees. Specific appraisal criteria may vary for each type of job, but the general criteria as well as appraisal procedures and processes should be consistent across the company's departments and divisions. Ensuring consistency will help ensure the feasibility and effectiveness of the appraisal system.

Rule of Limiting Self-Interest: Self-interest should be prevented in the process of employee evaluation. To ensure this rule, evaluation standards, evaluation process and procedures

Evaluation should be clear and employees should be informed of the standards, processes and procedures at the beginning of the evaluation period. To prevent self-interest, performance objectives for employees should also be discussed and agreed upon between the leader and the employee. These objectives should be clear and achievable to avoid the situation where the leader uses performance objectives to evaluate employees lower if the leader has prejudices against that employee.

Correction rules: The evaluation system includes: evaluation criteria, evaluator, evaluator, evaluation time, evaluation content, evaluation method, etc. Therefore, in order for the evaluation system to achieve fairness, it needs to ensure correction rules, meaning that this evaluation system can be flexibly adjusted for each different type of work to ensure accurate and appropriate evaluation.

Representative rules: The evaluation system and especially the evaluation criteria must represent and cover the issues that the evaluator and the evaluated are interested in. Representative rules and correction rules will contribute to making the evaluation system as well as the employee evaluation criteria more effective and feasible.

Ethical rules: Because the subject and object of evaluation are people - the sum of relationships - ethical rules are also mentioned in the evaluation system of an organization. An employee evaluation system, in addition to being accurate and fair, also ensures the orientation of employee development. Evaluation does not stop at being the basis for salary and reward, but needs to orient development through training and promotion of employees. Evaluation aims to develop a real person, develop a comprehensive person.

1.3.2 Performance appraisal organization

1.3.2.1 Choosing a performance evaluation method

Evaluation method is the method, the way to conduct employee performance evaluation. Which method to use for evaluation depends on the evaluation subject, whether it is management or employee level, depending on the evaluation objective, whether it is salary or promotion, training or employee development... In reality, there are many different performance evaluation methods and no method is considered the best for all organizations. Even within the enterprise, different methods can be used for different departments, units or groups.

employees in different functional groups such as sales, production, marketing, administration... Some methods mentioned are:

- Graphic scale: the assessment is done through an evaluation form. This evaluation form has evaluation criteria including criteria related to the job. The evaluation scale can be divided into ranks such as excellent, good, average, below average, poor. The ranking of the scales is very important.

- Checklist: Evaluation through an evaluation form. This form describes the behaviors and attitudes that may occur during the employee's work performance. The descriptive statements are usually of equal value, but in some cases they are often weighted to clarify the importance of each statement. The evaluator will give a score appropriate to the evaluation object of each descriptive statement, the final result is calculated by adding up the scores in the statements.

- Management by Objectives (MBO) Management by objectives is a management philosophy proposed by Peter Drucker in 1945.

1954, with this method, employees set their own goals (eg: production costs, product sales, quality standards, profits) through consultation with superiors and then use these goals as the basis for evaluation. The system operates as a goal setting process in which goals are set for the organization (step 1), for the Department (step 2) and for individuals, managers and employees (step 3). The goals set by employees are discussed with leaders and reviewed and adjusted until both sides (employees and leaders) are satisfied with the set goals. The table of goals will be accompanied by a detailed description of the activities that employees propose to perform to achieve the stated goals (Step 4). During the implementation process (Step 5), the manager will monitor and record the progress of the employee's work. Analyzing and adjusting goals is necessary when there are changes or adjustments/ additions are needed when there are changes from the outside or from within the organization (Step 6). Finally, the manager and employee together review and evaluate work performance to recognize achievements (Step 7).

Identify the organization's goals

Define department goals

Identify group/individual goals

Develop an action plan

Perform

Analyze and adjust goals

Evaluate results and achievements

Figure 1.3. Management by objectives process

Source: Tran Kim Dung (2011)

To ensure success, MBO should be viewed as part of an overall management system, not simply as additional work for the manager. Managers should be determined to empower employees to take the initiative in achieving their goals, giving them full choice in how to achieve them (but holding them accountable for the results).

- Scoring method

The scoring method allows the user to have a lot of options in designing the assessment model. In this method, the assessor considers each assessment criterion (characteristic of the person being assessed) and scores or ranks them based on a pre-built rating scale. Typically, the rating scale (score scale) consists of a number of levels ranked from low to high, from “poor” to “excellent” or some similar arrangement.

Each characteristic that needs to be evaluated will have a suitable scale. Typically, the characteristics that need to be evaluated about employees include the level of cooperation at work,

communication skills, information expression, creativity, discipline, work skills... and some other characteristics depending on the specific requirements and conditions of each enterprise. When choosing the characteristics to be evaluated, the designer must always keep the principle that these characteristics must be related to the work of the employee or person being evaluated.

- Evaluation method for scoring according to GE-McKinse matrix (According to Dohn,

2004)

The 9-Cell Matrix developed by Mr. McKinsey is used to evaluate units.

business units (SBUs) and to prioritize individual investments. It was developed in the late 1960s and 1970s to assess the potential of business units and to prioritize investments with the overall strategy. It is thought to be based on the BCG matrix and the business units in the BCG matrix or potential products are applied to individuals.

About the idea: The horizontal row is the 3 boxes for evaluating work efficiency and the vertical row is for leadership potential. Combined, they will form a grid of boxes that will determine the position of the person being evaluated. (See figure 1.4)

Benefits of using 9-Cell Matrix.

- A useful tool to support decision making in senior leadership teams. These teams can use the 9 Boxes to recalibrate expectations and scores;

- Using this process, managers can create a shared sense of ownership in their search for individual talent;

- Is an effective way to identify personal development needs and find development plans;

- Provide a blueprint for future planning;

- Use 9 Boxes as a tool to manage talent.

Every individual has different talents and abilities. An employee will be able to make an effective contribution if the talent he possesses matches the job requirements, otherwise it will create a conflict between the individual and the organization. The company will either hire another new employee or stunt the development leading to a waste of a resource. That is why we say that this matrix shows talent to find talent. Companies often put their best efforts to attract and retain the best performing employees and therefore talent management is a core aspect for companies.

Talent management is the process of managing current high performing individuals and attracting new individuals to join the organization to achieve high professional performance in line with the company's objectives. It is the basic element in the art of selecting the right people in the right positions and utilizing them to their full potential. Many companies are in need of the hour to incorporate good teams and talent management systems into their business strategies.

From a talent management perspective, an employee will be evaluated based on two factors: leadership potential and work performance. The employee's past data or previous personal performance will show the basics of choosing this person's role and position. The 9-Box model in talent management is a way to isolate the personal characteristics of employees depending on the level of leadership potential and personal performance.

Poor performance High potential

Good performance High potential

Excellent performance High potential

Performance management is a key element for an individual career development process within a company. The specific classification is as follows:

High

Poor performance Average potential

Good performance Average potential

Excellent Achievement Average Potential

Poor performance Limited potential

Good performance Limited potential

Average Leadership Potential

Excellent performance Limited potential

Limit

Achievements

Poor Good Excellent

Figure 1.4. GE-McKinsey 9-Cell Matrix

Source: DOHN (2004)

1A - Excellent Achievement/High Potential:

Definition: An employee who achieves results that exceed the requirements of his or her current position. Performs work with a high level of commitment and achieves outstanding results, and is willing and able to assume a higher level of responsibility.

How to recognize:

- Always perform above and beyond the scope of work required and perform excellently when assigned additional work.

- Have an attitude that is consistent with the company's core values and competencies

- Always look for new opportunities to learn and develop yourself.

- Have independent solutions to address related issues.

- Always put the interests of the Company above personal interests.

2A - Excellent Achievement/ Average Potential:

Definition: The employee performs well in the current job, contributes to creating values and demonstrates the appropriateness of capacity to the requirements of the assigned tasks. May be ready to take on a higher scope of responsibility in the next 12 months.

How to recognize:

- Achievements are greater than expected, but superiors are uncertain about the ability to handle the job as the scope expands and complexity increases.

- Demonstrate the ability to take on additional work or new projects, and be willing to take on new tasks of increasing difficulty.

- Always look for opportunities to improve yourself and the organization.

- Understand the company's mission, value system, and core values through behavior and conduct and connect them in daily work.

3A - Excellent Achievement/ Limited Potential:

Definition: The employee performs well within his/her scope of responsibility but needs to continue to develop in his/her current role, or has good technical skills but lacks leadership potential. The employee does not demonstrate readiness to take on additional tasks and responsibilities within the next 12 months.

How to recognize:

- Achievements always exceed expectations

- Has not developed beyond the current job, only developed within the current scope. Has professional experience with professional skills, but does not demonstrate

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