A Comparative Study of Performance Management System in IT/ ITES Industry
Dr. Neeraj Kumari
The primary aim of the study is to compare and analyze Performance Management components and their usage in IT/ ITES industry. The study entailed detailed examination of the methods to measure and enhance performance management system against its objectives. In addition to thoroughly examine performance management system, the study also includes identification of trend lines and process improvement recommendations. Exploratory research followed by descriptive research has been used in the study. Non-probability convenience sampling has been used in the study. The sample size is 40. Primary data has been collected using two structured questionnaires which were administered to various ITES organizations in and around Delhi. Depth interview method is used by which three companies i.e. HCL, Wipro, IBM were compared with Steria. The obtained data has been analyzed using Excel sheets. The study has identified the most important factors which contribute to the effectiveness of creation and maintenance of such systems. In future the ITES organizations must concentrate and develop a system towards 360 degree appraisal. This is the future trend and ITES companies must adhere to it. The companies must identify and develop unique retention strategies to retain the employees. An established formal communication networking with an informal focus would give the ITES organizations an additional competitive advantage.
Keywords: 360 degree feedback, development, retention, self appraisal, succession planning.
Author: Assistant Professor (Management) Faculty of Engineering & Technology, Manav Rachna International University Faridabad, India.
2.1 Indian ITES-BPO Industry: Background
Off shoring to India is known to have three advantages - significant cost savings, major productivity gains and dramatic improvements in quality.
The primary driver of cost savings is labor cost arbitrage. The difference in wages between the parent location in the US or UK and India is more than 70-80 percent for off shore processes. Interaction costs increase by 10-20 percent because India is a remote location, resulting in net savings of 40- 60 percent for the off shored processes.
Significant potential exists for cost savings through off shoring across industry verticals. Therefore, customer interest in off shoring will be much more widespread and not be limited to just a few verticals. Insurance and retail banking create the bulk of savings because of the high proportion of processes that they can offshore. Therefore, companies in these two verticals are taking the lead in sourcing ITES from India and swiftly growing in scale.
Off shoring opportunities varies from standardized corporate center activities such as accounting, etc. to more niche and vertical specific opportunities such as clinical trials support for pharmaceutical companies, claims processing for the insurance sector, etc
The ITES industry in India attracts people who are better skilled and qualified than those who work for BUs or shared services centres in the parent location. Further, the ITES set-ups serve a multitude of divisions/BUs within the company (in case of in-house providers) and across companies (in case of third party providers) facilitating transfer of best practices across all. As a result, the offshore centers in India have been able to provide dramatic improvements in process quality and productivity as compared to those in the parent location.
Over the past ten years, the Indian BPO segment has undergone significant transformation. Starting with basic data entry tasks, the industry modified to a high proportion of voice-based services and a variety of back-office processing activities. The past 7-8 years have seen the capacity of services expanding to include progressively more complex processes involving rule-based decision making and even research services requiring informed individual judgment.
The fast growth in the scope of BPO has been accompanied by an equally rapid adoption across a choice of vertical industries. This wide range of services may be summarized into 4 wide categories including customer interaction services (CIS), finance and accounting (F&A), human resource administration and niche business services.
2.2 Key highlights of domestic BPO industry
In the domestic market of BPO industry, the demand has been witnessed noticeable growth over the past few years. While the high growth rate may be attributed to a small-base effect, the rapid adoption of BPO in the domestic market is receiving well-deserved attention.
Globally, Indian market is being integrated, businesses in India are beginning to face increasing levels of global competition and being pushed to deliver world class levels of product and service quality. ITES-BPO has emerged as an effective means of entrusting specialists with the task of consistently delivering the desired high-levels of quality – leaving the client organisations to focus on their core businesses.
2.3 Key growth drivers of Indian ITES-BPO exports
- Abundant talent- India’s young demographic profile is an inherent advantage complemented by an academic infrastructure that generates a large pool of English speaking talent. Talent suitability concerns are being addressed through a combination of government, academia and industry led initiatives. These initiatives include national roll out of skill, setting up finishing schools to supplement graduate education with training in specific technology areas and soft skills and memorandums of understanding (MoUs) with education agencies to facilitate industry inputs on curriculum and teaching and develop faculty development programme.
- Sustained cost competitiveness- India has a strong track record of delivering a significant cost advantage, with outsourcing organisations regularly reporting savings of 25-50 per cent over the original cost base. The ability to achieve such high levels of cost advantage by sourcing services from India is driven primarily by the ability to access highly skilled talent at significantly lower wage costs and the resultant productivity gains derived from having a very competent employee base. This is further complemented by relative advantages in other elements of the cost structure (eg telecom) that contribute to India’s cost competitiveness – even when compared to other low-cost destinations.
- Continued focus on quality- Demonstrated process quality and expertise in service delivery has been a key factor driving India’s sustained leadership in global service delivery. Since the inception of the industry in India, players within the country have been focusing on quality initiatives, to align themselves with international standards. Over the years, the industry has built robust processes and procedures to offer world class IT software and technology related services.
2.4 Scope Of The Study
Any organizations’ development is primarily based on its employees’ efficiency and attitude towards the organizational goal. The company and the employees are to be mutually benefited with the organization profit, which is possible only with an understanding management & dedicated staff, which require a proper blending of organizational goals with individual goals. Performance management helps the management of an organization to overcome this situation.
In connection to this, the performance of the employees is being analyzed which can indirectly influence the satisfaction of the employee and directly motivates them to work for the organizational development. The study helps to analyze the trends in performance management system in IT industry and give appropriate suggestions to improvise the practices taken by them.
Timperley (1998) sought the views of New Zealand secondary school principals to whom responsibility for developing appraisal systems has been devolved since 1989. In general, principals developed systems that met their own requirements and were reasonably satisfied with their efforts. Some principals prioritized developmental purposes while others included accountability purposes. These two groups experienced different outcomes. In some cases, staff opposition prevented principals from developing accountable systems. Although the performance appraisal systems developed by principals mostly met their own requirements, most did not all meet the state’s requirements for accountability.
Dwyer (1991) agrees that the quality of instruction is one important dimension in the complex teaching‐learning process, but to encourage the pursuit of excellence of instruction the instructor appraisal process must not polarize policy makers and instructors. The appraisal process must not be used for summative purposes, and must be well separated from personnel decisions.
Shen (2004) develops the Chinese international performance appraisal model by exploring performance appraisal policies and practices and the associated factors in Chinese MNCs. It reveals that Chinese MNCs adopt different approaches towards different groups, particularly different nationalities and managerial status. The Chinese international performance appraisals are a mix of home and local appraisal systems, and a mix of traditional Chinese personnel management and modern Western HRM concepts. Moreover, Chinese international performance appraisal policies and practices are affected by various host‐contextual and firm‐specific factors, and there is also interplay between international performance and other international human resource management activities.
Soltani (2005) highlights that while some of the quality management gurus, followed by other TQM scholars, advise organizations to relinquish and eliminate performance appraisal practices; this is not a unanimous view in both the literature and practice.
Pradhan et al (2017) shown that transformational leadership is positively related to psychological empowerment. The study also found partial mediation of organizational culture between transformational leadership and psychological empowerment.
Wilson & Western (2000) Describes research conducted into some of the potential inhibitors which can reduce the effectiveness of a hospital performance appraisal system in relation to training and development plans. Takes as its perspective the views of the appraisees which counter the more usual overview provided by managers and other commentators. Relates these findings to literature on the subject and concludes that in spite of its limitations the performance appraisal process is likely to remain.
Millmore et al (2007) Performance ratings were either gender neutral or higher for female than for male managers. Within the case company there was no evidence of unfavorable discrimination against female managers, if anything the reverse with female managers showing superior performance compared to their male counterparts.
Thurston Jr & McNall (2010) Results supported hypothesized relationships between procedural justice and helpful behaviors toward the organization via appraisal system satisfaction; distributive justice with appraisal satisfaction; and interpersonal and informational justice and helpful behaviors toward the supervisor via supervisor satisfaction.
Seddon (1987) Cultural assumptions are often inadvertently exported or imported when performance appraisal is introduced in organizations in developing countries. Performance appraisal has been developed in “individualist” societies, and the systems, when applied in non‐individualistic cultures, can cause unintended offence, or are incorrectly, and therefore uselessly, employed.
Sinha et al (2016) a culture influenced TQM model has been developed. The model demonstrates a linkage between cultural dimensions and TQM interventions, thereby suggesting that OC characterised by “openness”, “confrontation”, “trust”, “authenticity”, “proaction”, “autonomy”, “collaboration” and “experimentation” has a significant and positive impact on TQM implementation.
Harrison & Goulding (1997) Examines the impact performance appraisal has had, and is having, on public libraries. Considers appraisal in a broader context, discussing the effect political opinions and decisions have had on the way appraisal has been introduced into the public sector. Discusses the theory of appraisal in relation to what happens in practice using evidence from a case study carried out as part of a BA Librarianship at Loughborough University. Considers the purpose of appraisal and how it should be carried out in order to maximize its potential for improving individual and organizational performance. Suggests that appraisal in public libraries has a tendency to fail because not enough attention is given to defining the aim of appraisal, to ensuring communication channels are open and that proposed training is followed through.
Problem statement: The IT industry as a whole is undergoing turbulent and dynamic changes due to various macro economic environmental factors prevailing in the country as well as globally. The industry has to adapt to the fluctuating and challenging environment on a day to day basis. In this environmental scenario, it becomes very much important to retain the talent in any organization. This could be a unique competitive advantage for the organization as well as for the industry.
- To study the existing system prevailing with regard to performance management systems in ITES sector in NCR.
- To focus on the challenges prevailing in the retention of such highly skilled effective employees.
- To provide some meaningful suggestions to the organizations as well as the industry to improve, modify and change the existing systems of performance management.
Research design: Exploratory research followed by descriptive research has been used in the study. A specific problem is formulated for precise investigation or a specific hypothesis is formulated from an operation observation. Such studies are therefore, known as formulated studies because discovery of ideas & new insight literature survey and evaluating the past experiences, etc, are generally associated with such design. In managerial studies this type of design is commonly used.
Descriptive studies are undertaken in many circumstances. When the researcher is interested in knowing the characteristics of certain groups such as age, sex, educational level, occupation or income, a descriptive study is necessary. Descriptive studies are well-structured. It tends to be signed and its approach cannot be changed every now and then. It is, therefore necessary that the research give sufficient thought to framing research questions and deciding the types of data to be collected for their purpose.
Sampling Technique: Non-probability convenience sampling has been used in the study. Convenience sampling refers to the collection of information from members of the population who are conveniently available to provide it. It is most often used during the exploratory phase and is perhaps the best way of getting some basic information quickly and efficiently.
Sample size: The study has been carried out by collecting information from ITES organizations by using simple random sampling. The study covers 4 ITES organizations out of the total 50 such types of organizations in NCR. The sample size is 40.
Data collection tools: In the study data has been collected using primary and secondary methods of data collection. Primary data has been collected using two structured questionnaires which were administered to various ITES organizations in and around Delhi. Depth interview method is used by which three companies i.e. HCL, Wipro, IBM were compared with Steria. Secondary data has been collected from journals, articles; research magazines and working papers available in various organizations and from Internet.
Data analysis: The obtained data has been analyzed using Excel sheets. Percentage analysis is done in most of the questions.
4.1 Survey Method Analysis for Understanding The Trends in IT/ ITES Industry
Following is the data analysis for understanding the trends in IT/ ITES industry:
Table 1: Showing how effectively organizations follow Performance Management
% of responses
Interpretations: we can infer that more than 44.4% companies in IT/ ITES sector follows Performance Management System very formally, i.e. it is an important part of their HR functions.
Table 2: Showing application of PMS in IT sector
% of responses
Interpretations: we can infer that PMS in IT sector applies to all employees and it is an important part of the system in order to retain and nourish the talent.
Table 3: Showing how PMS differ for different groups
% of responses
Interpretations: As per the 60% of the responses, we can infer that self appraisal is an important tool which is used extensively for appraising the performance of the employee.
Table 4: Showing HR methods of Performance Appraisal as part of your system
% of responses
No. of responses
Graphic rating scale
Balance score card
Interpretations: we can infer that self appraisal, 360 appraisal and forced distribution are the most common tools used.
Table 5: Showing the rating of parameter on the basis of importance to reduce biasness in the PMS
Interpretations: peer review ranks first as tool to reduce biasness in IT/ITES sector, whereas multi raters rank second in the same category.
Table 6: Showing various processes as part of PMS
No. of responses
Training & Development
Interpretations: we can infer that training and development is an important part of PMS followed by career management.
Table 7: Showing ranking of factors on scale of 5 on the basis of their linkage to PMS.
Training & Develop
promotion & transfers
Interpretations: we can infer that first rank is given to retention strategy and second to motivation strategy i.e. while making policies and PMS, companies keep these two things in mind.
Table 8: Showing the determinants for job performance in an organization
No. of responses
Interpretations: we can infer that knowledge/ skill/ attitude is of most important determinant.
Table 9: Showing performance linked pay in relation to performance management
No. of responses
Interpretations: we can infer that there is a trend of linking performance with performance incentives.
Table 10: Showing factors involved in evaluating performance
No. of responses
Interpretations: we can infer that in IT industry, performance review of an employee is done more for development and effective communication.
Table 11: Showing the type of feedback given
No. of responses
Interpretations: we can infer that the feedback of an employee is given both in numerical as well as verbal.
Table 12: Showing the employees receiving training in performance appraisal techniques
No. of responses
Interpretations: we can infer that mostly employees in IT/ ITES industry are given training in performance appraisal.
Table 13: Showing the number of meetings for performance appraisal
No. of meetings
No. of responses
1 to 2
2 to 3
3 or more
Interpretations: we can infer that usually there are three or more meetings conducted for performance appraisal.
Table 14: showing responses for trends after identifying poor performance
No. of responses
Interpretations: we can infer that after identifying poor performance post review, there is a trend of providing coaching.
Following are the trends in IT/ ITES industry:
- The major tools used in PMS in IT/ ITES industry are almost identical.
- Self appraisal is an important tool which is used extensively in IT/ ITES industry.
- 360 degree feedback, self appraisal and forced distribution are most common tools for PMS.
- For reducing the biasness in PMS peer review is used mostly.
- Training of the employees is an important part of PMS.
- Retention of the employees is of utmost importance while making policies regarding PMS in the company.
- There is a trend of linking performance with promotion in IT/ ITES industry.
- In IT/ITES industry performance review is done for the development and effective communication.
- There are at least three performance review meetings per year in IT/ ITES industry.
- If poor performance of an employee is identified, there is a trend of providing improvement coaching.
Following are the recommendations for improving the overall PMS in the companies studied:
- Biannual performance review should be started with the next review period.
- Innovative policies should be formulated to retain and train more employees which would match their satisfaction level.
- More efforts should be made in terms of improving communication between the top management and the employees.
- As it is inferred that PMS system is important for any organization, the organizations must invest in specific technology oriented products and services, software and hardware to improve the performance.
- Self appraisal is the most effective tool for PMS system, so the management must effectively develop training and development tools to make the employees sensitive towards the organizational environment and culture.
- 360 degree appraisal is an effective tool which has to be effectively enhanced in the organizations.
- Ranking of various factors helps to reduce biases in performance appraisal systems so organizations must use this standard tool for measurement.
- Training and development, career development and succession planning become the core essential functions of a PMS. The organizations must concentrate on these areas to effectively appraise and improve the performance of employees in the organizations.
- Retention and innovation strategies are used to improve the performance of employees, so the focus must be directed towards improving the PMS.
- Performance incentive and salary incentive encourages and improves the performance of employees. So the PMS must focus on these factors to improve the performance.
The performance management system is an integral part of an organization to measure, motivate, and improve the performance of the entire organization. It also helps to focus on the goals of the organization towards specific pre-determined objectives for an organizational culture. The study has identified the most important factors which contribute to the effectiveness of creation and maintenance of such systems. In future the ITES organizations must concentrate and develop a system towards 360 degree appraisal. This is the future trend and ITES companies must adhere to it. The companies must identify and develop unique retention strategies to retain the employees. An established formal communication networking with an informal focus would give the ITES organizations an additional competitive advantage.
7.1 Future Research
The study would be indicative and not exhaustive to further probe in to the challenges of ITES industry regarding performance management, talent management, staff turn over and increasing the performance in the industry. The study provides some focus in to these challenges in the current setup across ITES organizations and it intends to critically evaluate the performance of such systems.
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