1. Performance Management System (PMS) (Department of Public Enterprises)
Workshop on
Performance Management System (PMS)
&
Performance Related Pay (PRP)
*******
(Department of Public Enterprises)
Govt. of India
Visakhapatnam

2. 2007 Pay Revision : Background
Constitution of the II PRC in November, 2006
Headed by Justice M.J. Rao, retired Supreme Court Judge
Committee gave its recommendations in May, 08
Some recommendations not accepted
DPE O.Ms dated &
Appointment of Committee of Ministers (Chidambaram Committee)
DPE O.M dated

3. PRP in 1997 pay revision
Out of 5% ‘Distributable Profit’ for the entire CPSE as a whole
Freedom to the management to decide the amount each individual should get
Total PRP to be paid to all the employees including workmen not to exceed 5% ‘Distributable Profit’
PLI ideally to be part of Perks & Allowances. However, if it is not sufficient it could be paid as PRP
Problems in PRP system in 1997 pay revision

4. Paradigm shift in PRP/PMS in 2007 Pay Revision
DPE O.Ms dated & lay down transparent method for calculation of incentive w.e.f for all executives and Non-Unionised supervisors of CPSEs.
O.Ms provide for PRP is linked directly to the profits of the CPSE and performance of the executive.
PRP progressively increases with level of the executive.

5. PRP determinants Profit of CPSE
Grade of Executives (E0 – 40% to CMD(A) 200%)
MoU rating of CPSE (Excellent – 100% to poor – 0%)
PAR rating of Executive (Excellent – 100% to poor - 0% in a system based on PMS)
Remuneration Committee

6. Profit of the CPSE and PRP
PRP will come out of profits of the CPSE
60% of the PRP will be within ceiling of 3% of Profit before Tax (PBT)
40% of PRP from 10% of incremental profit as compared to previous year’s profit
The total PRP, however, will be limited to 5% of the year’s PBT, both for executives and non unionized supervisors
The PRP for the year will be calculated latest by December of the following year, based on the CPSE’s performance as per audited accounts
The proposed PRP scheme will begin w.e.f. financial year

7. Maximum PRP for different Grades
% of
Basic Pay
E0 to E3 40
E4 to E5 50
E6 to E7 60
E8 to E9 70
Director (C&D)
100
Director(A&B) &
CMD(C&D)
150
CMD(A&B)
200

8. PRP & MoU Each CPSE to sign the MoU.
MoU rating will form the basis of PRP.
All the key Result Areas to be identified in the MoU.
CPSEs not executing MoU will not be eligible for PRP.

9. PRP based on MoU rating CPSEs rating %age of PRP for Executives
Excellent
100
Very Good 80
Good 60
Fair 40
No PRP for ‘Poor’ rating

10. PMS - DPE Guidelines (26.11.2008) CPSEs to adopt ‘Bell Curve Approach’
Not more than 15% of executives to be graded as “Outstanding”
10% of executives to be graded as “Below Par”.
PMS to be introduced latest by
Between and till a PMS is in place, existing guidelines on PRP, (which is limited to 5% of distributable profit will be applicable)

11. PRP and Performance Based on PMS
PMS Rating
PRP
Excellent
At 100% eligibility levels
Very Good
80%
Good
60%
Fair
40%
Poor 0%

12. Remuneration Committee
Each CPSE to have Professional Boards with Independent Directors.
CPSE to constitute a Remuneration Committee headed by an Independent Director.
No PRP, if there are no Independent Director on the Board of the CPSE.
Remuneration Committee will decide the annual bonus/variable pay pool and policy for its distribution across Executives and Non Unionised Supervisors.

13. Amount of PRP from current and Incremental Profit
Basic Pay X MoU rating X PAR
60% will be from current years PBT
40% will be from incremental profit
Depending on availability of funds, the PRP would be paid proportionately

14. Annual Performance Reports
DPE issues guidelines for writing Annual Confidential Reports for top management (Chief Executives, Directors and 2 levels below Board).
Earlier guidelines issued in 2005.
Earlier separate formats for Chief Executives and Directors.

15. Salient Features of New Guidelines
Common format for Chief Executives, Directors, Executive Directors (E9) and General Managers (E8).
Assessment based on MOU performance of company, Individual targets flowing from MOU and Personal attributes and functional competencies and differential weight to these aspects.
Detailed time schedule prescribed.
Clear channel of submission of PAR prescribed.
Provision of strict monitoring of PAR process.

16. Salient Features of New Guidelines (contd.)
Provision of numerical grading for the purpose of objectivity
Clear description of Personal Attributes, Functional Competencies and Benchmarking of assigning grades.
Aspects such as Medical examination, annual property return, training programmes attended, additional qualifications acquired, etc. included in PAR.

17. Salient Features of New Guidelines (contd.)
Grading to follow Bell Curve approach.
Nomination of nodal officer both in CPSEs and Ministries.
Designation of PAR Repository Authorities to keep PARs in their custody.
While prescribed PAR form, guidelines and procedure to be treated as Core elements, Boards of CPSEs authorized to supplement the contents of PAR under intimation to DPE.
Oversight of Performance Appraisal exercise by DPE.

18. Individual targets flowing from MoU Targets
DPE guidelines have further concretized the Performance Appraisal System for E 8 and above. CPSEs are expected to do this exercise for other levels.
Weightage
MoU Targets
Individual targets flowing from MoU Targets
Personal Attributes and functional competencies
Total
What is being
Assessed
Designation
Company
Unit
Individual
Chief Executive 75 25
100
Functional Director 40 35
EDs(E9) & GMs (E8) 50

19. Why Performance Management System ?
What is measured well is managed well
Bring objectivity, fairness, transparency in assessment (Build Credibility of process)
Harmonize individual, group and Company goals
Recognize & Incentivise superior Performance
Motivate employees for superior performance
From each, to the best of his/her ability 19 19

20. Thank you DPE Website : www.dpe.nic.in
Link to DPE pay related guidelines :
Contact details in case of any query on salary/wage related matters.
Shri Rajendra Kumar, Director, DPE
Telefax :
Shri P.J. Michael, Under Secretary, DPE
Tele :
Thank you