Traditional Japanese performance management system (PMS)

Model Employers: Committed long-term employment

security and offered systematized training programs and periodic opportunities for advancement in status and wages to employees Model Employees: Developed their careers within one firm and shared interests and goals with their employers Employees were assessed and their pay and promotions determined by a scheme called the skill-grade system Firms rarely staffed higher-level positions with external hires Japan is rather unique in that even unionized production workers are also subject to merit assessments conducted by supervisors

Drawback of the traditional PMS

Traditional PMS focused mainly on only the input aspect of employee performance: Most importantly, skills and abilities
Not much effort to measure and evaluate employee output Simply focusing on employees inputs does not necessarily identify productive and effective workers (More true for white collar employees)

Key Factors Impacting PMS in Japan

Historical factors: Already Discussed Legal Factor: Japanese courts (Evident from various rulings) have made it almost impossible for employers to terminate or lay off their regular-status employees without the employees' (or their unions') consent. Impact of Government: Both long-term employment and employment security are explicit policies of the Japanese government Role of Unions: Japanese unions' accommodating attitudes in wage negotiations have been complemented by their strong insistence on employment security for their membership.

Key Factors Impacting PMS in Japan

Impact of Globalization, Ageing workforce & changes in the competitive environment
many employers have begun to question the effectiveness of current HRM practices As a result, following two trends are visible in the current context:
Output-Based Evaluation and Individual Differentiation: The introduction of competitive appraisal practices which emphasize individual performance and output The externalization of core, regular-status employees

Recent Trends in PMS in Japan

Output-Based Evaluation and Individual Differentiation: Eemployees are now evaluated on the basis of both performance and ability/competence
Fuji Research Institute Survey (1998): Suggested that firms assigned approximately 40% of the weight to performance and about 25 to 26% to ability/competence. Tsuru, Morishima, and Okunishi (1998): 54.0% of the firms had some type of pay-for-performance schemes for at least some segment of their workforce. The proportions was even higher for larger firms (65.8% in the employment >5,000 category) and among manufacturing firms (61.0%) Japan Institute of Labour(1997): The proportion of firms introducing individual differentials after the cohort had been employed for 5 to 10 years, had dropped to 33.1%

Recent Trends in PMS in Japan

Externalization of Regular-Status, Core Employees : Some Japanese firms have started offering different levels of employment protection instead of traditional Life Term Employment.
Japanese firms often use shukko and tenseki to remove redundant workers from the company payroll
With Shukko, employees are temporarily lent to other companies With Tenseki, their official employment status is permanently changed and they become employees of the receiving firms

Strategies to remove senior employees range from early voluntary retirement to aggressive outplacement counselling (called Katatataki)

Recent Trends in PMS in Japan

Rising Concern with Procedural Justice : The
psychological contract between Japanese employees and employers has shifted from Relational to Transactional
Relational :The employee-employer linkage that existed in the learning centered system Transactional: The new emerging model

Why
Employees have become increasingly more concerned with the procedural equity which their employers performance management system is operated Employees now demand for procedural fairness in evaluation practices

Our strategy for managing across cultures (Japanese Subsidiary)

Regiocentric
Aimed at both profitability and public acceptance Governance Mutually negotiated between Indian operation & its subsidiary (Japan) Targeted Regional integration and national responsiveness Culture: Regional Marketing approach: Standardize within region, but not across regions Personnel practices: Regional people developed for key positions anywhere in the region (Japan)

Points to be taken in mind while designing PMS for Japanese subsidiary

Standardization with Indian PM System Management-by-objectives approach to PMS Completely fair & transparent system Comprehensive Assessor & Assessee training on the PMS Formal Mechanism for handling appeals and complaints Criteria for Employee Evaluation to be Disclosed Open to continuous feedback & subsequent modification Adopting an Enterprise Performance Management System interlinking Indian operation with Japanese subsidiary

Enterprise Performance Management System

Proposed PMS System Overview

Performance Appraisal Discussion Flow Chart

Plan Do Check!!

Performance Plan Feed back!! Implement of operations and measures

Performance Report

13

Welfare and Benefit Program to support employees life events

Compensation for Accident Childbirth, Childcare and Nursing Care Support System Asset Formation Long-Term Service Awards Marriage, Childbirth and Funeral grants and Disaster Support Leisure Activity Support Home Loan, Transfer/ Home Removal Support Retirement Pension Plan

 Focused on continuous employee and organizational learning & developing intellectual skills: Learning of new skills and acquisition of knowledge to be supported and encouraged Internal Training and HRD to be considered as pivotal HRM functions: Extensive in-house training Compensation practices designed to reward both: employee performance and skill development Progressive policy designed to systematically discourage and eventually eliminate "life time" employment, seniority wage & promotion, enterprise unionism Promote seikashugi or performance-ism: Individual performance to be used as one of the major determinant of employees compensation Frequent job assignment changes to develop organizational skills (Ability to effectively work within a firm, across divisions, departments, teams, and individual workers) Other key skills are Communication and coordination skills & Quality Focus & Improvement

Key features of proposed performance management system (PMS)