Performance management is the software in which a company sets each employee's goals, reviews their work, gives each person a rating, and plans who could take over each key role. In India, the yearly review is usually called the appraisal. The rating decides the increment, which is the yearly pay rise, and often the bonus too.
The work follows a yearly cycle. In April, each employee and their manager agree on goals. Many Indian companies call these key result areas (KRAs). Others use OKRs, which stands for objectives and key results. During the year, the manager and the employee record short check-ins. Colleagues can add feedback as well. When feedback comes from the manager, peers and juniors together, it is called 360-degree feedback. In March, the employee rates themselves, and then the manager rates them, usually on a scale of 1 to 5.
Then comes calibration. Senior managers compare the ratings across teams, so that one generous manager does not rate everyone 5. Some companies also set a limit, for example that no more than 20% of staff may get the top two ratings. The final rating then goes to the HRIS and payroll system, which applies the increment to the April salary.
Say an area sales manager at a paint company in Nashik has two KRAs. The first is sales of ₹6 crore, and he sells ₹6.6 crore, which is 110% of the target. The second is 25 new dealers, and he adds 19. He rates himself 4. His manager also rates him 4, and calibration keeps the rating. The company's pay table gives a rating of 4 an increment of 9%. So his salary of ₹12 lakh a year becomes about ₹13.08 lakh a year from April.
The same software runs the succession plan. This is a list of the key roles, such as each regional sales head, with the people who could take over each one. Managers often place each person on a grid of nine boxes. One side of the grid shows how well the person performs now, and the other shows how far they could grow. The area sales manager is marked "ready in one to two years" for the regional head's role. Talent intelligence can suggest other names, from the skills it infers from each person's job history.
Rating people is the most disputed job in HR. A once-a-year rating can rest on what the manager remembers of the last few weeks. So newer products ask for check-ins every few weeks, and an AI model can draft a summary of the year from them for the manager to edit. Many companies also add the results of the engagement survey to each manager's own review, because a team's answers show something about how its manager leads. A skill that the review finds missing often leads to a course in the learning management system.