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Thirty Ninth ATC Day Issue, Oct 2013
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APPRAISAL BASED ON KEY PERFORMANCE AREAS
     The Performance Appraisal System in the Govt. Sector is not a new phenomena. Much before the forming of Public Sector Enterprises, the system existed for deciding the promotion and also for grant of annual increments based on the knowledge, skills, sincerity, integrity, punctuality and overall performance assessed by superiors. We have the legacy of British period which went upto 60s. The second phase of making the appraisal system in the form of annual confidential reports began in early 60s and continued for a decade. There was no objectivity in the system and the evaluation of performance was solely in the hands of superior officer which was a secret document in Govt. records. The concerned employee was not having any access for knowing as to how he has performed and what grading has been given to him.
     In 80s, some pragmatic thinking came in the mind of bureaucrats due to the influence of public sectors and the system took a step forward from Annual Confidential Report to Performance Appraisal Report. By this time the new theories of appraisal system were known with the creation of Human Resource Department. The various methods of appraising performance were debated and in the govt. sector, the parameters of evaluating the knowledge and skills were introduced. In early 90s we could see that the concept of Human Resource Development came into practice.
     Now, from 2001 onwards, we are seeing the new phase of performance analysis and potential appraisal. The New Performance Management System was introduced not only in public sector but in Govt. Sector also which is based on the concept of Key Result Areas (KRAs). It is necessary to talk in detail about the concept of KRAs which is more understood in the form of management by results to plan, set, measure, and reward performance. The Key Result Areas (KRAs) needs to have the components of principle thrust, goals or milestones, optimum activity to goals ratio by defining current, basic and outstanding levels with joint accountability. The weightage is to be given by adopting a scoring methodology for ensuring that each goal must be achieved for making the valid KRAs.
Supreme Court played a vital role for change
     While the planning of introduction of New Performance Management System in Govt. Sector was in pipeline the guidelines of Supreme Court came quite handy specially when the issue of communication of entries in the Annual Performance Report was considered by Supreme Court in the case of Shri Devdutt v/s Union of India Civil Appeal No.7631 of 2002 in the judgment dated 12/5/08 and Supreme Court observed that:
     “ When the entry is communicated to him the public servant should have a right to make a representation against the entry to the concerned authority, and the concerned authority must decide the representation in a fair manner and within a reasonable period. We also hold that the representation must be decided by an authority higher than the one who gave the entry, otherwise, the likelihood is that the representation will be summarily rejected without adequate consideration as it would be an appeal from Caesar to Caesar. All this would be conducive to fairness and transparency in public administration, and would result in fairness to public servants. The State must be a model employer, and must act fairly towards its employees. Only then would good governance be possible.”
It has been further mentioned in the judgement that the above directions will inter-alia be applicable to the employee of Public Sector Corporations.
     The above guidelines of Hon’ble Supreme Court were complied by the Govt. to make the Performance Appraisal system more consultative and transparent. A series of instructions were issued by the Govt. citing the above judgement for preparation and maintenance of Annual Performance Appraisal Report and it was decided to modify the nomenclature of ACR to be known as Annual Performance Assessment Report.
Govt. Initiative for implementation
     Govt. of India introduced KRA based Performance Appraisal System in 2007 for All India Services in Group A, accordingly it all began for the officers in the cadre of IAS, IPS, IFS etc., The earlier thinking of covering bureaucrats with 360 Degree Appraisal did not materialize mainly due to the reason that it would have been quite difficult for making the objective statement after analyzing the observations of persons concerned. The public sector enterprises fall under preview of central government were also covered by way of Department of Public Enterprises (DPE) Guidelines and the practice of signing MOUs with the concerned Ministries by Chief Executives of the organizations started right from the year 2005. The DPE monitored the progress and issued guidelines from time to time.
     Majority of Navratna and Mini Ratna Public Sector Enterprises introduced this new system by engaging outside expert agencies. Bharat Heavy Electricals Ltd., took the lead right in the year 2001 with the help of consultant McKenzie. National Thermal Power Corporation (NTPC) was also pioneer in this field by introducing the system with the help of consultants of A.T.Kearney in the year 2003. Indian Oil Corporation engaged Hewitt Associates in the year 2005 to start the process. Engineers India Ltd., followed IOC and engaged Hewitt Association for their organization. There were some Public Sector who introduced the system at their own like Steel Authority of India in the year 2008. The process is on and slowly the PSUs are introducing this objective appraisal system based KRAs linking pay with performance.
Performance Linked to KRAs
     A great amount of planning is involved as to what KRAs or KPAs to be chosen. These KRAs are to be planned, keeping in view of overall organizational objective, therefore, the planning is to be done with various types of KRAs for different levels i.e. organizational, individual and work group. Care needs to be taken that there is enough scope for performance recognition scheme.
     If we talk in terms of Govt. of India and the various Public Sector Enterprises attached with different Ministries, than it will be necessary to have a bird’s eye view as to how the New PMS with the objective of Performance Related Pay (PRP) has been conceptualized. For example, the Chairman of PSU enter into a Memorandum of Understanding with concerned ministry with the aim to monitor the overall performance giving responsibility to the Chief Executive of the Organisation for achieving the targets specified in the Memorandum of Understanding (MOU). The concerned Ministry is required to provide necessary assistance for facilitating the Public Sector in achievement of the targets.
The MOU is structured in following five parts:
Part-I Mission and objectives.
Part-II Autonomy & Delegation of Financial Powers.
Part-III Performance Evalution Parameters & Targets.
Part-IV Commitments / Assistance from Govt.
Part-V Action Plan for Implementation & Monitoring of MOU.
     In order to achieve the targets by the organization, the concept of team work was thought about and the hierarchy of the organization was kept into mind. It was decided to identify the role and responsibility of the work force among executives in two parts. For example: The Chief Executive, Functional Directors and other top executives were made accountable for the target set out by the Ministry in MOU. The weightage for achievement of MOU targets as determined by Deptt. of Public Enterprises, individual targets, personal attributes and functional competencies for the top levels were clearly specified. The care was taken for not assigning individual target flowing for MOU to the Chief Executive for example; if the weightage is 100 for overall performance, the Chief Executive was made responsible to the extent of 75 for MOU targets and his performance to be evaluated for personal attributes and functional competencies for the rest 25 points.
MBO is the basis of New Performance Management System
     The new system aims to use KRAs for optimum utilization of Human Resource in order to achieve organization objective to correlate with pay with performance. It is necessary to explain that MBO is a programme that encompasses specific goals, particularly set for a explicit time period with feed back on goal progress. It is a comprehensive management system which is based on measurable anticipatively set objective that leverages the motivational power of objectives.
KPA and KRA distinguished
     In some of the organization the system is implemented on the basis of discussing the Key Performance Areas (KPA) in the beginning of the year, whereas in reality the same are the off shoot Key Result Areas (KRAs). Mainly, due to the reason that once the results are there than only the performance can be defined for achieving the desired results. Now it is for the reporting officer to have a discussion with the subordinate as to how he is going about. Basically it is a cascading process from top to bottom. The line of action decided by the top management is the sole criteria for fixing and formulating, the KRAs coming out of MOUs signed by the chief executives. It makes vital difference for accepting KPAs arising out of KRAs. Therefore, one has to be clear about organization objective and the plan for activities to be accomplished at all level in the organization. The cascading at various level will come out automatically, for identification of KRAs giving rise to KPAs for achieving the ultimate targets.
     In real terms, the new appraisal system is a motivational programme based on KRAs settings. I am using the word Key Result Areas instead of commonly used Key Performance Areas because when we talk about result it becomes more specific for measurement of true performance. Otherwise also ultimately, it is the result which matters coming out of performance. One has to see that the KRAs should be mutually agreed upon it may be difficult but must be realistic so that there is every possibility to achieve them. The definite time frame and yardsticks for measurement are essential which will give enough scope for having a feedback
A word SMART crystallizes the concept into reality
For planning and setting the individual KPAs or KRAs it has to be ensured that the goals are conforming to the following:
S - Specific
M - Measurable
A - Attainable
R - Result Oriented
T - Time bound
     The above alphabets needs to be in the mind of appraiser and appraise right from the stage of planning so as to ensure that the goals are finalized and agreed upon only when both are satisfied that the above parameters say yardsticks are there for individual goals decided upon. The subordinate works with supervisor to establish specific task related objectives. KRAs based system is the most individualized appraisal method which works well with counseling provided the goals are focused on important activities. It is not highly subjective to rating errors.
KRA Requirements
While implementing the system based on KRAs we must bear in mind that it can only be successful when the following requirements are met;
1. The commitment of top management on essential basis.
2. The system must be applicable to the organization as a whole.
3. The organizational objectives must ‘cascade’.
Since the KRA works by cascading objectives down through the organization i.e. objectives are structured in a unified hierarchy becoming more specific at the lowers levels of the organizations. This approach of cascading works from top to bottom which can be well understood by the following flow chart;
Strengths and limitations of KRA

     We must appreciate that though the New PMS has been introduced by the Govt. recently, but it is not the latest one. The MBO concept is quite old and it has got its own Strength and Weaknesses. If we carefully, undertake the SWOT analysis of the system, it will emerge that there are more limitations than the strengths and we need to strive while framing the KRAs that limitations are reduced as far as possible. A pro-active approach can only give desired results. The main strength and limitation are appended below;

     New PMS is a five step process which is based on the following five parameters with their relative weightage to be given depending upon the level of performance. We can easily exclude the top management who are otherwise accountable for the MOUs and are responsible for ensuring that the targets set out by them for their subordinates are achieved for 100% efficiency level, the relative weightage may be based on the following;
Key Result Areas - 60%
Functional and managerial competencies - 15%
Core values - 10%
Potential - 10%
Special achievement - 5%
The New Performance Management system is having following five step process
The system aims to have “Bell Curve Approach”
     As we know that the system works to realign the organizational objectives with individual objectives – thrust upon performance driven culture. The basic purpose is to evaluate potential of the appraisee to assure higher responsibilities by identifying the high and low performance. Therefore, we have to adopt the “Bell Curve Approach” which will result in the assessment of the performance by identifying 15% executives as outstanding and 10% average performers. The balance 75% executives will come under the category of very good performance.
     For undertaking the task of ensuring the implementation of Bell Curve Approach, the normalization process is done at the corporate level of the organization by taking the overall assessment of all executives into consideration.
Implementing KRA based Performance Appraisal System
     The technical aspects of the system have been explained above, now in order to implement this system, it requires to have broad guidelines which should be followed for achieving desired results by having objective to assessment of performance of the executives. Broadly, following five stages of the process which comes one after the another.
Planning for Performance
     It comes by defining expectations of the management from the executives. What we have discussed earlier for setting the KRAs and in times KPAs. In brief we can say results or targets set for achievement and skill and competencies needed to achieve those targets. Added to it the measures and targets are to be set determining the priority and weightages. It is required to identify and allocate appropriate resources also such manpower, tools, budget and training so as to equip the executive for being able to achieve the targets. We have already discussed about, the need of complying with SMART while setting the goals, targets and objectives. It must be borne in mind that the results are substantially within the control of the executive and the measurement always relates to results. The only requirement is that the data must be available for measurement. The mutual discussion between the executive and his superior is necessary because there has to be an agreement on mutually agreeable and achievable performance targets.
Identification and Measurement of KPAs
     The most important task in the planning process is the identification of KPAs which relates to the target set relating to the role and responsibility of the executives which is different from department to department and discipline to discipline i.e. why there is a need for having a KPA directory to be prepared by the individual departments. However KPAs can be enhanced or modified after mutual discussion. One needs to remember that KPAs should be cascaded in an open and transparent manner with each reporting officer sharing his KPAs and targets with all the executives reporting to him. There has to be mutual agreement with regard to the weightage to be given out of 60 for the number of KPAs listed and agreed upon.
After finalization of KPAs there is a need for identification of their constituents, measures and targets. Basically, the freedom is given for measurement and the marks for each KPA at the sole discretion of reporting officer with mutual agreement with immediate subordinate. It is a written document which is signed by both of them.
Mid Year / Periodical Review
     This system based on the concept of MBO is quite different from other traditional methods where the performance is evaluated on year to year basis. As a matter of fact, the KPA based Performance Appraisal System is an on going process. The mid year review is one of the necessary component for reinforcing good performance in time. One way it is a progress review by the superior which gives an opportunity for not only updating the status of targets but also helps in identifying the areas of correction, if required. During the course of review depending upon the progress, the KPAs and Goals can be revisited. The superior can fulfill the shortcomings to clear the bottlenecks coming in the way of achievement of targets.
The mid year review is beneficial for mutual discussion between subordinate and superior, and the feedback obtained on the competencies relating to functional, managerial and potential areas. The superior can also give an early warning for non-performance so that there is no surprise at the end of the year for the rating given.
     Let us discuss about the implementation part of mid year review. Basically, it is the responsibility of concerned HR Department to resubmit the appraisal forms with agreed KRAs to the reporting officer so that the same can be discussed with the concerned executive for his observation and view point based on the progress made . Now comes the question of assessment based on the self-evaluation by the executives where he indicates road blocks and the efforts made by him to overcome them including assistance obtained from the reporting officer. The reporting officer is duty bound to discuss the matter with the executive and should record the progress and performance including the feedback on KPAs progress and other competencies. Again, the recording made are to be signed by both executives in agreement.

     There can be some occasions during mid year review when the need is felt for alternation of KRAs such as in the event of change in role and responsibility of the executive, unanticipated projects, change in business objectives and in some cases when situation goes completely out of control of the executive such as accident and other emergencies. The reporting officer should not be lenient in changing the KRAs targets, marks or weightages, it should be done in extreme cases with full justification. The consultation with the reviewing officer will be most appropriate so that the rational for mid year alternation is justified. The mid year review duly signed by all concerned should be submitted to the HR Department.

Final Annual Assessment
     The annual assessment of the performance on the given parameters and the target set helps in arriving to a decision with regard to overall performance and achievement of targets. The road blocks and required management support is also discussed to assess the competencies, potential and core values. Finally the mutually agreed rating give rise to formulating the improvement plans and development needs for the concerned employee.
     The annual assessment is undertaken on re-submission of KRA based performance appraisal forms by HR Department to all concerned reporting officers as already discussed. Keeping the spirit of transparency and objectivity, the performance needs to be discussed by reporting officer with the executive and evaluation needs to be made with mutual agreement. The actual targets achieved by the executive are written and the marks obtained under each KRA and the constituent are to be added up. There are formulas derived for giving the weight-age of 60 for the marks given out of 100 for KRAs.
     The whole process of forwarding and receiving the appraisal form is administered through a Nodal Officer who is responsible for implementing the KRA Based Performance Appraisal System as a whole for regular monitoring and follow up. The tracking and analysis of all activities for ensuring the time bound schedule of completing the entire process is necessary.
Non-participation of the Executive in the Process
     There may be some cases where the executive does not participate in all or few stages of the system despite being given ample opportunity to do so. In that case the reporting officer has got the authority to complete the form in the absence of executive and forward the same to reviewing officer indicating the non-participation of the executive. Now it is for reviewing officer to offer the opportunity to the executive to he heard after verifying that indeed the executive has voluntarily decided not to participate despite being giving sufficient opportunities. In such cases the reviewing officer forward the form to HR department with his observation.
Normalization for implementing Bell Curve Approach
     We have already discussed about the concept of Bell Curve Approach, however, it is quite a tough task for the management for implementing normalization process because we need to maintain the desired ratio for the entire workforce on the yardstick of poor to excellent performance with a view that there are clusters to be categorized for the level of performance. Normally it is 15% executive as excellent performers and 10% average performers with the majority of 75% executives performing very good. Normalisation ensures parity and integrity by minimizing variation in rating by different reporting officers across the different locations of the organizations with large number of different disciplines. It is necessary for enhancing the objectivity and transparency in the system.
     After the process of normilisation of the scores the performance management committee which is constituted for the purposes of ensuring Bell Curve Approach gives the forms to the HR Department for consolidation of final scores relative ranking and preparation of summary sheet. Finally, the forms with final rating comes to the reporting officer so as to hand over the same to the executive as feed-back forms in order to communicate the final score pertaining to the individual concerned.
Feed Back and Counseling
     By now we know that KPA Based Performance Appraisal System is an open system with the objective to enhance development, orientation across the organization. Keeping in this mind, the feed-back and counseling become essential component. The communication of final performance result in the form of feed-back is a critical exercise in this process.
     The feedback and counseling not only create transparency but also re-inforces good performance on time. It enables development of coaching and mentoring relationship between reporting officer and executive. Most importantly, it ensures that organizational objectives are achieved not only in acceptable standard but the same are there in acceptable form.
     The reporting officer should take care that the feedback is provided on actual events and the same are for description and not for judging. The talk should be specific on selected issues. It has to be positive in nature with the focus on improvement. Reporting should ensure that feed back is given only after reviewing all achievements for that matter a log of critical incidents needs to be maintained which may have both achievements and failure with details. It has to be a regular exercise.
     Now coming to the counseling part of the system which is an essential component to sort out issues related to current and future responsibility and aspiration. Now the question comes as to how the counseling is to be done. Basically, coaching and counseling are nothing but a feedback mechanism for the individual on his performance with the basic objective to communicate the areas of development and improvement to the executive by reviewing and reporting officer. It has to be taken in a positive manner for recognizing and understanding not only the strengths but also the problems being faced by the executives. The reporting officer needs to facilitate and guide the executive with his expertise so that he may be able to evaluate alternatives and formulate an action plan to achieve the most suitable course of action.
Objective Assessment of Competencies
     We have discussed about various stages of KRA based Performance Appraisal System with necessary details. This system envisaged unbiased assessment of performance with the basic objective of achieving the mutually agreed targets which in turn goes a long way in meeting the organizational objectives. The KRA based assessment is having allocation of 60 marks out of 100 for the targets and balance marks are earmarked for other essentially required competencies relating to potential, core values, managerial competencies etc., It is necessary for a reporting officer to be unbiased and quite objective while discussing the competencies with the executive and care must be taken that assessment is based on the performance given by the subordinate and there should not be any room for comparing behaviours with others. Let us talk about some tips for assessment of competencies.
Managerial Competencies
     The reporting officer need to discuss mandatory and other managerial competencies with the executives and the marks should be assigned for each one. The easy way of assessing the competencies can be a 10 point scale so that the behavioural description of such competencies can be quite handy. The aggregate marks can be the sum total given for various managerial competencies. Now in the annual assessment the reporting officer and the executive must come to an agreement for the assessment given by reporting officer. This process makes the system quite transparent.
     Some of the managerial competencies can be in the areas of leadership to see that how the executive demonstrate ability for guiding collective decision making for succession planning and what way he acts in crisis management by taking risks. The business attitude is also one of the competency which indicates commitment to bottom line results by addressing interest of customers and stakeholders. The effective communication is another area for evaluating the ability to convert ideas through action plan. The reporting officer cannot forget in giving the assessment for the important cost consciousness aspects which will be on the principle of maximum output from minimum input with least amount of waste.
Assessment of Core Values
     First and foremost the reporting officer must ensure that the organizational core values are adopted for his discipline, because it is applicable to all the executives in the organization. As a matter of fact core values are the base for business dealings. Now comes the question as to how the assessment is to be made for individual executive. The reporting officer has a major role in actualisaiton of core values of the organization since he is required to act as an role model to facilitate the subordinate in observing and practicing. He has to prove as a leader so that his demonstrated behavior is followed by the subordinate in day to day dealings.
     Again, like managerial competencies, the core values should be assessed on 10 point scale at the end of the year by having mutual discussion for each of the value description after indicating the rating to be given. The total marks obtained should be given due weightage as per the prescribed formula for example, if maximum marks are to be given as 10 and there are 7 core values listed to be assessed on the 10 point scale than the total score will be out of 70 and to give the required weightage for 10 marks the figure arrived out of the total score is to be multiplied by 10 and divided by 70.
     The business ethics, customer focus, organization pride and professional pride are some of the areas of core values. The total quality management, innovation and speed are also there to be considered as core values of the organization. The most important aspect lies in mutual respect and trust for ensuring that the executive has high regard and faith in the fellow organization members, subordinate peers and superiors and believes in collaboration and openness to maintain good team spirit.
Assessment of Potential
     Basically, the appraisal of potential help in understanding the extent to which the executive is demonstrating competencies of higher levels. The reporting officer can appreciate his preparedness and suitability for higher responsibilities in the hierarchy. The change management according to the organizational plan, the networking and relationship management among the employees are some of the potential competencies which needs objective assessment by the reporting officer. It is also necessary to see that how the executive help subordinates to grow and develop in synergy with organization goals. The assessment on the parameter of strategic thinking helps in assessing as to how the executive formulates the organization vision by showing commitment. His potential in identification of strategic issues and promotion of vision both internal and external is important for evaluation. In any case the reporting officer is required to discuss each of the competencies with the executive. The same formula for arriving to the weightage score as mentioned for core values is to be followed. The integrity aspect is also required to be commented upon.
Special achievement needs to be recognized
     Although the Key Result Areas KRAs) are planned and decided in the beginning of the year of assessment year, but at the time of annual assessment, the reporting officer can always appreciate, the contribution of the executive which was exhibited beyond the call of duty. There may be some unanticipated tasks which were assigned to the executive or some achievements noticed for which the activities were not planned. Therefore, it become necessary for giving due weightage for them. The appraisal of these special achievement helps in understanding the extent to which the executive has contributed in terms of special accomplishment adding value to the organization. Even the group accomplishment or the team achievements are to be appreciated. It is for the executive to give description about the area of achievement and his contribution and the same needs to be discussed at the time of annual assessment by reporting officer. Again the assessment should be made in mutual agreements. There may be little weightage say 5 marks out 100 to be assigned for special achievement.
Plan for Training and Development
     The KRAs is a concept with its all objectivity which aims in upgrading the skills of the Human Resource that is why the training and development needs are to be considered as the off shoot of the final assessment. In fact, it gives enough opportunity for the reporting officer in undertaking the training needs analysis out of the competencies evaluated by him. The Performance Appraisal System has been planned accordingly to give the room for providing the opportunity to capture the developmental need of the executive. The ratings in the functional and managerial competencies provide the basis for identification of training and development needs of the executive. While recommending the development needs the reporting officer should ensure that it must facilitate the executive in immediate performance. The reporting officer should identify specific competency gap coming out of the assessment made by him. The suggestions must have a time frame.
     The past record of the training areas needs to be mentioned as a ready reckoner specially the training given in last year. The training is an continuous process, but it has to be need based and there should be clear demarcation, functional or technical, managerial and behavioural training. Well the reporting officer is having the liberty for recommending any other required area which may be in the field of specialization.
Distribution of rating scores on 10 point scale for competencies & potential
     We have discussed at length about assessment of various competencies on 10 point scale but the question remains as to how to give the scores while assessing the functional and managerial competencies for assessment of outstanding and unsatisfactory performance. Although there cannot be any strict yardstick for micro scoring, but still in a broad sense, it can be said that wherever the reporting officer feels that level of competencies leads development than the score should be 1 to 2 out of 10 and if the executive meet the expectations by demonstrating effectively than it can go from 3 to 5 score. The very good performance above the expectation level at significantly higher level deserves 6 to 8 score. Now, if the performance level significantly exceeds the expectation and executive can be viewed as an internal expert giving the impression of excellent performance than the score of 9 to 10 must be considered.
     The rating scale for potential assessment should also have the distributional scores depending upon the level of competency, therefore, in case the executive needs coaching and development the score will be in the range of 1 to 3 and if it is observed that he somewhat demonstrates the competency with minimal coaching and guidance than the score will be 4 to 7 out of 10. For excellent level of competency which give rise to demonstration of all behaviours without coaching and guidance as role model for others it will fall for the highest score of 8 to 10.
Frequent communication is essential
     The reporting officer must ensure frequent communication with the executive and the discussion during the course of evaluation on mutually agreed goals. The success of the system lies in self-actualisation meaning thereby that the reporting officer should take time to evaluate his own performance first. It is advisable to have feed back from others i.e. peers and superiors to see how well he is creating an achievable atmosphere for his executive. The documentation of performance meeting and the preparation for discussion with the executive by conducing meeting successfully, is essential.
     Lastly, the participation of executive must be there with open ended questions that will start with “Tell me How, Why do you think? And so on so as to give the opportunity to executive to open up and talk at greater length. The reporting officer needs to give assessment openly, clearly, and rationally. Both good and bad news are to be presented with facts. Focus should be on performance and not on individual personality. The discussion should be closed in a professional manner by asking executives impression as to how the meeting went with thanks to him.
Contributed By : Prof. Dewakar Goel
 
             
 
 
     
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