Chapter 8: Training, Development, and Performance Management
Training develops employees' current job skills, while development prepares them for future roles. Performance management ensures employees' efforts align with organizational goals. Together, these HRM functions build organizational capability and competitiveness.
8.1 Training and Development
| Basis | Training | Development |
|---|---|---|
| Focus | Current job skills | Future roles and career growth |
| Time Frame | Short-term | Long-term |
| Scope | Specific, job-related | Broad, career-oriented |
| Example | Software training for bank tellers | Leadership program for future managers |
Training Process (ADDIE Model)
| Step | Activity | Output |
|---|---|---|
| Analysis | Identify training needs through gap analysis | Training needs assessment report |
| Design | Set objectives, select methods, plan content | Training program design document |
| Development | Create materials, prepare trainers, arrange logistics | Training materials, schedule |
| Implementation | Deliver training program | Trained participants |
| Evaluation | Assess effectiveness (Kirkpatrick model) | Evaluation report, ROI analysis |
Training Methods
| Category | Methods | Best For |
|---|---|---|
| On-the-Job | Coaching, mentoring, job rotation, apprenticeship, understudy | Practical skills, hands-on learning |
| Off-the-Job | Classroom lectures, workshops, seminars, case studies, simulations | Theoretical knowledge, management development |
| Technology-Based | E-learning, webinars, virtual reality, mobile learning | Large dispersed workforce, self-paced learning |
Kirkpatrick's Training Evaluation Model
| Level | Evaluates | Method |
|---|---|---|
| 1. Reaction | Did participants enjoy it? | Feedback forms, satisfaction surveys |
| 2. Learning | Did they learn the material? | Pre/post tests, quizzes |
| 3. Behaviour | Are they applying it on the job? | Observation, supervisor feedback, 360° |
| 4. Results | Did it impact business outcomes? | Productivity data, sales, quality metrics, ROI |
8.2 Performance Management
Definition: A continuous process of setting expectations, monitoring performance, developing capabilities, and evaluating results to ensure employees contribute to organizational goals.
Performance Appraisal Methods
| Method | Description | Advantages | Disadvantages |
|---|---|---|---|
| Graphic Rating Scale | Rate employee on traits/behaviors using 1-5 scale | Simple, easy to administer | Subjective, prone to rater bias |
| Ranking | Rank all employees from best to worst | Forces differentiation | Difficult with large groups, demoralizing |
| MBO (Management by Objectives) | Set mutual goals; evaluate against achievement | Objective, participatory, results-focused | Time-consuming, ignores process/behaviour |
| 360-Degree Feedback | Feedback from supervisors, peers, subordinates, customers | Comprehensive, multiple perspectives | Complex, time-consuming, potential for bias |
| BARS (Behaviorally Anchored) | Rating scales with specific behavioral examples | Precise, reduces subjectivity | Expensive to develop |
| BSC (Balanced Scorecard) | Evaluate across financial, customer, internal process, learning dimensions | Comprehensive, strategic alignment | Complex implementation |
Common Appraisal Errors
| Error | Description | How to Minimize |
|---|---|---|
| Halo/Horn Effect | One trait influences overall rating | Rate one factor at a time for all employees |
| Central Tendency | Rating everyone as average | Use forced distribution or ranking |
| Leniency/Strictness | Rating too high or too low consistently | Rater training, calibration sessions |
| Recency Effect | Rating based on recent performance only | Keep performance logs throughout the year |
8.3 Training Needs Assessment (TNA) — Detailed
| Level | Analysis | Questions Answered | Methods |
|---|---|---|---|
| Organizational | Where is training needed in the organization? | Business goals, strategy gaps, performance issues, new technology | Strategic plan review, exit interviews, customer complaints, productivity data |
| Task/Job | What tasks need training improvement? | Required vs current skill levels, job description analysis | Job analysis, observation, competency frameworks, task inventories |
| Individual/Person | Who needs training and in what? | Individual skill gaps, performance deficiencies | Performance appraisals, skills tests, 360° feedback, self-assessment |
Example — Nepal Bank TNA:
Organizational: NRB mandates digital KYC by next year → bank needs to digitize customer onboarding → training needed.
Task: Customer service officers need to use new digital KYC software, upload documents, verify biometrics → specific software training required.
Person: 60 officers assessed: 20 are tech-savvy (no training needed), 30 need basic IT training, 10 need intensive support → customized training groups.
8.4 Training ROI Calculation
Example: Sales training program for 20 employees.
| Item | NPR |
|---|---|
| Costs: | |
| Trainer fees (3 days) | 1,50,000 |
| Venue and materials | 50,000 |
| Employee time cost (20 × 3 days × NPR 3,000/day) | 1,80,000 |
| Travel and accommodation | 70,000 |
| Total Training Cost | 4,50,000 |
| Benefits (measured 6 months after): | |
| Increased sales (attributable to training) | 12,00,000 |
| Reduced customer complaints (cost savings) | 2,00,000 |
| Total Benefits | 14,00,000 |
Training ROI = (Benefits - Costs) / Costs × 100
= (14,00,000 - 4,50,000) / 4,50,000 × 100 = 211%
Every NPR 1 invested in training returned NPR 3.11 in benefits.
8.5 Performance Management Cycle
| Phase | Activities | Timing | Nepal Practice |
|---|---|---|---|
| Planning | Set objectives, KPIs, and targets; agree on expectations | Start of fiscal year (mid-July) | Banks set individual targets aligned with branch goals |
| Monitoring | Regular check-ins, feedback, coaching | Quarterly reviews | Monthly target reviews common in banking; less formal in SMEs |
| Reviewing | Formal appraisal against targets; self-assessment + supervisor review | End of fiscal year | Annual performance review; some companies do mid-year review |
| Rewarding | Salary increment, bonus, promotion based on review | After review completion | Annual increment; performance bonus in private sector |
| Developing | Create development plan for identified gaps | Ongoing | Training nomination, mentoring, job rotation |
8.6 Balanced Scorecard for Performance Management
| Perspective | Focus | Example KPIs (Bank Branch Manager) |
|---|---|---|
| Financial | Profitability, revenue, cost efficiency | Deposit growth 15%, loan disbursement NPR 10 crore, NPA below 2% |
| Customer | Satisfaction, retention, market share | Customer satisfaction score 85%+, complaint resolution within 48 hrs |
| Internal Process | Operational efficiency, quality | Loan processing time <5 days, zero audit findings |
| Learning & Growth | Employee development, innovation | Staff training hours 40/year, staff turnover below 10% |
Practice Questions
Short Answer:
1. Differentiate training from development.
2. Explain the ADDIE training process model.
3. Describe Kirkpatrick's four levels of training evaluation.
4. Compare MBO and 360-degree feedback appraisal methods.
5. What are common performance appraisal errors?
Long Answer:
6. Design a comprehensive training program for new bank tellers at a Nepali commercial bank using the ADDIE model. (15 marks)
7. Compare at least five performance appraisal methods. Which would you recommend for a Nepali manufacturing company and why? (15 marks)
8. "Training is an investment, not a cost." Discuss with reference to Kirkpatrick's evaluation model and ROI of training. (15 marks)
9. Discuss the challenges of performance management in Nepali organizations. How can these be addressed? (15 marks)
10. Explain the concept of 360-degree feedback. What are its advantages and challenges in Nepal's hierarchical organizational culture? (15 marks)
Exam Tips: ✓ ADDIE model and Kirkpatrick's levels are frequently tested ✓ Know at least 5 appraisal methods with pros/cons ✓ Appraisal errors are a popular short answer ✓ On-the-job vs Off-the-job training comparison common ✓ MBO is especially relevant for exam questions