The Performance management system can be used as a powerful transformational tool if it focuses on identifying, measuring and rewarding the right kind of competencies and designing the right processes to achieve the business vision (values) and mission (strategy). The performance management system process followed is in sync with other key HR processes such as compensation, promotion, competence development and thus is very effective. We believe that the ownership and efficacy of the PMS system is significantly enhanced when employees themselves participate in its design which results from the above process as there is active participation from the employees at each level. Further, skills building for the appraisal process are imparted in a phased manner, nearer to the actual event to enable maximum transfer of learning to the job. There is reinforcement of the right mindsets, styles and skills required for creating a high performing organization through a participative process that involves employees in identifying issues, designing the new system and developing effective appraisal skills.