There has been an increased emphasis on the use of performance management. This term has grown popular since the 1980s. Tovey & Uren (2006, p. 57) best described performance management as:
'...a process of managing and developing people through everyday activities, where there is a common understanding of what is to be achieved and how well it is to be achieved, based on firm agreements between managers and individuals which clearly contribute to organizational results... When performance management is aligned with organisational objectives...the chances of success are greatly improved.'
Kramar, Hollenbeck and Wright (2008) have quite similar idea towards performance management. They asserted that performance management is to ensure that employee's activities and outputs are fit with the organizational goals. They also tell us that performance management is crucial nowadays as to develop competitive advantages. However, to ensure robust performance the managers need to know how to apply the performance management (Tovey & Uren 2006).
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There are a variety of stages that should be included in the performance management system. Armstrong (2001) highlighted four key stages under performance management and emphasise on the role of human resource in ensuring successful performance management.
'An organisation is judged by its performance, so setting, measuring and monitoring employee performance are substantial HR activities' (Armstrong, cited in Stredwick 2005, p. 327).
The process of performance management should begin with determining the performance agreement with objectives which needs to be fitted with the organisational objectives. That is, an agreement between manager and staff on the required level of performance and how it is to be measured must be reached. This agreement will include the sharing of corporate goals and values; individual performance plan; how the performance is to be monitored and measured; agree to help to pursue the targets set out and; the availability of fair rewards.
The second stage is to measure the employees' performance by using either establishing targets or to determine the level of competence. However, these methods of measurement have controversy. Both of the methods use some form of rating scale. Rating scale may intrude elements other than performance such as personality. For instance, managers may rate their staff according to personal relationships rather than by an objective measure of their competencies and abilities.
The next stage is to provide feedback. Traditional feedback is likely to be appraisal interview. The 360 degree appraisal has been considered as the most popular way of giving feedback. It is believed to have high quality feedback. However, Handy et al. (1998) stated that 50% of the 45 organisations using 360 degree feedback was time consuming and costly. The final stage included in performance management is making sure that the outcomes of the process are delivered in a fair and equitable way. There are two major outcomes namely rewards and development.
Tovey & Uren (2006, p. 57) reported most performance management process generally comprise of: planning, performing and reviewing. They agreed that the human resource management play an important role to enable the performance management run smoothly. Human resource is responsible in designing, printing and distributes the forms that are needed in the performance management process such as appraisal forms. Moreover, human resource should provide appropriate skills and knowledge to all people involve in the process by conducting proper training and development.
In addition to that, the main element in determining high level of performance is the role of the manager. They must possess required skills and have commitment to influence the staff to ensure high performance.
'Skills such as listening, paraphrasing, questioning, giving and receiving feedback, communicating effectively, handling conflict and encouraging full participation are required for a performance management system to be effective' (Tovey & Uren 2006, p. 71).
However, certain issues arise regarding the process. One is the inability to see how performance management is central to overall organisational performances. Often organisation cannot observe any significant changes in terms of performance even after three years and as a result abandon the process. Another issue is the difficulty to link individual performance objectives to organisational outcomes. Moreover, performance management will be complicated for those organisations that have no experience implementing the system. The common issue is the potential that the performance management system can be misused.
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Tovey & Uren (2006, p. 70) stated that:
'Misuse tends to occur where those conducting the appraisal or performance management system do not have adequate skills in managing people.'
One example is managers may use the system as a way to bully employees. Therefore, the key to enable the organisation to maximise high performance is to have a good understanding of overall performance management system.
Often the organisations have to face the issue of unsatisfactory performance of their employees. In some situations, certain employees do not perform as desired. This may be caused by a variety of factors. A publication of MAB & MIAC, Australia (1994) noted the factors are such as poor job design, lack of communication, conflicts among teams and lack of appropriate skills. This has to be managed or minimised because employees may be treated unfairly for instance in terms of unfair dismissal or termination.
There are two issues under unsatisfactory performance: under-performance and non-performance. The under-performance is: '...not performing to the future expectations required by the role' (University of Sydney, 2009). Some believed that under-performance is caused by either those aspects that are beyond the control of employees or behaviours that inhibit the employee performance improvement.
University of Sydney (2009) outlined the key steps involve in addressing under-performance:
'clearly state the nature of the problem, objectives and outcomes to be met; issue a formal performance warning; use the Performance Improvement Plan to document the objectives and the evidence that will demonstrate that these results have been achieved; allow the staff to address the issue and; agree on a timeframe for reassessing performance.'
If the under-performance occurs again, the managers can use counselling discussion which concerns on one incident or a number of incidents involving the same performance. When performance is improved as a result of counselling discussion, no further action will be required.
Non-performance referred to as those who have no intention of performing. Employees that are not performing tend to have many excuses. Most of them find it is useless to perform efficiently when others are not. Normally, the process to deal this is similar to dealing with under-performance but in some cases, the result is disappointing that is, performance level is not improved. The idea of dealing this issue is basically to take appropriate action and fully implement it. However, if there is no positive effects on performance level, termination can be the last option.
Performance management is about improving performance by aligning individual performance objectives against pre-defined organisational objectives. The process basically involves planning, performing and reviewing. Human resource play crucial role to ensure managers are well prepared with the skills needed to implement the process. However, organisations will often have to deal with unsatisfactory performance which comprises of two issues namely under-performance and non-performance. Under-performance is when employees are not performing the required job. Non-performance is a situation where employees have no interest to improve performance. There are steps that organisation can follow to address this issue.