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Performance management includes activities carried out to ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on performance of the organization, a department, processes to build a product or service, employees.
The field of performance management can comprise two separate types:
In one aspect, an analyst may view the performance of a company holistically, evaluate the effectiveness of the managers and heads of departments towards reaching goals, and also evaluate the processes in the company and their effectiveness towards achieving organization goals.
The starting point is the setting up a business strategy. It should seek to clarify the direction in which the organization should assume, and answer the question on the products, markets to serve, technology to use and processes to employ so as to gain competitive advantage.
The other aspect of performance management, employees are evaluated to help them reach reasonable goals and thus ensure that the organization performs better. It also seeks to improve the company culture and goodwill of the employees towards the company. These can help company to attract the best employees and retain valuable employees with essential experience
Performance management of individual employees can be defined as the process companies use to manage their employees to ensure organizational success, and includes the following:
planning job goals and expectations,
offering feedback and reviews,
offering opportunities to improve in one's field,
rewarding employees with good performance
Employee centered performance management works best when work is planned and goals are consistent. This means that a clear way to communicate on work expected at the moment and upcoming work is in place. Planning also includes defining employees' expectations so that they are not sidelined by evaluation criteria not included in planning.
Planning and setting goals creates a system where rewards for good performance are predictable, as well as consequences for poor performance. This way the employee can reasonably assume the consequences of his performance. If goals are not established, there is little motivation for employees to maintain high standards of work. The goals should be realistic and attainable.
Feedback should be given consistently and on a regular basis. The shortcomings or ability to exceed to meet goals on the part of the employee should also be addressed regularly, to allow him either the opportunity to receive compliments and rewards regularly, or to make behaviour changes soonest if performance is not up to standard.
In performance management , employees must be given avenues to expand their skills. This may involve: giving opportunities to work on harder projects, pairing less-skilled employees with expert employees, and offering opportunities for the employee to make decisions. This ensures that the employee is self confident and happy with the company thus loyal to the company.
Reward forms the major part in performance management. This should take both monetary as well as non-monetary aspect. The employee must see a direct relation between his actions and the reward or punishment. The company should emphasize more on the positive rewards as opposed to punishing negative performance so as to motivate the employees.
In performance management performance (both business and employee) should be constantly evaluated and improved.
At the employee level, this is usually done through a performance appraisal system. This compares actual performance against standards and targets and seeks to identify and agree opportunities for improvement as well as rectify any shortcomings.
Employee performance appraisal
Performance Appraisal, also called employee appraisal or Performance Review, is a part of guiding and managing career development method, by which the performance of an employee is evaluated by the immediate manager or supervisor. The appraisal is evaluated in terms of quality, quantity, cost and time.
It is the process of obtaining, analyzing, and recording information about the relative worth of an employee to the organization. It is an analysis of an employee's successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It is also the judgment of an employee's performance in a job based on considerations other than productivity alone.
The aims of a performance appraisal are to:
give employees feedback on performance;
identify employee training needs,
document criteria used to allocate organizational rewards;
form a basis for personnel decisions like salary increases, promotions, disciplinary actions, bonuses, etc.;
provide the opportunity for organizational diagnosis and development;
facilitate communication between employee and administration;
validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.;
Improve performance through counseling, coaching and development.
Problems associated with performance appraisal
According to Steers and Black (1994), "performance appraisal is one of the most important and often one of the most mishandled aspects of management". It has also been said to be one of the most problematic components of human resource management and is viewed as either a futile bureaucratic exercise or, worse, a destructive influence on the employee-supervisor relationship (Coutts and Schneider, 2004).
Performance appraisals require the rater to objectively reach a conclusion about performance. The use of ratings assumes that the rater is reasonably objective and accurate. However, in reality, raters' memories are quite fallible, and raters subscribe to their own sets of likes, dislikes, and expectations about people, which may or may not be valid (Ivancevich, 2001). The rater should be impartial and objective hen rating the employees and not let his/her personal feelings cloud their judgment. Some of the areas that manifest bias on the part of the rater are:-
â€¢ Halo effect. When the one perceives one factor as having paramount importance and gives a good rating to an employee based on it. The rater fails to discriminate between the employee's strong points and weak points; and the halo is carried over from one dimension to the other.
â€¢ Horns effect. The appraiser gives an unfavorable rating to overall job performance essentially because the employee has performed poorly in one particular aspect of the job which the appraiser considers important.
â€¢ Central tendency. When a rater avoids using high or low ratings and assign average ratings.
â€¢ Standards of evaluation. Problems with evaluation standards arise because of perceptual differences in the meaning of the words used to evaluate employees. Thus, good, satisfactory, and excellent may mean different things to different raters. Some raters are "easy A's", while others almost never give an A.
â€¢ Leniency effect. Brought about by a desire to avoid controversy over the appraisal. The downside of this error is that even poor performers may get good ratings and this could lead to retention of employees who ad no value to the organization.
â€¢ Strictness effect. Being unduly critical of an employee's work performance. Some raters apply an evaluation more rigorously than the company's standards.
â€¢ Contrast effect. occurs when another employee's performance influences the ratings administered to someone else. For example, when performance of an average employee is evaluated immediately after the performance of an outstanding employee, the rater might end up rating the average person as poor.
â€¢ Similar-to-me error. An error whereby the rater judges more favorably those he perceives to be similar to him. The closer an employee resembles the rater in attitude or background, the stronger the tendency of the rater to positively.
â€¢ Personal bias. A rater can either consciously or unconsciously, rate an employee either highly or lowly in a discriminative manner.
â€¢ Recency effect. This error is influenced when the rater relies on the employees' most recent behavior, and is unable or unwilling to closely monitor an employee.
â€¢ Relationship effect. Employees with a close relationship with the rater are more likely to get better ratings than those who have a distant relationship.
COMPONENTS OF PERFOMANCE MANAGEMENT
An effective performance management system should include the following components:
Performance Planning: is the first crucial component and forms the basis of performance appraisals. Performance planning is jointly done by the rater and also the employee in the beginning of a performance session. During this period, the employees decide upon the targets and the key performance areas which can be performed over the rating period, which is finalized after a mutual agreement between the supervisor and the employee.
Performance Appraisal and Reviewing: The appraisals should be performed twice in a year in an organization in the form of mid reviews and annual reviews which is held in the end of the financial year. In this process, the employee first offers the self filled up ratings in the self appraisal form and also describes his/her achievements over a period of time in quantifiable terms. After the self appraisal, the final ratings are provided by the appraiser for the quantifiable and measurable achievements of the employee being appraised. The entire process of review seeks an active participation of both the employee and the appraiser for analyzing the causes of loopholes in the performance and how it can be overcome. This has been discussed in the performance feedback section.
Feedback on the Performance followed by personal counseling and performance facilitation: Feedback and counseling is given a lot of importance in the performance management process. This is the stage in which the employee acquires awareness from the appraiser about the areas of improvements and also information on whether the employee is contributing the expected levels of performance or not. The employee receives an open and a very transparent feedback and along with this the training and development needs of the employee is also identified. The appraiser adopts all the possible steps to ensure that the employee meets the expected outcomes for an organization through effective personal counseling and guidance, mentoring and representing the employee in training programmes which develop the competencies and improve the overall productivity.
Rewarding good performance: This is a very vital component as it will determine the work motivation of an employee. During this stage, an employee is publicly recognized for good performance and is rewarded. This stage is very sensitive for an employee as this may have a direct influence on the self esteem and achievement orientation. Any contributions duly recognized by an organization helps an employee in coping up with the failures successfully and satisfies the need for affection.
Performance Improvement Plans: In this stage, fresh set of goals are established for an employee and new deadline is provided for accomplishing those objectives. The employee is clearly communicated about the areas in which the employee is expected to improve and a stipulated deadline is also assigned within which the employee must show this improvement. This plan is jointly developed by the appraisee and the appraiser and is mutually approved.
Potential Appraisal: Potential appraisal forms a basis for both lateral and vertical movement of employees. By implementing competency mapping and various assessment techniques, potential appraisal is performed. Potential appraisal provides crucial inputs for succession planning and job rotation.