Definitions Of Performance Management Business Essay
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Published: Wed, 07 Jun 2017
The origins of performance management can be traced back to the 1940s. Primarily the process was developed by managers to justify whether the salary that was being paid to the individual was justified. Since then, performance management processes have become much more sophisticated and have evolved to encompass variations on the usual line manager – employee appraisal to encompass areas such as competencies, 360 degree feedback, and development planning.
Organisations used Performance Management to drive behaviours from the employees to get specific outcomes. In practice this worked well for certain employees who were solely driven by financial rewards. However, where employees were driven by learning and development of their skills, it failed miserably. The gap between justification of pay and the development of skills and knowledge became a huge problem in the use of Performance Management. This became evident in the late 1980s; the realisation that a more comprehensive approaches to manage and reward performance was needed. This approach of managing performance was developed in the United Kingdom and the United States much earlier than it was developed in Australia.
In recent decades, however, the process of managing people has become more formalised and specialised. Many of the old performance appraisal methods have been absorbed into the concept of Performance Management, which aims to be a more extensive and comprehensive process of management. Some of the developments that have shaped Performance Management in recent years are the differentiation of employees or talent management, management by objectives and constant monitoring and review.
The implementation of the PMS in Mauritius started on a pilot basis in April/May 2006 in three organisations, namely; the Central Statistics Office, the Meteorological Services and the Valuation Department of the Ministry of Finance and Economic Development. On the basis of positive feedbacks from the pilot projects, the PMS was extended to other Ministries/Departments as from January 2007. At present the PMS is being implemented in 19 Ministries/ Departments.
DEFINITIONS OF PERFORMANCE MANAGEMENT
Performance management can be interpreted differently through different perspectives of people.
It provides important source of information on human capital and its huge contribution to the organisation (Lawler, 2003). It allows the organisation, in a way, to perceive how well individuals are achieving their objectives.
There are different interpretations of performance management by different authors and it is listed in a table below
Year and pg No
Performance management is a mean of getting better results from the organisation, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and attribute competence requirements.
It is a process for establishing shared understanding about what is to be achieved and an approach to managing and developing people in a way which increases the probability that it will be achieved in the short and long term.
Performance means both behaviours and results. Behaviours emanate from the performer and transform performance from abstraction to action. Not just the instruments for results, behaviours are also outcomes in their own right- the product of mental and physical effort applied to tasks – and can be judged apart from results
Performance management is a process for establishing a shared understanding about what is to be achieved, and how it is to be achieved; an approach to managing people which increases the probability of achieving job-related success.
Weiss and Hartle
Performance and its importance have become all pervasive in all aspects of modern life. We have all become susceptible to falling under the influence of performance in our ways of looking at things and people, as well as our ways of behaving. The notion of performance has become of central importance for our perception of our activities, our self-perception and self-worth and our understanding of the world.
Performance management systems are increasingly seen as the way to manage employees performance rather than relying on appraisal alone. Such systems offer advantage of being tied closely into the objectives of the organisation, and therefore the resulting performance is more likely to meet organisational needs.
Torrington and Hall
Performance is a multi-dimensional construct, the measurement of which varies depending on a variety of factors. It is important to determine whether the measurement objective is to assess performance outcomes or behaviours.
Bates and Holton
Performance management can be defined as a strategic and integrated approach to delivering sustained success to organisations by improving the performance of the people who works in them and by developing the capabilities of terms and contributors.
Armstrong and Baron
Performance is something that the person leaves behind and that exists apart from the purpose
1996, p 478
So here are some of the definitions that were gathered in order to have an evident view about performance management at first. As illustrated above, performance management has been defined differently but in some ways it has some similarities about the achievement of organisational objectives, achieving better results from employee involvement, developing people in terms of behaviours and results and what is to be achieved in terms of individual and organisational objectives.
To be able to have a good performance management system, the organisation must take into consideration these factors to create a better and effective working environment.
Performance is therefore, the ultimate life or death norm of business, yet surprisingly a uniform definition of organisational performance has not been emerged.
AIMS OF PERFORMANCE MANAGEMENT
As Armstrong and Baron (2005, p.2) stated that “the overall purpose of performance management is to contribute to the achievement of high performance by organisation and its people.” High performance is referred to the means of acquiring the desired targets by developing the capacity and potentials of present people who are contributing in the achievement of the organisational goals.
On the other hand, according to (Lockett, 1992), performance management is aiming at developing the people concerned with the required commitment and competencies for working towards the shared objectives within the organisational structure.
The structure is designed with the main aim of improving both the individual and organisational performance by providing developmental feedback, assisting employees, giving them the proper tools and equipments to deliver good quality tasks and moving on the path to a better performance.
Performance management does make sure that there is improvement in the organisation’s process on a continuous basis in order to raise the competency bar of the subordinates by enhancing their own skills and knowledge in terms of roles, responsibilities, accountabilities and the expected behaviours. The continuous review will drive the people towards doing the right things at the right time. Teamwork cannot be left behind in the main aim of performance management, as it contributes in accomplishing optimum results through people.
Below is a summarised list of the major aims of performance management:
To enable the employees towards achievement of better-quality standards of work performance.
To help the employees in identifying the knowledge and skills required for performing the job efficiently as this would drive their focus towards performing the right task in the right way.
Boosting the performance of the employees by encouraging employee empowerment, motivation and implementation of an effective reward system.
Promoting a two way system of communication between the supervisors and the employees for clarifying expectations about the roles and accountabilities, communicating the functional and organisational goals, providing a regular and a transparent feedback for improving employee performance and continuous coaching.
Identifying the barriers to effective performance and resolving those barriers through constant monitoring, coaching and development interventions.
Creating a basis for several administrative decisions strategic planning, succession planning, promotions and performance based payment.
Promoting personal growth and advancement in the career of the employees by helping them in acquiring the desired knowledge and skills.
Therefore, we can say that performance management approach has become a fundamental tool in the hands of the corporate as it ensures that the people maintain the corporate values and tread in the path of accomplishment of the ultimate corporate vision and mission. It is a forward looking process as it involves both the supervisor and also the employee in a process of joint planning and goal setting in the beginning of the year.
CHARACTERISTICS OF PERFORMANCE MANAGEMENT
Mohrman and Mohrman (1995, p.61) put emphasis that” Performance management practices must derive from and be tailored to fit each organisation’s changing requirements.”
In other term, each organisation has its corporate objectives that are set to be met for a specific period of time.
Performance management in this way is a planned process of which the primary elements are agreement, measurement, feedback, positive reinforcement and dialogue. It is concerned with measuring outputs in the in terms of delivered performance compared with expectations expressed as objectives.
Furthermore, it provides the setting for ongoing discussions about performance, which involves the mutual and continuing review of achievements against objectives, requirements and plans. Inputs and values play a significant role in achieving performance. Inputs are characterised in the form of knowledge, skills and behaviours required to generate the expected results. Employee needs are identified by defining the requirements and assessing the extent to which the expected levels of performance have been achieved through the effective use of knowledge and skills through appropriate behaviours that maintain core values. (Armstrong, 2009).
In addition, performance management is a continuous and flexible process that involves managers and those whom they manage acting as partners within a framework that sets out how they can best work together to achieve the required results. It relies on consensus and collaboration rather than control and compulsion.
The performance system developed has to comprise of the following characteristics (Pridmore and Myer, 2005, p.2):
Results Oriented: It will focus primarily on outcomes and outputs
Selective: it will only focus on significant indicators of performance
Reliable: it will ensure that data is accurate and consistent
Useful: it will provide information which will be valuable to decision makers
Accessible: it will be regularly communicated to the appropriate audience
Incentive: it will reward accordingly on the basis of performance.
IMPORTANCE AND EFFECTIVENESS OF PERFORMANCE MANAGEMENT
Performance management is highly important for both the employer and the employees who contribute in the objectives of the organisation. It has gained more attention recently due to high competitive business environment. A good P.M.S will allow the organisation to undertake a systematic assessment of the training needs of its employees, set developmental plans and give them the option of using the results of the performance management process to influence an individual’s reward.
As from the employee’s perspective, the P.M process provides transparency over performance in the workplace, provides a framework for documenting issues relating to performance, and can be used to assess future career development requirements. (Anon 2012, p.2)
Armstrong and Baron (1998) defined P.M as ‘a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved’.
The key to effectively managing employee performance is communication. An effective communication strategy definitely helps in employee engagement. The communication should flow from both top-to-bottom and bottom-to-top. There should be regular meetings with the top management so that employees feel a part of the organisation. In addition, the employees should be listened for suggestions as well as complaints.
Regular and frequent communication is important with all employees, but it is especially important when dealing with a possible performance problem. Ongoing communication ensures that there is a shared understanding how the work should be produced.
According to Dr. Michael Beitler (2012), “Managers must be trained and evaluated on their ability to provide feedback to employees about performance”.
According to Lawson (1995), effective performance management means:
â€¢ It articulates organization’s vision.
â€¢ It establishes key results, objectives and measures at key business unit level.
â€¢ It identifies business process objectives and the key indicators of performance for those processes.
â€¢ It identifies and installs effective departmental measures.
â€¢ It monitors and controls four key performance measures namely quality, delivery, cycle time, and waste.
â€¢ It manages the continuous improvement of performance in those key areas.
â€¢ It prepares to aim for breakthrough improvements in performance when this is required by a significant shortfall in performance measured against the performance of major competitors.
However performance management does not necessarily deliver good results. Some ineffective performance management can be a drain on employee morale and affect both employees’ behavior and a company’s ability to achieve its strategic objective.
Understanding performance: a two-category model emerge
EXTERNAL PERFORMANCE- LINKED TO ACHIEVEMENT OF THE GOALS OF THE ORGANISATION
INTERNAL PERFORMANCE-SEEING PERFORMANCE AS BEHAVIOURAL
Source: Adapted from Rees and McBain, 2004
Authors are careful to distinguish performance management from performance measurement which involves the development of metrics that quantify the “efficiency and effectiveness of action” (Neely et al., 1995).
Performance measurement encompasses several uses that have been summarized above by means of five elements: decision-making, control, signalling, education and learning as well as external communication (Simons, 2000). A stakeholder approach defines the contribution of performance measurement according to three roles: coordination, monitoring and diagnosis (Atkinson et al. 1997).
Measuring the performance of employee is accomplished by many tools; however it is the human resources leader’s responsibility to determine the kind of tool that fits the organisation (Ruth Mathew, 2012).
In a holistic view, performance measurement plays a key role in the development of strategic plans and evaluating the achievement of organisational objectives (Ittner and Larcker, 1998a) as well as acting as a signalling and learning device (Simons, 1990).
Efficiency, effectiveness, benchmarking information, the balanced scorecard, management by objectives, performance appraisal and the attainment of organisational mission are potentially useful measures of performance.
Benchmarking has been defined as “the search for and the implementation of best practices” (Camp,1995, p. 15), and includes the benchmarking of products and services, business processes, and performance measures. The goal of benchmarking performance measures is “to establish and validate objectives for the vital few performance measures that guide the organization” (Camp, 1995, p. 16). Four types of benchmarking exist:
(1) Internal, based on entities within the same organization;
(2) Industry, based on entities in the same type of business;
(3) Competitive, based on direct competitors; and
(4) Process, based on dissimilar companies employing similar processes
(Elmuti and Kathawala, 1997).
In addition, the aim of balanced scorecard framework is to give managers a comprehensive view of the business and allow them to focus on the critical areas, driving the organisation’s strategy forward. The Balanced scorecard retains a highlight on financial objectives as a gauge for identifying how the system is performing (Kaplan and Norton, 1992; Kaplan and Norton, 1996a).
The balanced scorecard framework includes four major perspectives namely (Norton and Kaplan, 1993):
Internal business process
Learning and growth
The B.S emphasises that financial and non financial measures must be part of the information system for employees at all levels of the organisation. The scorecard should translate the business’s mission and strategy into tangible objectives and measures. The scorecard uses measures to communicate and to inform employees about drivers of current and future success (Kaplan and Norton, 1996a).
A major strength of the B.S is the emphasis that it places on linking performance measures with business unit strategy. Kaplan and Norton (1996b) have also introduced a framework to link the scorecard with the management of strategy and they are as follows:
Clarify and translate vision and strategy
Communicate and link strategic objectives and measures
Plan. Set targets and align strategic initiatives.
MANAGEMENT BY OBJECTIVES
Differences can be made between MBO and the performance Management System as follows:
Tailor made systems
Applied to managers
Applied to all staff
Emphasis on individual objectives
Emphasis on corporate goals and values
Emphasis on quantified performance measures
Inclusion of qualitative performance indicators
Job divided into key results areas
Jobs divided into principal indicators
Objectives set for each key result areas
Objectives set for each accountability
Most schemes used complex paperwork
Some schemes have complex paperwork
Schemes ‘owned’ by specialists
Schemes owned by line management
Source: adapted from Fowler 1990
PERFORMANCE MANAGEMENT CYCLE
Source: adapted from Rees and McBain (2004).
From the figure above, we can see that performance management is a continuous process which comprises of the planning, managing/ coaching and review and the review cycle.
Planning- setting individual objectives
This stage typically embraces ( Rees and McBain 2004, p.77):
Definition of job responsibilities
Setting performance expectations
Goals or objectives setting at the beginning of the period
It involves the agreement between the manager and the individual of how the latter is expected to perform in terms of results and behaviours (Armstrong 2009, p.64).
The aim of planning is to reach an agreement often called a performance and development agreement. (Armstrong 2008, p.167). The starting point for the plan as a role profile which defines the results, knowledge, skills and behaviours required.
Goal setting usually occurs in line with annual standard review cycles (Suutari and Tahvanainen, 2002).
Managing/ coaching- ongoing ‘good’ management
This stage involves these points as follows (Rees and McBain 2004, p.78):
Monitoring performance and achievement towards objectives
Feedback and coaching
The level of competence needed to achieve the objectives to a satisfactory level is another important consideration. The manager plays an important role in motivating, coaching, enabling performance, organising resources, facilitating development opportunities and also monitoring and revising performance expectations and objectives. (Torrington et al, 2005).
Ongoing coaching during the tasks is essentially important, as managers can guide employees through discussion and by giving constructive feedback. Although it is the employee’s responsibility to achieve the performance agreed, the manager has a continuous role in providing support and guidance and in oiling the organisational wheels. (Hall, 1998)
Reviewing – feedback
This stage embraces (Rees and McBain, 2004):
Formal performance appraisal, resulting in a rating if used
Links to reward, if deployed within the organisation
Possible 360 degree feedback around the competencies or other feedback tools.
Formal review should be made once or twice yearly and this act likes a focal point for the consideration of key performance and development issues. (Armstrong, 2009)
The performance review meeting is the means through which the five primary performance management elements of agreement, measurement, feedback, positive reinforcement and dialogue can be put to good use.
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