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Managing people in organisations is becoming more and more important nowadays so as to produce the best result and achieve efficiency. Therefore employees should be managed efficiently so as to add value in organisations.
Performance management is not new, despite the fact that nowadays more emphasis is being laid on it, especially in the public sector. Performance management system is considered as a tool to an organisation.
Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organisation. The performance management system is a process which increases competence, decreases cost and promotes quality.
Performance management is a term borrowed from the management literature. The term 'performance management' was first used in the 1970s, but it did not become a recognised process until the later half of the 1980s (Armstrong & Baron, 1998).
It has been among the most important and positive developments in the sphere of management in recent years.
The meaning of performance management has evolved and continues to evolve. While in the sixties and seventies performance management was often equated to some form of merit-rating, in the eighties and nineties it has been linked to 'new' management paradigms such as Management by Objectives, Performance Appraisal, Behaviourally Anchored Rating Scales and Performance-related Pay.
The ultimate competitive asset of any organization is its people (Band et al., 1994), thus organizations should develop employee competencies in a manner aligned with the organization's business goals. This can be achieved through performance management systems (Moullin, 2003), which act as both behavioural change tool and enabler of improved organizational performance through being instrumental in driving change.
Defines mission, values, strategies and objectives
Understands and agrees objectives
Define tasks, standards and performance measures
Understands and agrees tasks, standards and performance measures
Monitors organisational, team and individual performance
Monitors own performance
Develops team and individual performance
Develops own performance
Figure 1: The contribution of the organisation and the individual in performance management
Performance management therefore aims to emphasize and encourage desired and valued behaviours (Risher, 2003), thus is a key tool of communication and motivation within organizations seeking a competitive edge through strategic change and control.
Performance management then becomes a system for translating organizational intention and ambition into action and results delivering a strategic goal, such as behavioural change (Band et al., 1994).
Band, D.C., Scanlan, G. and Tustin, C.M. (1994), "Beyond the bottom line: gainsharing and organizational development", Personnel Review, Vol. 23 No. 8, pp. 17-32.
Moullin, M. (2003), "Defining performance measurement", Perspectives on Performance, March, p. 3.
Risher, H. (2003), "Refocusing performance management for high performance", Compensation and Benefits Review, Vol. 35 No. 5, pp. 20-30.
DEFINITION OF PMS
Fowler (1990) defines performance management as: "â€¦the organisation of work to achieve the best possible results. From this simple viewpoint, performance management is not a system or technique, it is the totality of the day-to-day activities of all managers."
The (then) Institute of Personnel Management (1992) produced a similar definition:
"A strategy which relates to every activity of the organisation set in the context of its human resources policies, culture, style and communications systems. The nature of the strategy depends on the organisational context and can vary from organisation to organisation."
Storey and Sisson (1993) define performance management as: "â€¦an interlocking set of policies and practices which have as their focus the enhanced achievement of organisational objectives through a concentration on individual performance."
Fletcher (1992) provides a more organisational definition of performance management:
"â€¦an approach to creating a shared vision of the purpose and aims of the organisation, helping each individual employee understand and recognise their part in contributing to them, and in so doing manage and enhance the performance of both individuals and the organisation."
Performance management systems are defined as:
â€¦the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities (adapted from Simons, 2000).
Reference: Simons, R. (2000), Performance Measurement and Control Systems for Implementing Strategy: Text and Cases, Prentice-Hall, Upper Saddle River, NJ.
Armstrong and Baron (1998):
"Performance management, in a human resource management (HRM) sense, is the process of delivering sustained success to organizations by improving capabilities of individuals and teams."
Armstrong and Baron define performance management 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. They go on to stress that it is "a strategy which relates to every activity of the organisation set in the context of its human resource policies, culture, style and communications systems. The nature of the strategy depends on the organisational context and can vary from organisation to organisation."
In other words performance management should be:
Strategic - it is about broader issues and longer-term goals
Integrated - it should link various aspects of the business, people management, and individuals and teams.
It should incorporate:
Performance improvement - throughout the organisation, for individual, team and organisational effectiveness
Development - unless there is continuous development of individuals and teams, performance will not improve
Managing behaviour - ensuring that individuals are encouraged to behave in a way that allows and fosters better working relationships.
Armstrong and Baron stress that at its best performance management is a tool to ensure that managers manage effectively; that they ensure the people or teams they manage:
know and understand what is expected of them
have the skills and ability to deliver on these expectations
are supported by the organisation to develop the capacity to meet these expectations are given feedback on their performance
have the opportunity to discuss and contribute to individual and team aims and objectives.
It is also about ensuring that managers themselves are aware of the impact of their own behaviour on the people they manage and are encouraged to identify and exhibit positive behaviours.
PERFORMANCE MANAGEMENT AS AN INTEGRATING PROCESS
Performance management is concerned with the interrelated processes of work, management, development and reward. It can become a powerful integrating force, ensuring that these processes are linked together properly as a fundamental part of the human resource management approach which should be practised by every manager in the organisation. This concept is illustrated in Figure 2.
Figure 2: Performance management as an integrating force
CHARACTERISTICS OF PMS
Armstrong and Baron (1998) define performance management by eliciting the characteristics of a performance management system, which are as follows:
It communicates a vision of its objectives to all its employees.
It sets departmental, unit, team, and individual performance targets that are related to wider objectives.
It conducts a formal review of progress towards these targets.
It uses the review process to identify training, development and reward outcomes.
It evaluates the whole process in order to improve effectiveness.
It defines a managerial structure to look after all the characteristics above, so that individual staff and managers are assigned specific responsibilities to manage the Performance Management System.
Furthermore, a performance management system should have SMART objectives namely; Specific, Measurable, Appropriate, Relevant and Timed.
PURPOSES OF PMS
Armstrong and Baron (1998, pp. 51-6), Williams (2002, pp. 219-24), Poister (2003, pp. 9-15) and others have noted that organisations introduce performance management and/or measurement for a variety of purposes which might include one or more of the following 17 (the list below is not intended to be exhaustive):
(1) to provide information on organisational effectiveness;
(2) to provide information on employees' effectiveness;
(3) to improve organisational effectiveness;
(4) to improve employees' effectiveness;
(5) to provide information on organisational efficiency;
(6) to provide information on employees' efficiency;
(7) to improve organisational efficiency;
(8) to improve employees' efficiency;
(9) to focus employees' attention on areas deemed to be of greatest priority;
(10) to improve employees' levels of motivation;
(11) to link employees' pay with perceptions of their performance;
(12) to improve the quality of employees' training and development;
(13) to raise levels of employee accountability;
(14) to align employees' objectives with those of the organisation as a whole;
(15) to improve customer service;
(16) to facilitate the implementation of an organisation's mission and/or strategy;
(17) to act as a lever of change in developing a more performance oriented culture.