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The word performance management is made up of two words that is performance which means "what an employee does or does not do" and other is management which means "managing the men tactfully".
So if we club these two words will get Performance Management: A process that consolidates goal setting, performance appraisal, and development into a single, common system, the aim of which is to ensure that the employee's performance is supporting the company's strategic aims. It is actually an integrated human resources system that aims to make sure that the behavior of employees is in line with the goals and standards of the organization. These performance management practices are predetermined set of guidelines for individuals employed by a company and are used to describe the current position to the employee and lay out the expectations of company management for the employee.
So in a lay man language - "It is a process through which companies insure that employees are working toward organizational goals"
Many times we confuse performance management with performance appraisal. So let us look upon the differences between performance management and performance appraisal.
Following are the best performance management practices:
Identify expected performance levels
Encourage high level of performance
Measure individual performance then evaluate
Provide feedback on individual performance
Provide assistance as needed
Reward or discipline based on performance
I would like to explain these best performance management practices in relation to my dad's business which is of pouch milk and other dairy products. So let us look at the profile of our company.
Bharat Milk Product is a pvt ltd company incorporated in the year 2001. We are a part of FMCG industry as we processed the raw milk into pasteurized pouch milk and produce various dairy products from milk. Presently we are working on the capacity of 50000 liters per day with the head count of 500. As of now we are active in 7 cities of Punjab and planning to spread tentacles in Haryana and Himachal.
Setting the goals is the first and foremost task in the organization. SMART goals like specific, measurable, achievable, relevant and time framed should have to set with employees.
Our company has a both short term and long term goals. Short term goals like daily production of 50000 liters milk and long term goals like 10% increase in sales and profit in the next year are to be discussed with employees so that they also get fair idea what management is planning for and what they as a employees have to do to achieve that goal.
Identify expected performance levels:
It is very important for the organizations to decide upon the expected level of performance from the employees. If there are no expectations from employees than definitely there will be no specific standard to measure their actual performance against the expected one.
Our company gave target to everyone like for e.g. there is benchmark for the employee who takes care of packaging that he is allowed to dispose maximum to maximum 400 pouches daily out of 50000 pouches while packaging. The truck driver is expected to drive the vehicle carefully and is expected that the vehicle should give daily average of 12 km/hr. so in this way these expectations will create a particular responsibility for employees and which in turns lead to high performance.
Encourage high level of performance :
The organization should really encourage the employees for high level of performance. If there is no encouragement from higher level than definitely the performance of employees must suffer. They should be given regular incentives and other fringe benefits so that the employees keep on performing well.
Our company really encourage the employees by motivating them, by giving some incentives , gifts on festivals, some other fringe benefits like scooter, motorcycle free of cost to drive. By giving these benefits employee feel encouraged to perform well.
Measure individual performance than evaluate:
This is very important performance management practice as first they measure the performance of individual and then they evaluate on the basis of performance through which organization come to know how well or bad one is performing in the organization.
Our company measures individual as well as group performance and then give evaluation on the basis of their performance. My dad has kept benchmark for every group of workers and they need to perform up to that if they lag than the employees have to suffer in terms of salary or bonus etc.
Provide feedback on the individual performance :
Giving feedback is also a important practice which an organization should need to follow. Only measuring and evaluating the performance will not serve the purpose, the organization should provide feedback to employees about their performances so that the employees come to know how well or bad they are performing.
Our company provide sometimes monthly or quarterly feedback to employees so that the employee feel that he is the part of the organization and may improve in the future if need arises.
Provide assistance as needed :
Management should provide regular assistance to employees so that they the employees may not come under stress regarding their work. It is the duty of management to keep the employees jolly by providing the help wherever they needed. This will help in building good relation between management and employees.
Our company has special tech savvy employees who are always available for these employees so that if any problem or difficulty arises these tech savvy employees may help them in a very efficient manner thus leading to the high performance.
Reward or discipline based on performance :
This is the last but not the least performance management practice adopted by organization. Without reward all the practices adopted by the organisation will be like body without soul or car without petrol which shows how crucial role rewards play in the performance of employees. So the management should give reward to the employee for the successful completion of their tasks.
Our company provides special rewards for the employees who really lead up to the expectation of the organisation. My dad gives promotion or increment on the basis of the performance of the employees. Some of the appraisals are also given on the basis of following methods:
360 Degree Feedback - performance information is collected from supervisors, superiors and peers
Management By Objectives - it requires the manager to set specific measurable goals with each employee
Critical Incident Method - keeping the record of uncommonly good or undesirable examples of employee work related behavior
Key Performance Indicators- on the basis of their key performances our management gave various appraisals to boost the morale of the employees.
Some of the companies using best performance management practices in India:
BMP Pvt Ltd Co (My dad business)
From these performance management practices definitely organization will gain lot of benefits. So let us look at some of the benefits also:
Direct financial gain
Aligns the organization directly behind the CEO's goals
Decreases the time it takes to create strategic or operational changes by communicating the changes through a new set of goals
Optimizes incentive plans to specific goals for over achievement, not just business as usual
Improves employee engagement because everyone understands how they are directly contributing to the organizations high level goals
Create transparency in achievement of goals
High confidence in bonus payment process
Improved management control
Flexible, responsive to management needs
Displays data relationships
Simplifies communication of strategic goals scenario planning
Provides well documented and communicated process documentation
So to conclude we can say that performance management practices are vital to the smooth running of any enterprise. They ensure that employees know what is expected of them and receive feedback on how their performance measure up against standards. But sometimes you never know when these best practices turns worst for the organization. As management thinks that they are doing something productive but there is a chance that employees may not feel comfortable with these practices and which in turn leads to the negative performance of the employees. So management should need to be very careful while implementing these practices.