Using Performance Management to Improve Training and Business Performance

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The first step in improving and managing performance is to define the term performance. Understanding the meaning of performance is essential to transforming traditional training departments into strategic HRD functions. It is also critical to improving an organization's performance capabilities. According to Rothwell (1996, 26) , "perform" means "to begin and carry through to completion; to take action in accordance with the requirements of; fulfill." "Performance" means "something performed; an accomplishment." He stresses that performance is synonymous with outcomes, results, or accomplishments.

Rothwell (1996) asserts that performance should not be confused with the terms behavior, work activity, duty, responsibility, or competency. He maintains that a behavior is an observable action taken to achieve results, whereas a work activity is a task or series of tasks taken to achieve results. Thus, a work activity has a definite beginning, middle, and end. On the other hand, a duty is a moral obligation to perform, and a responsibility is an action or a result for which one is accountable; a competency is an area of knowledge or skill that is critical for producing key outputs. Moreover, he contends that a "competency is an internal capability that people bring to their jobs, a capability that may be expressed in a broad, even infinite array of on-the-job behaviors" (26). Robinson and Robinson (1996) assert that identifying and evaluating competencies typically means determining the underlying characteristics shared by outstanding performers.

New forms of performance management began to emerge when business needs changed as competition from abroad increased. Human resource management in general had to become strategic in order to help organizations operationalize their business strategies and achieve critical outcomes. When this step was taken, there was a greater emphasis on engaging every individual in the success of the organization. Employees were key to improved business outcomes by producing more at higher levels of quality with fewer resources and by continuously innovating in the workplace in an effort to reduce costs and improve product and service quality. More emphasis on employee contributions to overall business success led to a number of changes in the workplace and in particular to changes in the relationship between employees and their managers.

When organizations placed greater emphasis on managing people, they realized that performance measurement had to evolve to meet changing organizational needs. Employees need to be engaged fully in their work, but traditional ways of rewarding and motivating performance, such as promotion and advancement, are less available than before. Other trends, such as fading employee loyalty, fewer resources for the development of expensive incentive compensation systems, and instability in the employment contract between employers and employees, contribute to the need for organizations to find a new tool that can continuously sharpen employees' focus on precisely those things that lead to business success. Organizations have also been in the midst of great organizational change in an effort to meet competitive challenges, and shifts in organizational culture have served as important catalysts for change. As greater shifts in culture were required (for example, shifting from a “knowing” to a “learning” organization), there was a need to redefine appropriate job behavior and interactions with people both within (functional peers) and outside (customers) the organization. Thus, companies began introducing cultural change through performance management.

Organizations began to create tools that engaged employees in the enterprise by emphasizing the importance of managers managing people (as opposed to managing tasks) on a continuous basis. Managers and employees began to communicate frequently and in very specific ways, focusing on aspects of performance that contributed significantly to business success. They communicated until they achieved a shared understanding of what it takes to be most effective in the organization.

A distinguishing characteristic between ineffective and effective organizations is that ineffective firms commonly fail to achieve the results required of them. Historically, ineffective organizations have well-written, meaningful mission statements and strategic plans but are ineffective in bringing about business results needed to remain vibrant and competitive. They boast that employees are their greatest asset and most valuable resource, while reality reveals this couldn't be further from the truth (Gilley and Maycunich 1999 ).

Ineffective organizations fail to possess or embrace a comprehensive performance management process instrumental in bringing about the performance improvements needed to secure desired business results. Consequently, ineffective organizations' strategic business goals and objectives are often unrealized. Ineffective organizations believe that their employees are easily replaced; thus policies and procedures demonstrate a revolving-door philosophy toward human resources.

Gilley, Boughton, and Maycunich ( 1999, 2) report that ineffective organizations exhibit an attitude of corporate indifference whereby they "wash their hands of any responsibility for their actions and decisions regarding employee performance, and are quickly willing to blame scapegoats for their own failings." They contend that the dilemma facing today's organizations is their ignorance regarding how to manage performance, develop people, or create systems and techniques that enhance organizational effectiveness. In short, organizations must transform employees into high performers who are their greatest asset, which requires creating a performance management process that allows firms to achieve their strategic business goals and objectives, enhance organizational renewal, improve performance capability, and increase competitive readiness.

Organizations can do much to create a favorable context for performance appraisal. Performance appraisal should be viewed as an integral part of a manager's organizational role. Managers should be given adequate time to make appraisals, training, and rewards for the fairness and accuracy of their appraisals. Of course, employees attach the same degree of importance to performance appraisal as they perceive being attached by their superiors. If performance appraisal has visible and continued support from all levels in the organization, employees should evaluate the appraisal process positively.

Kavanagh and Taber (1987) have argued that organizations should consider implementing policies that affirm employee rights in performance appraisal systems. These rights include fairness and accuracy of appraisals, privacy, use of performance standards, and supervisor competency for appraisal. Kavanagh and Taber hypothesized that organizations incorporating these rights would improve employee acceptance of the performance appraisal process. Unfortunately, no research has been conducted that directly bears on this hypothesis.

A theoretical rationale for establishing organizational policies for performance appraisal could be based on the concepts of justice developed in social psychology. Distributive justice refers to the perceived fairness of the outcomes of decision making, whereas procedural justice refers to the perceived fairness of the procedures used in decision making. Outcomes in organizational decision making include wage scales, labor-management agreements, performance appraisal ratings, and performance goals. Processes related to these outcomes include job evaluation systems, dispute-resolution procedures, performance appraisal interviews, and Management by Objectives, respectively. Most organizations already have policies concerning outcomes such as wage scales and labor-management agreements as well as the processes of job evaluation and dispute resolution used to attain these outcomes.

In support of the rationale, Greenberg (1986) has already demonstrated that perceived fairness in performance appraisal can be understood in terms of the notions of procedural and distributive justice. He had managers, who claimed to have had at least 30 experiences giving and receiving performance appraisals, describe incidents in which they received a particularly fair or unfair performance appraisal. A second group of managers was then asked to identify categories reflected in these incidents using the Q-sort technique. A final group of managers rated the categories for importance as determinants of fair appraisals. A factor analysis of the importance ratings yielded two factors that accounted for 95% of the rating variance. One factor dealt with procedural processes (e.g., soliciting input prior to making an evaluation and using it; two-way communication during the appraisal interview). A second factor dealt with the relation between the appraisal rating and subsequent administration action (e.g., recommendation for salary--promotion based on rating).

Although most employees would welcome an appraisal that helps them to improve and leads to performance-based rewards, they could believe that the appraisal is based on inadequate or irrelevant information. Clearly, supervisors must be encouraged to attain first-hand knowledge of employee performance, an understanding of job duties, and the ability to conduct appraisals. Otherwise, performance appraisals would lead to few improvements and be unacceptable to employees.

Training programs have been shown to be effective for improving supervisory ability to make appraisals. Effective training should illustrate and provide practice in observing performance, recording relevant information, and making performance ratings. Training should also be provided in how to conduct performance appraisal interviews. Ivancevich (1982) reported a field study that examined employee attitudes toward appraisal interviews that were conducted by supervisors who received training in providing feedback and/or assigning performance goals (i.e., variations of the "tell and sell" style). These training programs increased employee perceptions of the fairness, accuracy, and clarity of the appraisal interview.

In some organizations, performance is constrained by factors in the work environment that are not under employee control. For example, employees may receive services and help from others to do their job, or they may have to wait for previous stages of the work flow to be completed. In these situations, performance can be impeded by poor coordination of work activities or unplanned changes in work schedules. If super- visors do not consider performance constraints in conducting appraisals, employees may believe that the appraisals are unfair and inaccurate reflections of their contributions to the organization.

Dickinson and Davis (1984) used structural equation analysis to evaluate the influence of perceived performance constraints (e.g., my appraisal considers limitations imposed by others), rater ability (e.g., received training; is familiar with my performance), and appraisal purpose (e.g., used for development and promotion decisions) on the perceived utility of the performance appraisals (e.g., aid for setting goals). The results suggested that appraisal purpose and performance constraints had direct influences on perceived utility. However, rater ability was perceived to influence utility indirectly to the extent that raters considered performance constraints in making appraisals. Greater rater ability was perceived to lead to more consideration of performance constraints, and in turn this led to greater perceived utility for the appraisals.

The motivation of the managers who use a performance appraisal system is also critical to its acceptance. Unless managers perceive support from top management for the appraisal system, they may not be motivated to use that system. Beer et al. (1978) described a comprehensive appraisal system, whose acceptance by managers was still in doubt after several years of operation. The system included extensive training for most levels of management, an emphasis on goal setting and development, and the splitting of salary and developmental interviews. Although the system was highly accepted by those managers who did use it, this enthusiasm did not spread throughout the organization. Managers who did not use the system reported that they do not use it because top management had not endorsed the system. Apparently, nonusers were reluctant to engage in the time-consuming process of using the new system, unless they were encouraged to do so by top management.

Managers should not only be encouraged by top management to use a performance appraisal system, but they should also be rewarded for performance appraisal. In a unique study, Napier and Latham (1986) asked managers to describe the outcomes that they expected from conducting performance appraisals. The outcomes included "nothing," intrinsic satisfaction, financial reward, and promotion. Napier and Latham also found that a majority of managers expected "nothing" as the primary consequence of giving employees positive or negative appraisals. Importantly, appraisals were perceived not to depend on financial reward or the likelihood of promotion. Although managers did expect appreciation from employees and superiors for positive appraisals, they expected little appreciation for negative appraisals. Napier and Latham asserted that expectations of few positive outcomes from conducting performance appraisals explain why managers tend to make inaccurate ratings. Obviously, these outcome expectations also help in understanding managerial attitudes about performance appraisal.