Rapid change in the environment having globalization, deregulation practices and introduction of new products in the market with very fast pace has made the performance of the employees very critical. Increase in competition has increased the importance of employee performance and evaluation and also need of implementation of performance management system in the organization.
Organizations can adopt various practices to enhance employee skills. First, efforts can focus on improving skills and abilities of current employees, or on both. Employees can be hired via sophisticated selection procedures designed to screen out all but the very best potential employees. Selection of proper method for employee performance evaluation is positively associated with the firm performance.
Michael Armstrong states, that performance management is a process which is designed to improve organizational, team and individual performance and which is owned and driven by line managers.
Performance management is an HRM process concerned with getting the best performance from individuals in an organization, as well as getting the best performance from teamed and the organization as a whole. Effective performance management therefore involves sharing an understanding of what needs to be done and then managing and developing people in a way that enables such shared objective to be achieved.
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The ideal situation for an organization is to have every one pulling in the same direction. Supporters of the HRM approach argue that two ways process will only be effective where there is a clear psychological contract between employer and employees based on mutual trust and commitment. The organization will benefit from setting out its aim in a clear way, for example by having a brief mission statement which gives direction to effort at every level in the organization.
Given the mission and values, the organization can create performance management objectives at every level within the organization right down to personal objectives for individual members of the organization. The performance of an organization, teams and individuals in the organization ipsation can all be measured and compared against objectives.
Peter Ducker, used the term Management by objective to identify a management approach which involves the establishment of clear objectives and the subsequent measurement of performance against these objectives.
According to Wagner, 1994 the way in which a workplace is structured affect organizational performance to the degree that skilled and motivated employees are directly involved in determining what work is performed and how are the work need to be accomplished. Employee participation system is critical to the organization as well as for performance evaluation.
The effectiveness of skilled employees will be limited, however if they are not motivated to perform their jobs it will effect the organization. Proper performance management system can effect on employee motivation level in several ways. First organization can develop a set of standard through which performance of employees will be evaluated. Secondly, compensation packages will be defined in a way that helps employees in achieving their personal needs.
Performance management is the process through which organizations all over the world evaluate their employee performance and effectiveness. Performance is the set of activities that employee perform in his or her job. Performance is what a predefined expectation of the employer towards employee and performance management system is the way through which performance expectation will be communicated to employees.
According to Amit and Shoemaker, 1993 unlike capital investments, economic scale, or patents a properly developed HR system is invisible asset. Strategic assets are difficult to intimate. Performance management system is also an invisible asset that has its own importance. Its advantages will be identified over the period of time and help in achieving the overall business objectives.
Bailey 1993, contented that human resource are frequently underutilized because employee often perform below their maximum potential and that organizational effort to elicit discretionary effort from employees are likely to provide returns in excess of any relevant costs. Performance evaluation and management are the most important function of human resource management it provides guidelines to the employees about how to perform their duties and provide an idea to managers to utilize the maximum skills of their subordinates.
A well developed performance management system will include the following:
Organization Objective Statement
Always on Time
Marked to Standard
Organization objectives are linked with the individual objectives
Timely Performance review
Performance related compensation
Counselling and development
Purpose of Performance management
To achieve the business objective of an organization, effective performance management plays a vital role. Performance management does this help by linking employee's behaviour with the organizational goals. It starts defining what the organization expects from each employee and at the same time it measures the performance of each employee's to identify either the expectations are met or not. Depending upon performance measurement, the organization can take corrective action such as training, incentives or discipline. Performance management can achieve strategic purposes on the following condition.
It is the way where organization uses the system to provide information for day to day decisions about salary, benefits and recognition programs. Decision making related to employee retention, termination for poor behavior, hiring and layoffs are supported by performance management. As the administrative decisions are supported by performance management, the information in performance appraisal can have a great impact on the future of individual employees.
It serves as basis for developing the employee's knowledge and skills. When the employee's met expectations they become more valuable. Employees get aware of their strength, weakness and areas of improvement by feedback of effective performance management.
Tools of performance management
Performance and development reviews
Learning and development
Objectives and Performance Standards
Competency and competencies
Team based work
360 degree appraisal
Performance problem solving
There are no of general purposes for the Performance Management System some of them are as follows:
Feedback to Employees
Feedback to employees is the most important factor in improving employee performances. Performance management systems are developed to establish the general guidelines through which employees can evaluate themselves and have a better understanding about the task needed to perform the job. Performance management system will help them to asses their own performance and help them in evaluation of how they are performing with respect to the expectations. Performance management system will help the employees in assessing their strength and weaknesses and provide the opportunity to improve the areas where they are weak or most vulnerable.
Coggburn J.D. 1998, performance appraisal management should be a formal component of the managers rating. A related feedback recommendation is the presence of subordinate appraisal to provide systematic feedback on managerial behaviour encompassing key administrative duties including the operation of appraisal process. Proper implementation of performance appraisal system will help in generating systematic feedback that helps employees in assessing their skills as well as creating proper feedback system in order to evaluate the performance of employees.
Employee compensation plays such a key role because it is at the heart of the employment relationship, being of critical importance to both employees and employers. Employees typically depend on wages, salaries, and so forth to provide a large share of their income and on benefits to provide income and health security. For employers, compensation decisions influence their cost of doing business and thus, their ability to sell at a competitive price in the product market. In addition, compensation decisions influence the employer's ability to compete for employees in the labor market as well as their attitudes and behaviors while with the employer.
Contemporary organizations focused in developing performance oriented culture in their organization the appraisals are made on the basis of performance not on the basis of seniority. Performance management system helps in determining the performance standards that help in evaluating the employee performance. Compensation reviews will be done through the help of performance management system makes it easy to take decisions about incentives. Further some organization also offers fringe benefits on the basis of performance they did not follow any specific formula or policy all they focus is on performance of employee.
Performance improvement opportunity
During periods of slow growth and a weak economy, corporations commonly cut programs to maintain profitability. Training programs in particular are often targeted because employee turnover is generally higher during times of economic uncertainty (OECD 1993). Even in the best of times, organizations must decide how much to invest in on-the-job training, balancing the benefits of increased productivity against the costs of training. Because trained workers can migrate easily between competing firms, another firm can potentially benefit from the increased productivity of workers trained by the former employer without paying the costs. For example, a survey of metalwork firms in Wisconsin indicated that managers are reluctant to train their workers because they fear competitor firms will lure their employees away before their investment costs are recouped Consequently, fear of losing trained employees to competitors can lessen a company's incentive to train and lead to less investment in skills than is economically desirable.
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Derekstockley, 2004, effective performance management helps in identifying the skills required by the employee in order to develop its skills and expertise. Through performance appraisal system management managers identify the strength and weaknesses of employee and provide them the feedback. Employees get the opportunity to improve their skills in order to increase their performance level and help in their Self development. Proper feedback of managers to their employees helps them in understanding of job and importance of their individual performance in achieving organizational objectives.
Criteria for Effective Performance Management System
Choosing the most effective performance management can be daunting but rewarding. A manager's job is not just to administer disciplinary action to an underperforming employee, but also to devise ways to recognize an employee that has made significant achievements and contributions to the team. When choosing an effective performance management system, the prudent manager will want to make sure the system adheres to the notion of setting specific, measurable, attainable, realistic, and timely (S.M.A.R.T) goals.
The five key areas of Performance Management are planning, monitoring, developing, rating and rewarding employees.
Planning Your Business Workload
Individual and Team Performance Development
Rating Individual Performance
Monitoring Business and Individual Performance
Rewarding Great Performance
Human Resource unique Competitive Advantage
Recent theoretical work in business strategy has given a boost to the prominence of HR in generating sustained competitive advantage. According to the resource-based view of the firm Barney, 1995), firms can develop sustained competitive advantage only by creating value in a way that is rare and difficult for competitors to imitate. Although traditional sources of competitive advantage such as natural resources, technology, economies of scale, and so forth, create value, the resource-based argument is that these sources are increasingly easy to imitate, especially in comparison to a complex social structure such as an employment system. If that is so, human resource strategies may be an especially important source of sustained competitive advantage.
Q2. Argue for and against the implementation of a performance management system in contemporary business organisations in Australia.
Performance management system helps in developing the performance standards that are considered to be benchmark for performing any job with in the organization. It clearly provides the idea about what is expected by the organization from particular job. Timely review of performance status will also practice due to the change in the outer environment.
Training and Development
Performance management system helps in the training and development of the employees. It provides the general guideline about the skills that are required to perform any particular job. Managers develop training program according to the need of job that benefited the organization in achieving the long term objectives of an organization.
Performance management system also helps organization at the time of appraisals in the organization it will give a general ideal about how much appraisals should be given to any particular employee at the time of appraisals and also helps in determinng the expectations of employees.
Performance management system keeps the past data in it in order to evaluate the available HR in the market also helps in forecasting of future HRM. The data that is stored in the performance management will provide the bird eye view to the manager about organization employee performance and their rewards. It helps manager in designing the reward system as well as future HR strategy for the organization.
Training of Managers
Implementation of performance management system required training of managers in order to implement the system effectively and efficiently. Training of managers required lot of time and investment as people take time in order to learn new systems.
High Financial Cost
Performance Management requires high finances from the organization so some how it becomes the liability at the initial phase of implementation. PMS system is a system whose advantage can be achieved in the long run that's why implementation of performance management system is considered to be a strategic decision.
Too High Standards
Some times performance management set the performance criteria that are too unrealistic for the employee to meet the expectations. In that scenario the impact of performance management would be negative rather than positive resulting decrease in the motivation level of the employee and dissatisfaction.
Q3. Examine the sources of performance information you would use to adequately evaluate the performance of sales assistance in a selected business (you should select a suitable organisation as an example for this task).
Sources of Performance Evaluation
The organization that is choosing to examine the sources of information adequately used to evaluate the performance of sales assistance is GIO Australia.
GIO Australia was founded as the Government Insurance Office in 1927. On July 1st, 2010 Suncorp acquired GIO and expand their businesses allover the Australia.
Sources of Performance Information
Sources of performance information are essential because it helps in examining the employee performance for the whole financial year. Different organizations has developed different performance of information in order to asses the employee performance.
Sources of information used to adequately evaluate the performance of employees
Ongoing tracking of progress
Use the performance information that has been collected and reported throughout the year of sales representative through branch managers and colleagues.
For several reasons results of the performance are tied to financial results or operation that occur in the periodic report of an organization..
Supervisors' observations and notes
Supervisors on the spot note down the action taken by the employee on particular situation or scenario. Collect the emails and memos written down in organization to appreciate some one performance. Feedback regarding the action and decision of employee on any stimuli.
Input from other people
Employee performance is not visible to their supervisors but it can be observed by some other people. Team members and colleagues of that employee, supervisors evaluate the performance of employees by linking the task with the performance. Evaluate either person is able to achieve its tasks or not.
Sales person work in a teams and when they are working on fields are not directly interact with their supervisors. So team members will be a good source in evaluating the sales person performance.
More often employees are given responsibility to evaluate themselves and report their progress on fixed interval of time. Employees provide periodic details to their supervisors it is a good practice evaluator does not go in to minor details just overview the report of the person.
Self evaluation of employees are most important sales person can evaluate their performance by themselves but this type of evaluation is not suitable for sales assistance because mostly sales people are not truthful when explaining facts.
Q4. Evaluate the fairness of performance management.
Fairness of Performance Management
According to Daisy Kee Mui Hung, 2006 fairness is a fundamental concept in the workplace where it is referred to as organizational justice and involves matters of comparison and equity. Without fairness, organizations would face great challenges in motivating and guiding employees. Thus, it is essential that organizations take into account the issue of fairness in performance management system. Also, organizations should be aware of individual differences in perceptions of fairness and the relationship of fairness to performance management system practices, specifically how fairly rewards are perceived to be distributed.
Cropanzano & Greenberg, 1997 in theoretical analyses, fairness has been conceptualized into two broad dimensions distributive and procedural defined distributive fairness by comparing an employee's pay-off ratio of outcomes with other co-workers' ratios. In other words, distributive fairness focuses on the fairness of the decision outcomes received.
Dailey and Kirk 1992, Perceptions of fairness lead to important consequences for employee attitudes and behavior. It has been suggested that fairness in the workplace contributes particularly strongly to employees' behavioral manifestations, such as the intention to quit, compared with core work attitudes.
Evaluation of Performance Management
The firm should focus that performance management system should link with the business strategy of the organization. Fairness or performance management system lies in its outcomes and on Strategic HRM decisions.
Performance evaluation management system should focus on equal evaluations for all; there will be no differences on the basis of gender or caste every one would be on same standards.
The fairness of the performance management system evaluated with the certain guidelines required for performance management system these are
Rules and Policies
Employee Goals and Objectives
Benchmarking Performance standards
Analyzing of Performance
Fairness of performance management system lies in it outcomes the purposes for which it is developed for. Performance management systems were developed in order to develop a criteria through which employee can clear about its responsibilities and managers have an opportunity to asses employee performance in more better way.