Performance Management Is A Process Commerce Essay

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It is clear that the success of an organisation depends on individuals who have specific competencies and who can achieve certain results. Performance management plays an important role in ensuring both success of the organisation and that of the individuals.

Boxall et al (2007) defines human resource management as "the management of work and people towards desired ends." (Armstrong's Hand Book of HRM, pg 5)

HRM is the function performed in organisations that facilitates the most effective use of people to achieve organisational and individual's goals. In simple words, human resource management is a management that deals with recruiting, selecting training and developing human resources in an organization

P 227 Noe, Hollenbeck, Gerhart and Wright

Personnel management is basically an administrative record-keeping function at the operational level.

There are two schools of opinions prevailing between the differences between both. Some commentators have highlighted the revolutionary nature of HRM, while others have denied that there is no significant difference in the concepts of personnel management and HRM.

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According to Armstrong (1987) as cited in Michael Armstrong Handbook of human resource management practice: "HRM is regarded by some personnel managers as just a set of initials or old wine in new bottles. It could indeed be no more and no less than another name for personnel management, but as usually perceived, at least it has the virtue of emphasizing the virtue of treating people as a key resource, the management of which is the direct concern of top management as part of the strategic planning processes of the enterprise." (p 42)

The key differences between personnel management and HRM are shown in table 1 below.

The functions of HRM can be separated into two groups namely:

Managerial functions

Operative functions.

The managerial functions are: Planning, organising, controlling and directing.

The operative functions are: Employment, human resource development, compensation and human relations.

Business Strategy, HRM, Performance Management and Performance Appraisal

HRM aligns people strategy with business strategy by designing performance appraisal system which identify, develop and reward talent to achieve business objective.

Performance management is the process through which managers ensure that employee activities and outputs contribute to the organization's goals. This process requires knowing what activities and outputs are desired, observing whether they occur, and providing regular feedback to help employees meet expectations. (P 224 Noe, Hollenbeck, Gerhart and Wright)

Performance management is a process that translates the overall strategic objectives of an organisation into clear objectives for each individual. It links individual job performance to attain the vision, mission and goals of the organisation. Organisational objectives are translated into departmental, team and hence individual objectives. These objectives have to be SMART (Specific, Measurable, Achievable, Reasonable and Time-bound).

Performance Management has a broad organizational focus, it is used to identify performance weaknesses and helps to improve along with provided measures whereas Performance Appraisal is the process used to evaluate how the employees perform their jobs and indicates the level of accomplishment. A better way of describing the comparison is that Performance Management is the course of action taken by companies to teach their employees to improve performance and Performance Appraisal contributes in decision making to Performance Management. Performance management is an ongoing process whereas performance appraisal is done at discrete time interval.

Performance management will serve as a solid structure for a more consistent HRM. It will be used to improve development of employees and it will contribute to the manageability and measurability of all staff.

PERFORMANCE APPRAISAL

Formal and informal

In informal system is a subjective way by which the appraiser is repeatedly making judgements about subordinate's performance.

In the formal process, managers and subordinates share understanding about what has to be accomplished in the short and long terms. Performance feedback is an important part of the process.

In many organisations, the feedback on job performance is unclear and is just given annually as a ritualistic exercise and people have trouble in gasping how their efforts are perceived by the organisation.

LITERATURE REVIEW

The history of performance appraisal roots in the early 20th century can be traced to Taylor's pioneering Time and Motion studies. It was a process linked to material outcomes and income justification. It was being used to justify an individual employee salary, a pay rise in case the performance was better than expected and pay cut if performance was below expectation. http://www.performance-appraisal.com/intro.htm Some scholars even contend that it was first used by the army in World War One to assess the performance of officers.

Views of Performance Appraisal

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Different writers in the subject use different basic definitions to describe the theory.

Eckes describes Performance Appraisal as "the process by which an organization establishes, measures and evaluates an employee's behavior and accomplishments for a finite period of time. [Eckes. G (1994), "Practical alternatives to performance appraisals", Quality progress, November - p57]

Cleveland, Murphy & Williams describes Performance Appraisal system as an important tool of providing information for personnel decisions such as salary, promotions, employee development and training programs. [Cleveland, J.N.,Murphy, K.R. & Williams, R.E. (1989), "Multiple Uses of Performance Appraisal: Prevalence and Correlates", Journal of Applied Psychology, Vol.74, No.1. )

Kramar, McGraw & Schuler (1997) define Performance Appraisal as a formal, structured system of measuring, evaluating and influencing an employee's job related attributes, behaviours and outcomes to discover how productive the employee is. This information can then be used to work out solutions for how to make the employee more effective ,motivated and productive in the future through methods such as( for example) training and development, and also be an important factor for determining salaries and rewards.[Kramar, R.,McGraw, P.&Schuler, R.S.(1997), Human resource management in Australia,(3rd edition),Melbourne: Addison Wesley Longman Australia Pty.]

According to:

Heyel (1973): Performance appraisal is a process of evaluating the performance and qualifications of employees in terms of requirements of the job for which he is employed, for the purposes of administration including placement, selection for promotions, providing financial rewards and other actions which require differential treatment among the members of a group as distinguished from actions affecting all members equally.

Levinson (1976) performance appraisal three basic functions:

It seeks to provide an adequate feedback to each individual for his or her performance.

It purports to serve as a basis for improving or changing behaviour towards some more effective working habits.

It aims at providing data to managers related to rewards and future job assignments.

He also stresses the fact that the existing systems of performance appraisal do not serve any of these functions effectively but focus on outcome of behaviour.

Cummings (1972), the objective of performance appraisal is to improve the efficiency of an organisation by mobilising the best possible efforts from the employee in the organisation. Thus the four objectives are:

Salary reviews

Development and training of individuals

Planning job rotation

Promotions

http://domapp01.shu.edu/depts/uc/apps/libraryrepository.nsf/resourceid/E4072267FD788A8885257172005FF43B/$File/Bangura-Sekou-D-Masters6.pdf?Open

Roland Benjamin (Mammoria & Gaonkar 2008) "A Performance Appraisal determines who shall receive merit increases, counsels employees on their improvement, determines training needs, determines ability to get promoted and identifies those who should be relocated.

Weir (2007) Performance appraisal results should be directed at:

Addressing performance problems of the appraisees;

Addressing developmental needs and career aspirations of employees

Linking performance results with pay increase

Formulating more discussion and feedback between managers and Employees.

To conclude, the purpose of the performance appraisal may differ from organisation to organisation according their objectives but some of the common points that apply to every company are:

Staff motivation and improving performance

Data gathering to provide a fair and rational basis on promotions, rewards, training, job planning and dismissal.

To improve manager-employee communication.

Despite all the potential advantages of performance appraisals, there are also potential drawbacks. According to T. Coens and M. Jenkins (Abolishing Performance Appraisals) "Performance appraisals impede genuine feedback, and there's no solid evidence that it motivates people or lead to meaningful improvement. In fact it usually produces distorted and unreliable data about the contribution of employees." http://performance-appraisals.org/cgi-bin/links/jump.cgi?ID=10665

However to motivate people the "performance appraisal systems should be seen as being transparent and equitable, providing reporting consistency and regular feedback on performance" (Armstrong & Baron 2005).

Transparent

The performance appraisal process must be open and clear. A transparent system means that the actions of individuals, groups, or organizations in the accountability relationship are conducted without any hidden motives and that all performance information is complete and that not any important data is intentionally missing.

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Transparency exists when people understand how reward procedure function and how they are affected by them. The reasons for pay decisions are clarified at the time they are made and that employees have their word in the reward policies and practices.

Equity

Equity is achieved when people are rewarded appropriately in relation to others within the organization. Equitable reward processes ensure that relativities between jobs are measured as objectively as possible and that equal pay is provided for work of equal value.

Equity, or fairness, is the cornerstone of accountability. The assumption of a fair deal should be maintained and promoted by organizational leadership. Inequity should be avoided because it will destroy trust and organizational credibility. As a result, performance will be less than optimal.

Consistency

A consistent approach to reward management means that decisions on pay do not vary arbitrarily - without due cause - between different people or at different times. They do not deviate irrationally from what would generally be regarded as fair and equitable.

Consistency brings stability and increases organisational accountability, credibility and commitment. It also boosts employee's morale.

Employee perception of consistency and equity is to employee retention. A fair and transparent reward process will help employees trust the organization and their commitment to it.

Feedback

Definition (http://essaybank.degree-essays.com/management/performance-management-system.php)

Feedback should be clear - If participants do not perceived the system to be fair, the feedback to be accurate, or the sources to be credible then they are more likely to

ignore and not use the feedback they receive. (Levy, P.E and Williams, J.R. 2004, "the social context of performance appraisal: a review and framework for the future " , Journal of Management, 30, 881-905

Feedback can influence future performance

Frequency of feedback

Trust will be developed if management acts fairly, equitably and consistently, if a policy of transparency is implemented, if intentions and the reasons for proposals or decisions are communicated both to employees generally and to individuals, if there is full involvement in developing reward processes, and if mutual expectations are agreed through performance management.

Failure to meet these criteria, wholly or in part, is perhaps the main reason why so many performance-related pay schemes have not lived up to expectations.( pg 269) Armstrong HANDBOOK

ANALYSIS AND DISCUSSION

On hearing performance appraisals, people will pick up the typical painstaking and tedious process with piles of paper and much complexity. At the end of the day, most of the time, every employee gets a similar 'fairly good' evaluation.

That's one of the common failures of performance appraisals. Due to those failures, some researchers or professionals argue that performance appraisal is only a perfect idea in theory but it never works out in practice.

Company Profile

The Central Electricity Board (CEB) is a parastatal body wholly owned by the Government of Mauritius. Established in 1952, the CEB's business is to develop, control and coordinate electricity supply for domestic, commercial and industrial purposes in Mauritius and Rodrigues islands.

The overall mission of CEB is to provide affordable, safe, reliable and quality electricity supply to the nation. Its vision is to become a world-class commercial electricity utility enabling the social and economic development of Mauritius, and ensuring that sustainable growth becomes a reality. (CEB Annual Report 2009, p4 Corporate Profile)

The CEB currently employs around 1800 people out of which around 900 are manual workers. The rest consists mostly of administrative or technical staffs such as administrative assistants, accountants, auditors, human resource officers, technical officers and engineers.

Performance Appraisal at the CEB

Like most organisation, the CEB has many departments. The Human Resource Department is well established and has a formal performance appraisal system. Till 2010, the CEB was using an old system of performance appraisal called the "Confidential Report on Staff Employees" which was based on the Graphic Rating Scale method. The appraisal was being done once a year by the line manager or head of section together with the employee. The purpose of the exercise was primarily related to salary increment.

Table below gives the criteria used to do the appraisal of the employees with the degree of appreciation.

As it can be deduced, this system was very subjective and biased. It is prone to errors. It is difficult to achieve consistency and equity.

The following errors can be made:

Appraisers are unlikely to interpret written descriptions in the same manner due to differences in background, experience, and personality.

Different appraisers have different level of severity/leniency while doing the appraisal. Some might be very lenient while others can judgement can be very severe.

Error of due to central tendency, error of leniency, halo effect, error in unreliability, personal bias, no consultation, spill over effect, status effect and recentcy effect.

To label people as 'average' or 'below average' is both demeaning and de-motivating.

With a view to improve the efficiency and performance of the organisation and to treat everyone with equity, consistency, fairness, dignity and respect, the Human Resource Department has appointed a consultant to design a new performance management system.

Since 2011, the CEB is using the new system, the e-PMS an electronic application of PMS. In 2011 it was on a pilot basis and as from 2012 it is being fully operational.

The aim of the e-PMS is to address certain fundamental concerns such as:

Objectivity

An objective measurement of performance against targets set at the start of the year.

Accountability

A cascade accountability right from top to the last level in the organisation by way of assigning responsibilities to every individual.

Transparency

An Integrated system that ensures uniformity and consistency of the process across the organisation with visible and transparent linkage to other HR functions such as succession planning, career path and training and development.

Transparency, Equity, Consistency and Feedback in the e-PMS system

The e-PMS system comprises of three cycles as shown in the figure below:

Objective setting

Performing and developing

Performance review

To provide a consistent method of completing the different stages of the new PMS, the employee can fill online his appraisal form from the three stages namely Performance Planning, Midyear Review and Final Year Review.

Consistency and Equity

At the beginning of the year, each appraisee meets his or her appraiser to do the Performance and Development Planning. A number of KPIs and Routine Responsibilities (RRs) and Quality Performance Criteria will form inputs of the performance planning.

KPIs are critical and quantifiable outputs of a job contributing to a firm's and a role's success. Each KPI consists of specific targets defined to quantify or verify extent of performance achievement in a given performance timeframe.

The KPI used is a cascaded effect from the business plan. Therefore all people from the same department and doing the same role will have the same KPIs. For example, all engineers working in the engineering section will have the same number of KPIs and this KPI will be same as their appraiser, i.e. the Senior Engineer since it is a cascaded effect. Hence, consistency and equity is achieved throughout the organisation.

Transparency

Transparency is achieved since the performance is done by filling an online form and can be seen by three parties: the appraisee, the appraiser and the reviewer.

An appraisee is the one being appraised.

The appraiser is the person to whom the appraisee is accountable and whom he works with.

The reviewer is the appraiser's appraiser. He is responsible for reviewing the entire performance process.

The Reviewer will ensure objectivity, transparency and consistency. Any disagreement between the appraisee and the appraiser will be resolved by the Reviewer. He ensures that the appraisees' performance goals are aligned to the organisation. If the Reviewer is dissatisfied with the appraisee assessment of performance, he can intervene and may award different ratings. The Reviewer is the final authority on performance appraisal and rating.

Feedback

As compared to the old system, this system has two feedbacks: a midyear review and a final year review.

Midyear review

In this stage, the appraiser will first have to do a self appraisal exercise and filling the online form. Then the appraiser and then the reviewer will insert their comments to finalise the midyear review process.

The midyear review feedback will help to:

Provide support and direction

Keep performance on track

Share information

Identifies obstacles to performance

The benefit of self appraisal is that people can be their own harshest critic. Furthermore self appraisal has the following advantages:

Increases employees perception of fairness of the process

Reduces potential for individual bias by providing further rating

Provides a useful tool to increase communication in the process

Helps clarify differences of opinion regarding performance requirements

Increases commitment to development plans and new goals.

End of year review

The end of year is like the midyear reviewer and is done at the end of the year.

During this session, the extent of the appraisee accomplishment of his KPI targets, RRs and Quality Performance Criteria will be discussed. The appraiser will rate each KPI, RR and QPC.

For evaluation of performance on KPIs, RRs and Quality Performance Criteria, a four point rating scale is used. Each KPI/RR/Quality Performance Criteria is rated on this scale. This will lead to inputs for identifying strengths and areas of development for the following year.

To further increases the effectiveness of the new system, the HR department provides regular training to the raters, i.e. appraiser and reviewer. E- PMS Champions (super users) are being trained to counsel the employees. The training incorporates coaching, counselling, conflict resolution and how to provide feedback to the employees without de-motivating them.

ROBERT LE MAIRE COMPANY LTD

Robert Le Maire (RLM) Limited was founded and incorporated in Mauritius on 25 November 1931. The company is an Importers and Merchants, General agents and providers of engineering and contracting services. It is specialized in the assembly, installation and maintenance of agricultural, mechanical, electrical and electronic equipments.

Below is the organisation chart of the company.

http://www.rlmgroup.mu/images/company_structure.gif

http://www.rlmgroup.mu/company_structure.html

Being a former employee of the company before joining the CEB I have chosen this company to elaborate on its appraisal system. As we can see from the chart above, although the company can be compared as big as the CEB (in terms of employees), it does not have a human resource department. Selection and recruitment exercises are done by the departmental managers and General Manager of the company respectively.

RLM Ltd does not a formal performance appraisal exercise. Salaries and other benefits are discussed at time of recruitment with the line manager and hence two engineers with similar qualifications and experience working in two different departments or even the same department might not have the same package. There is no formal feedback on the performance of the employees. Salary increments are decided by the General Manager in conjunction with the departmental manager.

Hence favouritism is seemed to be prevailed in the organisation.

Though working at RLM is considered to be an ideal place for an engineer in terms of experience, yet because of the lack of a well structured PMS it is very de-motivating to work with the company in the long run. Consequently, the company has a high staff turnover every year.

As compared to the CEB, in the year 2009, 73 people have left the employment. This can be attributed to normal attrition including retirements, deaths and resignation. During the same year 81 new staff members were recruited. (Annual report 2009, p 37)

To conclude the new PMS at the CEB is yet to prove itself as a transparent, consistent and equitable system. But compared to the Graphic rating method it is more transparent and consistent.

Some degree of inconsistency still exists in the new system as the 'QPCs' are based on skills, abilities and knowledge as shown in the table below.

The Appraiser judgment of these QPCs involves some degree of errors as discussed earlier.

Ideally appraisal process should always be conducted separately either for training and development or for reward outcomes of the employees. Rather than considering appraisal process as occasion for development, remoulding and encouragement to employees the reward linked appraisal results are perceived as condemnatory, punitive and distressing.

CONCLUSION AND RECOMMENDATION

Formal systems for Performance Appraisal are neither worthless nor evil, as some critics have implied; nor are they magic potion, as many managers might wish. A formal appraisal system is a required to improve organisational activities and make it transparent. Personal judgments, subjectivity and fallible human perception about employee performance are inevitable.

Employees generally require more feedback, and more frequently, than can be provided in an annual appraisal. appraisal session more than once or twice a year performance management should be viewed as an ongoing process.

Frequent mini appraisals and feedbacks sessions will help ensure that employee receive the ongoing guidance, support and encouragement they need.

Ideally appraisal process should always be conducted separately either for training and development or for reward outcomes of the employees.

Linking the appraisal results with reward outcomes purges the development value of the performance appraisal system. It can be more yielding process if reward outcome and appraisal results are isolated from each other. Rather than considering appraisal process as occasion for development, remoulding and encouragement to employees the reward linked appraisal results are perceived as condemnatory, punitive and distressing.

In contrast appraisees are inclined towards linking of appraisal results with rewards. They feel satisfied if they are linked together and think time waste and disappointed if not.

A worthy meaningful appraisal needs to be true, impartial, fair, purposeful, mutual, practical, specific, understandable, continuing and precise. It should be conducted without any discrimination like age, gender, colour, nationality, sexual orientation, race, religion, disability etc. It should be well formatted as well.

Communication is vital to any organization's success. Unfortunately, in many cases, communication is only flowing one way. Managing employees' performance depends on communication flowing freely in all directions at all times - not just once a year at review time.

Each performance management appraisal system will be different, because each company is different. However, there are some key elements which will appear in every well constructed system.

* An appraisal system should have the full support of senior management. Without this, the system will eventually collapse.

* The appraisal system should first have been piloted and then reviewed.

* The intentions of the appraisal system should be clearly communicated to all employees.

* The system should enable all employees to have clearly established objectives which are linked with the company strategy.

* The appraisal system should have simple and easily understood documentation to support it.

* The appraisal system should not be a part of the standard disciplinary procedures of the company. It must be subject to ongoing monitoring, review, evaluation and updating. As a business evolves, so must the appraisal procedures.

* The system should be adaptable and encompass all levels of employees in the company.

* A reward system should be separated from the appraisal system.

If they wish, a company can give whatever names for their performance appraisal system, which they feel most comfortable with or suit their needs best. The term 'performance appraisal' tends to set up two opposite groups---appraisers and appraisees. That may cause employees' aversion and thus become a barrier for their buy-in of the system. Therefore 'softer' or neutral terms may be considered, such as 'Joint review and action planning'.

There are two serious flaws in the traditional approach to performance appraisal. They are:

* Organizational performance appraisal is primarily concerned with the past rather than being forward looking through the use of setting objectives or goals.

* Performance appraisal is usually tied to the employees' salary review. Dealing with salary generally overwhelmed or blocked creative, meaningful, or comprehensive consideration of performance goals.

If they wish, a company can give whatever names for their performance appraisal system, which they feel most comfortable with or suit their needs best. The term 'performance appraisal' tends to set up two opposite groups---appraisers and appraisees. That may cause employees' aversion and thus become a barrier for their buy-in of the system. Therefore 'softer' or neutral terms may be considered, such as 'Joint review and action planning'.