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According to Armstrong and Baron (2004) performance management is "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". It was Dr. Aubrey Daniels who coined this term in 1970s and did so to "describe a technology (i.e. science imbedded in applications methods) for managing behaviour and results, the two critical elements of what is known as performance" . ^Â Daniels, Aubrey (4th edition, July 2004).Â Performance Management: Changing Behavior that Drives Organizational Effectiveness.
In order to manage performance one needs to understand the needs of the employee and the need of the task. In other words it requires a balance between compassion and accountability. Modern managers try hard to strike a balance between these two things according to the circumstances. They do so by judging the situation from every point of view and then deciding on an appropriate course of action.
Performance management as a tool ensures that managers manage efficiently and the team they manage knows and understand what is expected out of them. This way the manager knows about the skills and ability of the team members, and thus can target out those who do not come up to these expectations. Organisational support to these team members helps them to reach these expectations on the bases of the feedback. These feedbacks give them a chance to improve upon. This also makes the managers aware of their own behaviour and its impact on the team which in turn makes them identify and display positive behaviours.
Therefore we can say Performance Management is about creating aÂ cultureÂ which allows individuals and groups to take responsibility and thus continuously improve their own skills, behaviour and the business. In this, one has to share expectations. A manager should clarify what they expect and individuals and teams should tell how they should be managed. Thus it is aÂ jointÂ process involving a lot of planning.Â
How does performance management Designed and Reviewed?
Because performance management is so widespread and a necessity, there is a need of a structure in order to support it. This structure provides a framework in order for senior people to operate and help others. Obviously it is not a rigid framework but has some flexibility which is beneficial for both the company and the individual. Since it is a
process and not an event, it operates in a cyclic manner.
There are many 'off the shelf' performance improvement tools available in the market. These tools help in management and application of strategies. The major ones include European Foundation for Quality Management (EFQM) Excellence ModelÂ®, Charter Mark, Investors in People and ISO 9000. There are many more tools available in the market and information about them is available on the website: http://www.vision2020.info.tt/pdf/
The main starting point of PERFORMANCE MANAGEMENT is the 'corporate strategic goals'. The commitment analysis helps in drawing of mission statement for every job and this provides the guidelines to the department so that they can have their own goals related to 'corporate strategic goals'. Mission statement includes information like customer group, product, purpose of the goal and scope of the product in the market. The main purpose of this analysis is to find out the key objectives and performance standards. ^Â Hill, Ch., Jones, G. Strategic Management. Houghton Mifflin Company: New York, 2008. ISBN: 978-0-618-89469-7, page 11. This is followed by an agreement of these guidelines by both the employer and the employee. All of this leads to the drawing up these plans, constant monitoring after implementation and feedback supported by formal reviews.
Why is PERFORMANCE MANAGEMENT necessary in an organisation?
Performance management can significantly enhance the performance of any organisation if it is carried out in the right manner. It plays various roles. In general it assesses how well the task has been done by creating a set of goals or objectives. For example "investment performance measurement" which is a serious part of any "portfolio management process", measures how good a specific strategy did compared to the guidelines and parameters set before it is launched. It also measures how good the team did and how well it executed the decisions. Since Investment performance measurement is a methodical process which not only analyse return but also finds how good the returns were as compared to other portfolios, it helps in answer may other questions like what were the contribution of the securities, how much profitable was the trade and most importantly if the portfolio manager is effective or not.
In today's world, PERFORMANCE MANAGEMENT sticks to industry standards allowing easy comparison against similar portfolios. There are many international guidelines like the "Global Investment Performance Standards" (GIPS), which have been standardized in order to both calculate and report the performance. These standard guidelines answer many questions and provide the company with directions in order to find out what strategy and who all are beneficial to the company and who are not beneficial. These standards also help them find out the anomalies occurring in the business which in turn helps the manager interpret and understand the performance in an easy manner.
PERFORMANCE MANAGEMENT not only allows the calculation of the portfolio's return but also from where and how the returns originated. It also answers questions about 'luck' as in if the returns were due to manager's skills or by chance. Also the strategies can be monitored, i.e. if they are being followed in the style agreed in the beginning or there have been some changes in it since its initiation.
Therefore PERFORMANCE MANAGEMENT helps the company answer questions like; what is the description of performance in the company? In other words how can the company describe performance standards? What tools are required by the company to measure these performances? What benefits should be given to the stakeholders and who are these stakeholders? And how can the effects of performance management be measured and appraised?
Difficulties that arises in PERFORMANCE MANAGEMENT .
There are various difficulties that can arise with the implementation of PERFORMANCE MANAGEMENT. These may include stating clearly the corporate goals, agreeing on these goals, drawing up these goals as plan, monitoring these goals, monitoring reviews, time management, agreement on the feedback given etc. the list can go on as since this is a process rather an event there can be obstructions at every step.
In layman's term the difficulties can be divided into two categories, one that can be checked and rectified immediately like the ones mentioned above, or the types which have a broader aspect to them. These (along with the strategies to overcome some issues) will be discussed in the following paragraphs.
1. Programme outcome is difficult to measure:
There are certain cases because of which the difficulties increase for a performance manager. Situations like in which the program purpose is not clear; the beneficiary of the program is not defined; there is a difference in opinion between the stakeholders themselves; some data is missing or not available etc increases the difficulties. Then there are difficulties which arise because of the broadness of the outcomes. These outcomes, in certain situations, are inherently tough to measure because we have problem understanding the things we are measuring in the first place. A good example to understand this can be programs aimed to address the foreign policies. If we understand 'why' these programs are important, the scope of the problem can be understood. One has to again examine the fundamental questions about the program and ask 'why'. Following questions can help us explain the true purpose of the program and its outcome.
â€¢ Why is funding important to this program?
â€¢ Why do we have to give importance to program operations?
â€¢ Why is the program doing what it does?
â€¢ If the program is successful, what types of problems can it solve?
All this in turn helps us understand the things we are trying to measure in the first place. It will also help to identify the core issues which make the measurement difficult.
2. There are many other programs which contribute to the same outcome.
Sometimes it so happens that many federal programs, which includes programs from private-sectors, foreign countries, government (Federal, State, local), and non-profit organisations, all contribute to achieve the same goal. Example we can take here are international peacekeeping, highways, schooling and education, housing, food and water related programs. The problem faced here is to balance the goals which are specific to a company and the ones which are shared at a broader term with the other organisations. An approach regularly used to make the life of the performance manager easy is to have a broad but measurable outcome goal for the whole program and also to develop program-specific performance goals. Information about the whole program can mostly be available on national data systems whereas program-specific information requires targeted data collection.
Sometimes there are programs which are working together but they provide different outcomes. It is important here to have the outcome related questionnaires, data, information etc ready in order to avoid confusions. On other hand there are funding issues in which many organisations are working towards the common goal but are sharing the funds, which is mostly the case in government strategies in which the federal, state, and local organisations all contribute towards a common goal. All of these increase the performance measurement difficulties as the number of questions to ask increases.
In order to reduce the stress on the performance manager the questions that can be asked are:
â€¢ Are the overall efforts going in the right directions? What are the outcome measures? And what is the status of the evaluations?
â€¢ What is the contribution of the main investor and are these investments making any difference? Can there be a comparison between time when there was no funding available and how it differs from now?
â€¢ How are the funding shared between investing and the non-investing partners? And what are the advantages of this sharing? Is the sharing utilised in the manner it should be?
3. Results not available for many years:
In certain cases the results of the work are not available for until many years later. The best example is Mars exploration by NASA or research in scientific field like Biology or Chemistry. This increases the work load as now there will have to be more short and medium term goals which have to be measured for performance. The major loss is of finances involved in continuous measurement of performance.
In order to tackle this, organisations identify output-oriented benchmarks which vary in length from short-term to medium-term and in doing so they reach the long-term goal. The main problem that arises here is to make these benchmarks meaningful, measurable and linked to the output. In case of NASA it offers less complications as the steps are predefined and approachable but in cases of research in science, where the outcome of an experiment is not certain or unexpected at times, it poses as a problem. In these cases merit-based reviews are suggested to be followed by an organisation.
4. Programs related to prevention of specific behaviour (Drugs/Terrorism).
Programs of these kinds are difficult to measure due to variety of reasons. These kinds of programs are affected by many other related factors. For example, in order to measure the efficiency of coast guards drug interdiction, one would look at the number of seizures and the reduction of drugs entering the country. A high seizure rate might indicate that the strategies applied by them are effective. But if the drugs entering from land border increases and the rate of seizure reduces down by the coast guard, it does not mean that coast guards are not working properly, it means that there are other factors involved which are either hampering the outcome or deterring/improving it.
Then there are programs in which failure is not an option. For example, prevention of terrorism/nuclear accidents. Here as long as there are no incidents, the program is considered a success. The main problem that arises here is in the applications of proxy measures which can be many in number in order to keep a strict check. Failure in one measure though will not lead to the accident but will indicate where the leak is in the pipeline. The example here that can be given to explain this is of nuclear reactors. There are many check points which ensures the safe working of the plant and safety of the people working in there.