Performance Management In An Organization Management Essay

The purpose of this report is to understand the implications and importance of performance management in an organization by referring to articles that explain some of the best practices adopted by organizations.

This report includes the process of reviewing a performance, reasons to conduct a performance review, understand the different methods of performance review by referring to the articles and other sources and evaluating the same to adopt the appropriate methods as per the organization’s goals.

It can be witnessed through the report that while there is a need for performance review by an organization, for it to meet its goals, it should also be seen as a way of learning and developing for the employee as well, both personally and professionally.

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Lastly, this report speaks about some of the adopted practices that have not worked favourably for an organization and the reasons for the failure of such practices in an organization. This report also recommends best practices for an effective performance management by creating a link between the goals of the company and employee’s career goals.

Introduction:

Performance management is the most difficult process for a manager in an organization yet it is the inevitable part of an organizational process. Performance management is defined as “the process of recognising, gauging, managing, training and developing the performance of the human resources in an organization” (Performance Appraisal & outcome Chap 8 Page 285). Basically it’s the process of creating an environment where people perform to the best of their ability in order to meet the company’s goals. Line managers or bosses usually evaluate their sub-ordinates to gauge their performance.

Performance management needs are different for different people. So, trying to meet individual requirements and helping employees grow through their career trajectory achieving company’s goals is the role of performance management in an organization.

Steps in the Performance management Process

Planning

Identify & align organizational objectives with the employees

Set the standard and behavioural expectations

Understand their skills and set achievable goals

Review

Formal Performance Appraisal by Manager or Boss

Ensure everything is documented

HR decides on promotion, bonus etc. based on the performance review

Coaching

Training & development if necessary

Performance feedback on periodic basis. Keep two-way communication channel between appraise & the appraiser about performance throughout the cycle

Reassess the performance

Performance Appraisal:

Performance appraisal, which is an important part of performance management systems. It is an annual or bi-annual process in most of the companies where an employee is evaluated based on his/her job responsibilities (George Bohlander Chap 8 page 322).

Steps followed during the evaluation are:

Job analysis needs to be done to understand the job of an employee in order to assess him/ her performance

Standardized measurement methods needs to be identified and define methods to measure the performance

Regular feedback to employees and identifying their coaching & training needs

Final appraisal review process which is usually done once a year.

However Appraisal cannot have a narrow outlook. Although the task oriented capabilities are extremely important to any organization but Identifying non-task contribution of an employee such as Organizational citizenship where the employee supports/helps other co-workers after work hours in their jobs, trying to meet the moral & Ethical standards of a company, maintaining integrity with the customers and also their emotional quotient which is equally important to their technical skills. As interpersonal skills, sociable behaviour leads to a healthy work culture. (Yuk Lan, W., & Snell, R. (2003). Employee Workplace Effectiveness: Implications for Performance Management Practices and Research. Journal Of General Management, 29(2), 53-69)

The article referred here does not mention the tools or the ways to measures non-task oriented contributions. They do suggest 360 degree feedback as a way to measure the employee’s contribution; but it still does not give us any qualitative analysis or a holistic picture to assess an employee. For example: The customers you work with do not really come out and give an honest feedback in many cases, in such cases it gets difficult to differentiate any contributions between 2 employees. Also, open communication system could hamper employee boss relationship in case it’s not done effectively. Hence every organization should have a systematic approach to measure both task and non-task oriented contributions. The “HR Services” of an organization need to provide training & development in the area of employee feedback for its managers and leaders. During the training identify the key points to be addressed during the feedback session:

Specific examples of desirable and undesirable behaviour can be quoted. Try and relate to real life example to bring clarity in the mind of an employee.

Focussed feedback on behaviour and not on the person. This way he could be more receptive to feedback.

Framing the feedback constructively is an important aspect .Employee needs to learn that managers are there to help them build and grow in their career.

Timely feedback at the time of the event is an important aspect in performance management.

Keep it an open discussion so the employee feels involved & engaged in the conversation.

Implementing a process in an organization is usually costly. So what’s the reason company’s still prefer performance appraisals? Does it bring any value either to the organization or to an individual?

It’s been said that ” what gets measured get done” for instance when we know our exam papers are scored & evaluated we strive hard to perform better but on the other hand if there were no grading system in place many of us would not spend time to enhance our performance

Organizations adopting strong performance systems are likely to outperform their competitors in the areas of revenue, growth, productivity, profitability and market value. This is why it’s a good practice to continue appraising employees even during the downturn to keep the momentum of the employees and reward them when situation gets better.(Bidya, D. (2009). A study on Performance Management through Recession Metrics during Downturn. Advances in Management, 2(10), 27-30)

Below table show the common purposes of performance Appraisal:

If the appraisal is done in the right manner, they give us a very valuable feedback on employee performance. If done incorrectly, it leads to dissatisfaction and reduction in employee productivity.

Uses of Performance appraisal

Organization has many benefits of a good performance appraisal system:

Salary administration

Performance feedback

Identification of individual strengths and weaknesses

Documentation of personnel decisions

Recognition of individual performance

Determination of promotion

Identification of poor performance

Assistance in goal identification

Decision in retention or termination

Evaluation of goal achievement

Meeting legal requirements

Determination of transfers and assignments

Decision on layoffs

Identification of individual training needs

Determination of organizational training needs

Personnel planning

Reinforcement of authority structure

Identification of organizational development needs

Establishment of criteria for validation research

Evaluation of personnel systems

Conventionally only performance appraisal was viewed as part of the performance management. But, career planning has a direct link with performance management as well. Deloitte one of leading consulting firm in the world adapts this. They understand Career planning is one of the most important aspects of performance management. Besides pay, career planning is another driving factor for many employees to perform better. An organization with transparent and performance oriented career planning has positive outcomes in terms of employee retention, recruitment etc. With fierce global competition and scarcity of skilled resources company’s need to find various ways to keep the employee motivated through performance management aspect of career planning (Ahmed, P., &Kaushik, M. D. (2011). Career Planning – An Imperative for Employee Performance Management System. International Journal of Business Insights & Transformation, 4(2), 102-109). While trying to meet the manager’s & organizational goals employees should be allowed to build their individual capabilities to follow their aspirations and these aspirations need to be considered at some point of time during the employee’s stint with the company. This will ensure employee loyalty thereby lowering attrition and reduces poaching by competitors.

The article does mention training & development and compensation package. However it does not go deep in to explaining their co-relation with career planning & performance management. As career planning requires training & development to align with new path and also proportional increase in salaries, organizations implementing Performance appraisal must consider Career Planning & development as a link to performance.

Like Deloitte, companies need to consider career Counselling aspect as well. External and internal career counselling helps in having healthy discussions with the employees to understand their career development needs and aspirations. Deloitte’s competency based performance management helps to create career plan by means of a counselling sessions and then an appropriate training and development plan can be charted to facilitate employee growth.

Career development also considers certain aspects such as career mapping, succession planning and management development. Hence a good connected performance system has the capability to influence employee’s behaviour and improve organizations performance

Some of the effective methods of performance appraisal methods are:

360-Degree Appraisal system: Many companies such as Intel & Morgan Stanley combine various factors of performance appraisal system to create a 360 degree appraisal& feedback system. This method provides the employees with accurate information by getting feedback from all angles such as customers, peers, manager, sub-ordinates etc. Hence this type of feedback from multiple sources helps employees in self-development and prepares them for global competition such as customer satisfaction, interpersonal skills etc. The feedback is more for developmental purpose rather than evaluation purpose. This method involves more than one factor than a typical appraisal system hence it can get complex. Also, this method opens up the communication between 2 individuals (Salunke, G. N. (2010). Colleagues, Managers, Customers and Competitors Keys to Development: 360 Degree Approach to Development. Advances In Management, 3(8), 32-35)

The article does not consider other forms of performance appraisal during the discussion .Also it does not define any aftereffects or the next steps ones the all-round feedback is implemented.

However an organization should either hire people with cutting edge skills or develop through training to meet the organizational requirements, by adopting an effective system of assessment

Pros

Cons

Response gathered from multiple sources

System is complex

Increase TQM initiatives

Feedback could be intimidating to many employees if there is a Bias

Increases employee self-development

Conflicting opinions

Graphic Rating Scales: Each characteristic is represented on a scale on which a manager indicates degree to which an employee possesses these traits or characteristics. They are relatively easy to develop. It’s significant to precisely define the points on the scale which reduces any subjectivity bias.

Critical Checklist Method: As the name suggests the manager logs all the unusual success or failure events of an employee throughout the year. For example Business development manager winning a huge contract of a significant dollar amount will be recorded by his supervisor. And while completing the Appraisal form manager refers to his logs and uses this information to substantiate an employee’s rating.

Management by Objectives (MBO) : is a process of defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization in order to achieve them

The two methods that had the greatest potential were the work behaviour system and Management by Objective. Eventually, considering the positives of these two models, there was a dimensional feature included and both the models were combined to give a better output. In this method, not only the supervisor appraises the employee but the employee would also himself. Both the ratings are then compared and then mutually both , manager and employee would complete the performance cycle and cover the key development areas.

Balance Score Card Method (BSC): We have tried to explain Balance scorecard by taking an example of a huge organization which currently implements BSC successfully.

Performance management System at TATA Consultancy Services:

TCS follows an effective Performance management system which is rigorous and effective. Although it’s a tough task for a multinational company with lakhs of employees having difference culture. TCS follows a Balance scorecard system to evaluate its employees. It takes into account 4 related categories financial, customer, process and learning. Here the individual can actually see a big picture as how his/her performance ties to the overall performance of the firm. In BSC, broad corporate goals are translated into different verticals or departments & down to team’s goals in a cascading way. Aligned corporate strategies to each individual performance & is measure against revenue, growth, and cost .Internal process that TCS excels in where employee contribution is measured against creating and sustaining value. TCS focuses on customer perspective on how to differentiate our proposition to enhance business of our partner. Finally learning perspective, which enables company’s vision to be aligned with personal learning & TCS conducts many training session job related as well as trainings on personal growth to maintain a healthy work atmosphere.

TCS conducts performance twice a year:

1. Half yearly/End of project

2 Yearly

Appraisal is done based on objectives which are aligned with both the company and managers goals.

TCS’s performance appraisal process is maintained by an system called the Human Resource Management System (HRMS)- an Oracle Developer based tool. The system has the details maintained for all the employees. TCS makes sure its feedback process is on-going but a formal one happens at the mid of the year or end of a project.

Steps to efficient Balance Scorecard Method that companies follow:

Set an achievable objective

Assign measures to the objective

ensure strategy is understood and cascaded to all employees

Performance feedback based on measures.

Encourage for employee to focus on performance improvements

Re-evaluate the strategy if required

There are many more methods:

Essay Appraisal – A supervisor writes about the strengths and weaknesses of the subordinate

Forced choice – The rater chooses the best and least fit statement from the a group of statements that according to him describes the employee’s performance or behaviour.

Assessment Centre: Wherein employees have to go through a series of exercises , the same is observed and evaluated on an individual basis.

Why appraisal programs sometimes fail?

Some of them fail because of lack of top management information & support Many employees consider appraisal programs as a demotivater because it focuses on task orientated approach rather than team. It creates competition amongst team member to outperform each other thus creating conflicts. Often time’s appraisal process is never taken seriously in an organization.

(Sims, J. P., Gioia, D. A., & Longenecker, C. O. (1987). Behind the Mask: The Politics of Employee Appraisal. Academy Of Management Executive (08963789), 1(3), 183-193. doi:10.5465/AME.1987.4275731) one of main concerns employees have about appraisal system is its Fairness. Because appraisals are tied to the monetary benefits, career & growth in an organization there are high chances of rating getting manipulated here. In fact in my previous company my appraiser never believed in the company’s appraisal system, based on his judgement he uses to have his best man appraise rest of team members. Its important managers believe in the appraisal system to be honest try to look at the appraisal system as a motivational factor for their sub-ordinates and do not look at it like another bureaucratic system to just get through. As people rise through the ranks, process becomes less objective and more political because stakes are higher.

Inflating Appraisal: many managers look at the appraisal process as a motivator to their teams productivity, some think emotional rather than rationally and hence enhance their grades. Many executives inflate the rating just to get rid of the person called “UP & Out” tactic, when they fail to deal with the performance problem.

Many a times in an organization employee shows no improvement in his performance and managers deflate the appraisal to show they mean Business.

If top executives intentionally manipulate the rating, its sets as a culture and sub-ordinates tend to follow the culture. Appraisal programs fail in many organizations because politics is a reality in today’s competitive world. So, instead to trying to focus on eliminating politics, we will have to see how effectively we can manage politics for the betterment of an individual and an organization.

Conclusion:

Performance Appraisals is not only an evaluation process of a person’s performance with reward / punishments as an outcome of it. Rather, its intent is to align and improve the performance of an individual to meet the overall organizational goal.

A good Performance Appraisal should

1. Serve as holistic measurement system -impartial & impersonal and can be used across the organization

2. It should provide a way to create an effective individual development plan, completely tailored to individual needs and aspirations

The supervisor and employee should couple together to have a free flow of discussion on strengths, weaknesses, career aspiration and competency gaps, this reciprocation and involvement is important for performance management to yield any benefits.

Different forms of appraisal systems can be used to conduct the performance appraisal. 360 Degree Feedback enhances the effectiveness of the performance appraisals by providing a all-round view of the employees accomplishments.

The difference between the Standard Performance and Actual performance gives rise to training needs. Training and Development is about imparting knowledge to improve the skills and abilities of the employees to meet the current or future competency needs.

In all, the performance appraisal and the performance management system should help an employee in achieving the results efficiently and effectively thereby also fulfilling the organizational goals. Constant learning and improving based on the performance appraisal allows for more effective decision making followed by leading and influencing larger teams to achieve their goals.