Performance management is much more than appraising individuals work. It is managing the business using the natural process of management. The performance of every team member influences overall performance of an organisation. Performance management system (PMS) enables employees to optimise their performance and thus impact on organisational performance. PMS seek to achieve the best possible results by understanding and managing activities of employees for planned strategic goals. Bricoe & Claus (2008) propose that Performance management is the system through which organisations set work goals, determine performance standards, assign and evaluate work, provide performance feedback, determine training and development needs and distribute rewards.
The purpose of this report is to discuss the three general purposes and criteria for effective PMS which links employee activities with organisational goals and also evaluate the fairness of PMS. This report also discusses the advantages and disadvantages of PMS and then discussing about source for evaluating PM of sales assistance in organisation.
This report evaluates the PMS focusing on three general purposes: Strategy, Development and administrative as well as five criteria: Validity, Strategic Congruence, Adaptability, Specificity, and Acceptability for effective Performance management. By examining the relevant research on the PMS, recommendations will be formulated.
2.0Performance management Framework
2.1Three general Purposes
A Performance management system includes vision and an articulated strategy. Managers usually spent vast amounts of time monitoring past strategy rather than looking into future strategy. Planning is term such of strategy, mission statement, philosophy and helps to define its purpose (Fletcher & Taplin 2002).
According to De Waal, Kourtit & Nijkamp (2009) performance management is the process of achieving organisation's goals through planning, development and making it possible through success factors and key performance index, in order to track performance of the organization. De waal and Counet (2008) suggests that a high level of performance relies on both the level of engagement and capability. Engagement can be determined by contribution to the overall strategy, regular feedback and support for organisational development.
2.1.1 Strategic Planning
This is the first and foremost process to achieve high performance in which employee activities should link with the organisation's goals. According to Holloway (2009) strategic performance management is defined as the process where organisation goals are translated in terms of mission statement, strategy and objectives of the organisation and making it possible through Key Performance Index (KPI) and factors.
De cieri and Kramar (2005) found that organisations should have 4-5 performance objectives that reflect key aspects of performance.
Building the culture and capability of people to sustain performance
The effective execution of strategy and organizations processes
Achieving customer goals
Safety and compliance
For best outcome employers should outline the expected behaviours and values of the organisation.
In particular, for strategic planning the managers should consider the following goals:
Technical Knowledge or skills company require.
Managers demonstration of values and Behaviours and leadership Skills.
How managers personal goals are aligned to their department and business goals.
Use any feedback (e.g. 360 degree) to help identify what will have the most impact.
Employee activities are linked with organisation goals whether they are working well or not. Development activities are much more than training: it can include exposure to different parts of the business & other people, coaching and experience in managing different tasks, projects and tasks, projects and roles (Hartel, 1999). In organisaiton Team members and Line managers should review progress against the performance objectives using the milestones & measures. Reviewing how team members are progressing with their development goals and activities and making any modification required and discuss what needs to happen to achieve development goals are all part of the PMS. Seek further feedback from peers, customers, managers and directs reports (Such as 360- degree feedback) for improvements. Development is essential for success for organisation and also for team members for their career.
This is the administrative purpose used to make decisions related to salary, promotions and recognition of team members performance. The role of HR in PM is crucial. According to Armstrong (2009) HR roles is to encourage and facilitate the productivity and efficacy depending on both employee and team for performance dimensions in this level (Poister, 2003). In order to send the organisation message to employees it is important to provide them with incentives, compensations and rewards.
According to De Cieri & Kramar (2005) there are five criteria for evaluating PMS.
2.2.1 Strategic congruence
By strategic congruence De Waal, Kourit & Nijkamp (2009) means organisation goals and strategy mutually are consistent with job performance in PMS. Balance score card the one system for developing strategic congruence. It is the one way where organisation can link their goals, strategy and actions for improvement. In other words this is the process of sending an organisation message to the employee for high achievement. Conveying this message appropriately to employees is then an essential step.
PMS should have valid information and data, which can be used for effective performance management.Validity is the extent to which all the relevant and only relevant aspects of performance are assessed in PMS (De Cieri & Kramar 2005). For PM to be valid it has to be neither deficient nor contaminated. Deficient performance measure does not measure all aspects of the performance and contaminated measures aspects that are not job related.
Reliability refers to the consistency of the PM. For example there should be some information and data relating to potential of the employee for promotions. There are two type of reliability in PMS (De Cieri & Kramar 2005). One is 'Inter -rater reliability' and second is 'internal consistency'.
Inter-rater reliability refers to the consistency among the individuals for PM of the employee's. Internal consistency refers to the number of information used for Particular employee performance measure.
Acceptability in terms of PM is described as the acceptability of the employee to be evaluated for effective performance. It is affected by employees believe on fairness of the PMS. If employees see the PMS as unfair if discourage them to improve PMS, So for that PMS has to be legally compliant.
Specificity is the extent to which the PM gives guidance to employee about employers expectation for high Performance. Specificity is relevant for first two purposes of PM. If specificity does not describe what an employee should do to achieve high performance then it is very hard for employee to correct the problem in PMS.
3.0 Fairness of Performance Management
Williams (2002) defined fairness in terms of employees and is commonly related to the rewards and other benefits (e.g. Promotions, Bonuses and rewards). Fairness is perceived by the employee as a situation where both sides agree with the PMS. It means performance evaluations as fair if it is based on performance achieved. In other words Performance evaluation is fair only if:
Employee input is solicited before the evaluation and is used.
There must be Two way Communication during evaluation
Employee has rights to challenge.
3.1 Procedural fairness
Procedural fairness is used to minimize the rating errors and biases when evaluating different employees. It also gives opportunity for managers and employees to participate in development of the PMS
3.2 Interpersonal fairness
Interpersonal fairness Provides timely and complete feedback for improvement of the PMS. It also allows employee to challenge the evaluation if they think it is unfair for them.
3.3 Outcome fairness
Outcome fairness is related to performance of employee in regards of rewards. It communicates expectations of employers in regards of the high performance.
4.0 Impact of Performance Management
This section will describe the advantages and disadvantages in implementing the PMS. There are Negative and positive factors affecting Performance management.
4.1 Negative factors
4.1.1 Managers Commitment
Management put low priority in measuring PM
According to Daal & Counet (2008) due to the daily working pressure environment, delay the development and implementations of the PMS is often a case.
Lack of management and staff commitment
Bourne (2005) suggests that if management and staff don't see any benefit for them in implementing PMS, the implementation will be delayed and the new Performance system will be under utilised.
4.1.2 Internal resources
Introducing a new performance management system needs a lot of time and effort from each members of the organization. Mintzberg (2004) maintained that usually implementing a new system requires enough resources (Budget) and people. Often organisation can not free up this requirement resulting in delays in the implementing system.
4.1.3Lack of knowledge and skills in regards to the PM
In the organisation if employees do not have required skills and knowledge to work with the new PMS because of they have not been trained in the new working system the PMS will fail to achieve goals.
4.1.4 Too many measures for PMS
If there are too many KPIs in the organisation and members do not have an adequate time to work on each indicator, the system may also fail. If the KPIs are not linked to the particular areas and members do not feel responsible for the indicators then the PMS can appear irrelevant.
4.2 Positive Factors
4.2.1 Performance-oriented culture
Organisation culture is an important factor for effective performance management (Martinez et al. 2008). Culture can be an positive factor in conveying organization goals to the employee. A positive approach to performance oriented culture will improve customer satisfaction.
4.2.2 Employee engagement
If Members of the organisation have a positive attitude towards the implementation of PMS, this can have an impact on the success of the organisation in terms of Revenues, sales and profit (Johnsen 1999, Keenan 2000).
4.2.3 Maturity of PMS
Recent research by Martinez et. al.(2008) shows that the level of maturity of the people responsible for the PMS will affect it success. They defined maturity as years of experience in implementing and measuring the PMS.
5.0 Sources of Evaluation
To say what the evaluation criteria might be is one thing, but how actually to collect the data is quite another. This section will discuss about the sources for performance measurement which are used in the retail industry (Kmart) in Australia for High performance management. Customers, Sales Reports, Peers, Manager, Subordinates (depending), Previous PMAs, Self, Job Description
Customer Intimacy (customer)
Store Management (managers)
Financial performance (sales reports)
5.1 Passion for sales and Merchandise
5.2 Customer Intimacy
In the service industry due to daily work pressure peers, supervisors and subordinates do not have enough time to observe employee activity so customer intimacy is the best source to evaluate performance of the employee.
In Kmart there are two criteria to evaluate employee performance using customer feedback.
Provide fast and efficient service
Another source of performance evaluation is Co-workers. The involvement of peers in evaluation is also very useful source and becoming popular. In Kmart appraisal by peers means a lot because peers are the source who has unique insight to look in individual team contribution.
Professionalism is the source where employees have been evaluated with regards to store standards (e.g. in store presentation and Cleaning) in Kmart. Employees have to ensure disciplined execution of business initiatives in an effective and timely manner.
5.5 Store Management
Managers are the most frequently used source for evaluation. In Kmart Store manager will have a look at sources (Passion for sales and Merchandise, Customer Intimacy, Peers and Professionalism) for evaluation of team members and Line managers.
5.6 Financial Performance
5.7 KPI Performance
The purpose of KPIs in Kmart is to empower employees to use the information to assist them to improve performance. Each team member will select the KPIs related to their own efforts and actions. There are two criteria for selecting KPIs in Kmart:
Critical Success factors of the organization and how the team can achieve those.
The ability of the team to take action on the information.
Often PMS is viewed as lacking validity, as being too subjective, or merely as a being mechanism to justify salary or other personnel decisions. Resistance to carrying out the appraisal program can stem from the following recommendations:
Resistance to giving face-to-face feedback
Preference for "looking forward" rather than "looking Backward".