Evaluating Effectiveness of Performance Management System

INTRODUCTION

Performance management can be explained as the measures or systems put in place to ensure that the organization and all its subsystems i.e. departments, processes, teams, employees, etc. are working together in an optimum way towards achieving their goals and the results desired by the organization (Jackson, 1999:143). This field can be broken down into two components; one looks at the performance of a company as a whole evaluating the effectiveness of top management in reaching company goals while the other is a system of evaluating employees to help them reach goals that help them develop and ensure the company performs better. This paper will look at the later type of performance management. Performance management of individual employees involves setting of goals, planning work, giving feedbacks and reviews, providing opportunities for improvement and appraisal systems for well performing employees (Scullen, Bergey. & Smith, 2005:28). This paper will focus on the case study, “Performance management at Network Solutions Inc.” to give an informed review of performance management systems and their effectiveness. This will be achieved by providing detailed responses to four critical thinking questions emanating from the case study. It will begin by giving a review of the case study and proceed to evaluate the questions presented.

REVIEW OF THE CASE STUDY

The necessity of performance management system

Network Solutions Inc. had been using more that 50 different systems of performance measurement in the company. Despite this huge number of systems, it was found that “many employees did not receive a review, fewer than 5% of all employees received the lowest category of rating, and there was no recognition program in place to reward high achievers” (Aguinis, 2009: 19). There was clear indication that the employee performance management systems that were coming at a high cost were ineffective in addressing the required issues. Being in the business of computer hardware and software, the company found that quality initiatives were driving change in a wide area of the company. It was therefore decided that such quality initiatives could be applied to improve “people quality”. Further, it was seen that linking each employee’s goal to the organizational goals would greatly help the company in achieving its objectives (Aguinis, 2009: 21).

How the system works

Due to the above mentioned needs, the company decided to adopt a forced distribution management system in which each employee would be classified into a category depending on comparative performance e.g. a rating of 1 to the top 20% of performers; a rating of 2 to the middle 70% of performers; and a rating of 3 to the bottom 10% of performers (Aguinis, 2009: 24). This system would be implemented by a global cross-divisional Human Resource team. Their plan was to begin by showing that business goals would be easily met by carrying down organizational strategy to team contributions which are translated to individual goals. This system would raise the bar on the company’s performance management by focusing on the development of all employees. This would result into raised performance for all employees, talent identification and retention, and improvement of performance expectations for all employees.

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Company support

To effectively manage this system, the team sought support from the companies top managers who were required to remain committed to the plan. They were required to stop using any other system of performance management and ensure that top leaders understood and accepted it. They were required to engage employees in talent management training in line with the new system. The result of the plan is a performance management system that revolves around a joint year round responsibility of employees and managers developing the planning phase of the system (Aguinis, 2009: 21). Managers schedule meetings which are prepared and finalized by the employees. Lowly rated employees are given time for performance improvement after which depending on their performance they could leave the company or continue with the plan. Average and best performers are given appraisals in form of salary increases, stock options and bonuses depending on the level of performance.

The next part will use four questions to evaluate how the system at Network Solutions. compares with the ideal performance management system and give an assessment of its advantages, disadvantages and expected outcomes.

OVERLAP BETWEEN NETWORK SOLUTIONS SYSTEM AND AN IDEAL SYSTEM

Question 1: Overall, what is the overlap between Network Solutions’ system and an ideal system?

To answer this question, this section will look at the extent to which the performance management system at Network Solutions corresponds with the ideal system. It will look at the process that it follows in terms of phases.

Phase 1 ­- Performance planning.

This is the stage where managers in the firm meet with the employees for discussion on the planning of the performance appraisal process. They define the behaviours and competencies expected of the employees and there is statement on what the person will achieve in the next twelve months. These goals are closely linked to the individual’s development plans. As such, the manager automatically earns the right to hold the employees accountable at the end of the year (Simmons, 2002:86). Network Solutions have exhibited this phase by calling on all the senior managers to implement such measures.

Phase 2 – Employee Performance Execution

This is the phase where employees display the actual performance that is subject to evaluation at the end of the year (Winstanley & Stuart-Smith, 1996:66). Network Solutions displays this phase which is in accordance to the ideal system where there is a performance period of one year. In this period there are regular meetings to assess progress like they do at the company. The meetings are planned by the managers in conjunction with the employers who carry out the actual execution of the developments. In the meetings there is seeking of guidance and feedback in various issues (Rector & Kleiner, 2002: 43).

Phase 3 – Employee Performance Assessment

Senior managers assess how the employees in their departments have undertaken their duties and how much of their objectives they have fulfilled. They fill the various forms and paperwork intended for these purpose and forward them to the relevant team in readiness for individual appraisals based on performance (Molleman & Timmerman, 2003: 95). At Network Solutions, the assessment is comparative with the rating being based on the performance level, e.g. a rating of 1 for the top 20% of performers, 2 for the middle 70% and 3 for the bottom 10%

Phase 4 – Employee Performance Review

In this stage, the employee performer’s appraisal form that was prepared by the manager is reviewed together with the individual’s self appraisal (Lawler & McDermott, 2003:56). There is an honest assessment of the strengths, weaknesses, successes and areas needing improvement in the past twelve months. It is at this stage that the course of action to be taken in the next year is decided. In the case of Network Solutions, a low performer would consult with the managers to decide on the modalities of the performance improvement plan.

From this assessment, it is clear that the performance management system at network Solutions overlap with the ideal system as has been demonstrated in the timeline approach taken.

FEATURES IN THE SYSTEM

Question 2: What are the features of the system implemented at Network Solutions that correspond to what was described in the chapter as ideal characteristics? Which of the ideal characteristics are missing? For which of the ideal characteristics do we need additional information to evaluate whether they are part of the system at Network Solutions?

To supply an answer to this question, the paper will identify the aspects that are characteristic of the ideal performance system and for each identify if it is present or lacking in the Network Solutions system.

Standardization: The ideal performance management system requires that the aspects of performance measured are uniform and there is a constant level of strictness (Scullen, Bergey and Smith, 2005: 27). This is meant to ensure that employees do not lack faith in their mangers and the system that might result from variations. The system at Network Solutions exhibits this aspect when the team ensures that the managers drop the previous systems and they offer training so that they can understand and apply it uniformly.

Validity and conciseness: this means that the performance management system only measures what is valid at hand. The evaluation criterion therefore makes sure that employees are evaluated only in issue that regard their line of work (DeCenzo and Robbins, 2010: 214). In this case, the team of performance managers ensures that this is done by asking senior leaders to tailor new programmes applicable in their divisions. Hence the evaluation procedure in say the HR department is not the same as that in a technical field.

Due process: this means that there are set guidelines that determine how measures are taken after the evaluation. In the case of network solutions, employees who are lowly rated are a given a specified time period to improve their performance (Fisher, 1995:55). If they do not improve, they can choose to leave the company with a severance package or take up a performance improvement plan. If this does not improve their performance they leave without a severance package. There is also set guidelines that dictate the appraisal of good performers with high salary increases, stock options and bonuses.

ANTICIPATED RESULTS FROM IMPLIMENTATION OF THE SYSTEM

Question 3: Based on the description of the system at Network Solutions, what do you anticipate will be some advantages and positive outcomes resulting from the implementation of the system?

The real value purpose of employee performance appraisal in the organization is not only to transform the management of employee performance from an annual event to an ongoing cycle but also to harmonize the organizational goals with those of member employees (Cardy, 2004:128). The performance management system that the company adopts is fully geared to achieve this end. The systems will therefore yield immense advantages and positive outcomes. These will include the following:

Goal setting: the system helps employees understand the link between their responsibilities and the overall objectives of the organization. The habit of goal setting is inculcated in both the managers and employees. This results into greater efficiency and provides a good tool of analysis (Luecke & Hall, 2005:100).

Communication: the system that the company adopts will encourage good communication between managers and employees. The communication about work performance creates a sense of security for the employees and helps the company in retention efforts. It provides ample time for all employees to learn and grow throughout the year. This fosters an organizational culture ().

Motivation: the appraisal system acts as tool of motivation since employee rewards are tied directly to performance. This enhances the company’s productivity and efficiency. Employees who know that their presence and contribution is valued may feel more committed to the job and the organization as a whole (Pulakos, 2009: 212).

POSSIBLE DISADVANTAGES AND NEGATIVE OUTCOMES

Question 4: Based on the description of the system at Network Solutions, what doe you anticipate will be some disadvantages and negative outcomes resulting from the implementation of the system?

The following are the possible disadvantages associated with this system of management performance:

Risk of Internal Competition: this system might encourage employees to compete with each other for job status, position and pay (Molleman & Timmerman, 2003: 101). Teams might be broken down by backstabbing and misleading employee communication due to strong rivalry which would result to dysfunction and underperformance within the team.

Expenses and time: this system requires that employees are given rigorous training to equip employees with skills as required by the plan. This requires the use of extra resources and time in the extensive training, retraining and career development workshop for every division and employee division (Scullen, Bergey and Smith, 2005: 34)

Favoritism: due to the rating of employees, there emerges individuals who are viewed as key and they are increasingly entrusted with new job roles and duties as team leaders. This creates dissent and distrust among the team members which might adversely affect the morale and satisfaction ((Luecke & Hall, 2005:108).