Performance Management

Performance management (PM) is the process of ensuring that a set of activities and outputs meets an organization’s goals in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, an employee, or the processes in place to manage particular tasks. Performance management standards are generally organized and disseminated by senior leadership at an organization and by task owners, it can include specifying tasks and outcomes of a job, providing timely feedback and coaching, comparing employee’s actual performance and behaviors with desired performance and behaviors, instituting rewards, etc. It is necessary to outline the role of each individual in the organization in terms of functions and responsibilities to ensure that performance management is successful.

Benefits of performance management

Managing employee or system performance and aligning their objectives facilitates the effective delivery of strategic and operational goals. Some proponents argue there is a clear and immediate correlation between using performance management programs or software and improved business and organizational results. In the public sector, the effects of performance management systems have differed from positive to negative, suggesting that differences in the characteristics of performance management systems and the contexts into which they are implemented play an important role to the success or failure of performance management.

For employee performance management, using integrated software, rather than a spreadsheet-based recording system, may deliver a significant return on investment through a range of direct and indirect sales benefits, operational efficiency benefits and by unlocking the latent potential in every employee work day (i.e., the time they spend not actually doing their job). Benefits may include:

Direct financial gain

• Grow sales
• Reduce costs in the organization
• Stop project overruns
• Aligns the organization directly behind the CEO’s goals
• Decreases the time it takes to create strategic or operational changes by communicating the changes through a new set of goals

Motivated workforce

• Optimizes incentive plans to specific goals for over achievement, not just business as usual
• Improves employee engagement because everyone understands how they are directly contributing to the organizations high level goals
• Create transparency in achievement of goals
• High confidence in bonus payment process
• Professional development programs are better aligned directly to achieving business level goals

Improved management control

• Flexible, responsive to management needs
• Displays data relationships
• Helps audit / comply with legislative requirement
• Simplifies communication of strategic goals scenario planning
• Provides well documented and communicated process documentation

Application

Performance management principles are used most often in the workplace and can be applied wherever people interact with their environments to produce desired effects schools, churches, community meetings, sports teams, health settings, governmental agencies, social events, and even political settings.

The way performance management is applied is important in getting the most out of the group. It can have a positive impact on how employees perform on a day-to-day basis. In order to avoid a negative impact, it must be applied in a way that does not encourage internal competition, but rather teamwork, cooperation, and trust. This is done through an implementation process of clarifying the work that has to be done, setting goals and establishing a performance plan, frequently providing coaching, conducting a formal review, and recognizing and rewarding top performance.

An effectively implemented performance management system can benefit the organization, managers and employees in several ways as depicted in the table given below:

Organization’s Benefits	Improved organizational performance, employee retention and loyalty, improved productivity, overcoming the barriers to communication, clear accountabilities, and cost advantages.
Manager’s Benefits	Saves time and reduces conflicts, ensures efficiency and consistency in performance.
Employee’s Benefits	Clarifies expectations of the employees, self-assessment opportunities clarifies the job accountabilities and contributes to improved performance, clearly defines career paths and promotes job satisfaction.

Managers use performance management to align company goals with the goals of teams and employees in an effort to increase efficiency, productivity, and profitability. Performance management guidelines stipulate clearly the activities and outcomes by which employees and teams are evaluated during performance appraisal.

To apply performance management principles, a commitment analysis is completed first to create a mission statement for each job. The mission statement is a job definition in terms of purpose, customers, product, and scope. This analysis is used to determine the continuous key objectives and performance standards for each job position.

Evaluation Objectives

• By evaluating the readiness of the employees for taking up higher responsibilities.
• By providing a feedback to the employees on their current competencies and the need for improvement.
• By linking the performance with scope of promotions, incentives, rewards and career development.

Developmental Objectives

The developmental objective is fulfilled by defining the training requirements of the employees based on the results of the reviews and diagnosis of the individual and organizational competencies. Coaching and counseling helps in winning the confidence of the employees and in improving their performance, besides strengthening the relationship between the superior and the subordinate.

Pitfalls

Time Consuming

It is recommended that managers spend about an hour per employee writing performance appraisals.

And, depending on the number of people being evaluated, the process can take hours to write the department’s performance appraisals but also hours meeting with staff to review the written material.

Risk of Internal Competition

Under this system, employees compete with each other for job status, position and pay. This could amount to backstabbing, failure among team members to communicate efficiently and strong employee rivalry. It could lead to dysfunction of the department and/or team, resulting in failure to achieve performance standards.

Discouragement

The performance appraisal process needs to be one of encouragement, positive reinforcement, and a celebration of a year’s worth of accomplishments.

If the performance appraisal process is not a pleasant experience, it has the potential to discourage staff.

It is critical that managers document not only issues that need to be corrected, but also the positive things an employee does throughout the course of a year, and both good and bad should be discussed during a PA.

Favoritism

Managers and supervisors tend to trust and depend on one employee more than the others. This employee could be the foreman or the team leader. This employee is entrusted with responsibility of explaining new job roles and duties to other employees. It leads to dissension and distrust among the group members. It causes team fraction and adversely effects employee morale and satisfaction.

Inconsistent Message

We all struggle to remember things when we get busy. It is those times when we remember the bad and forget to acknowledge the great things employees do every day that sends an inconsistent message to employees. Make a habit of documenting employee observations (both positive and negative) when it is fresh.

Keep these notes as a source of information as you share feedback with employees. This document of observations will provide you with the necessary feedback to review with the employee at performance appraisal time to both correct behaviors and celebrate success.

Manager’s Dilemma

The manager is unable to perform his tasks efficiently because he spends too much time supervising employees about their job functions. He is faced with value-based appraisal systems. It becomes challenging and tough to decide value and performance indicators for measurement. It is not possible to have common indicators as each job has different job requirements. Managers are faced with information overload.

Low Morale

Worker morale can suffer under a performance management system, especially if unethical employees claim the lion’s share of the rewards. Even if the system is largely fair, internal competition and the strain of meeting rigorous standards could weigh on employees. If a business has a finite number of promotional opportunities and a specific number of employees who will need corrective action based on the company’s ratings system, workers might start to focus more on where they stand in that hierarchy rather than on their job-related duties.

Ethics of Performance appraisal

Employee Access to Results:

Employees should know the rules of the game. They should receive adequate feedback on their performance. If performance appraisals are meant for improving employees performance, then withholding appraisals results would not serve any purpose. Employees simply could not perform better without having access to this information. Permitting employees to review the results of their appraisal allows them to detect any errors that may have been made. If they disagree with the evaluation, they can even challenge the same through formal channels.

It follows then that formal procedures should be developed to enable employees who disagree with appraisal results which are considered to be inaccurate or unfair. They must have the means for pursuing their grievances and having them addressed objectively.

Standardization:

Appraisal forms, procedures, administration of techniques, rating etc. should be standardized as appraisal decisions affect all employees of the group.

Open Communication:

Most employees want to know how well they are performing on the job. A good appraisal system provides the needed feedback on a continuing basis. The appraisal interviews should permit both parties to learn about the gaps and prepare themselves for future. To this end, managers should clearly explain their performance expectations to their subordinates in advance of the appraisals period. Once this is known it becomes easy for employees to learn about the yardsticks and, if possible, try to improve their performance in future.

Practical Viability:

The techniques should be practically viable to administer, possible to implement and economical regarding cost aspect.

Training and Appraisers:

Because appraisal is important and sometimes difficult, it would be useful to provide training to appraisers namely insights and ideas on rating, documenting appraisals, and conducting appraisal interviews. Familiarity with rating errors can improve rater performance and this may inject the needed confidence in appraisers to look into performance ratings more objectively.

Legal Sanction:

It should have compliance with the legal provisions concerned of the country.

Job Relatedness:

The appraisal technique should measure the performance and provide information in Job related activities/areas.

Reliability and validity:

Appraisal system should provide consistent, reliable and valid information and data, which can be used to defend the organization even in legal challenges. If two appraisers are equally qualified and competent to appraise an employee with the help of same appraisal technique, their ratings should agree with each other. Then the technique satisfies the condition of inter-rater reliability. Appraisals must also satisfy the condition of validity be measuring what they are supposed to measure. For example, if appraisal is made for potential of an employee for promotion, it should supply the information and data relating to potentialities of the employee to take up higher responsibilities and carry on activities at higher level.