Performance Management: Importance and Strategies

Introduction

In the past, the main interest of management in most organizations was creating methods of increasing revenue. Previously, less emphasis was attached to value on work done. Over time however, the world has shifted its approach from measuring performance to managing it (Otley 1999, p. 364).

This is a proactive approach that lets managers to take charge of the direction that their organization is heading. This paper aims to assess all aspects of performance management. It discusses the scope, rationale and best practices of performance management, its link to human resource management and organizational functions. It also analyses real world examples related to performance management and gives recommendations as well.

Employers use the concept of performance management to ensure that the hard work of the employees is directed towards the attainment of the organization’s goals and objectives. Performance management also entails the recognition of important functions related to a job within an organization. Further, performance management involves the formulation of realistic standards of performance appraisal, spelling out the identified standards to the entire workforce, and the issuance of feedback on the necessary adjustment to the performance (Suliman 2003).

The formulation of organizational performance management involves five fundamental issues that should be dealt with. These fundamental issues entail important objectives that are vital for the future success of an organization. Project management also involves the steps needed to ensure that these objectives are implemented successfully, the targeted level of performance, the ensuing rewards once the anticipated target has been achieved, and the kinds of information flows that we would require in order to facilitate learning (Otley 1999, p. 366).

Employee performance appraisal is a very important step in the performance management process. Employee performance appraisal helps in correcting employees’ weaknesses and reinforcing their strengths. They also help employers in career planning, salary raise decisions, rewards, layoffs, and promotions. Performance appraisals help organizations to reduce the seven wastes which are overproduction, time constraints, defective products, transport and processing costs, motion, unnecessary downtime and inventory.

There are many different methods of employee appraisal. One of such methods is the self appraisal technique and here, employees have the freedom to highlight the weaknesses or strengths of their performance (Suliman 2001). The self-rating system is suitable for most organizations because employees are the ones who know their weaknesses and strengths. Employees are also in a better position to point out the areas in which they are weakest so that they can get the coaching that they need. There is also the supervisor rated system which is more commonly used. In this system, there are three methods that are used, namely; the traits method, behavior method and results method.

The traits method measures the extent to which employees possess characteristics that are considered to be important for the position that they hold. Some of the traits are leadership, creativity, and dependability. The traits method includes the graphic rating scales where characteristics are rated on a scale indicating the degree to which employee possesses that trait. The paired comparison technique is our third method that we need to consider. As the name suggests, it compares a trait between two employees. The last one is forced distribution method where employees are placed in performance categories.

The behavioral method considers the actions exhibited by an employee. Such actions include commitment to the job and enthusiasm, absenteeism and creativity. They also include the critical incidence method where the supervisor keeps a record of the employees’ behavior. The second is the behavioral checklist method where the supervisor ticks off the characteristics that are exhibited by the employee.

The last one is the behaviorally anchored rating scales which combines positive qualities and the quantified ratings of the employee. The critical incident method is difficult to use because the rater may find it difficult to rate or rank employees relative to another. The behavioral checklist is ideal for busy supervisors as it is quick unlike the behaviorally anchored rating scale which is difficult to develop.

The results oriented method considers the quantifiable contributions of the employee. They include productivity methods which measures the output of the employee. This may encourage employees to look good for a short while. This is because an employee can have high output by doing the job in the wrong manner. Common examples include over use of machinery or neglect of machine maintenance. For this reason, appraisals should not focus on productivity alone but also on cooperation, adaptability, initiative and concern for human relations.

Over the years, performance management has undergone through several important developments. Traditional performance measurements concentrated on the development of inputs and efficiency due to the limited ability to measure effectiveness or outcomes (Kloot & Martin 2000, p. 232). In addition, job performance was originally composed of quality and quantity of work. This did not take into account other variables that could have been affecting the employees’ performance. We also need to take into account the fact that nowadays employers are trying to get employees to be innovative (Abubakr 2001).

This makes employees to be more competitive and giving the organizations a more competitive edge. Performance management encompasses role clarification, setting of goals, the periodic assessment of performance, the issuance of feedback, support and training, giving out of rewards, compensation, as well as recognition. The scope of performance management is very wide. It encompasses risk management, activity based costing or activity based management solutions, planning and budgeting, customer relationship management, workflow management and business consolidation (Advanced Performance Institute 2011).

Performance management focuses on both the individual and the organization. Best practices are the strategies that are considered to be universally favorable in performance management. The term best practices connote not just the breadth of the effect, but also the level of policy. With regard to the implementation of policies, it is important ensure that they are all in harmony so that we may benefit from a superb performance (Otley 1999).

According to a study done by the institute for corporate productivity, there are nine key practices that human resources should recommend (Insala 2007). In order to ensure the advancement of future plans, the management often receives training on how best to undertake the evaluation. In addition, measurements on performance evaluation are also undertaken. Furthermore, it also important to measure the quality of performance appraisals are also undertaken (Insala 2007).

Main Body

The Human resources are responsible for planning, training and development, enhancing organizational commitment, ensuring organizational justice, as well as in assisting in performance management. Human resource management (HRM) plays a crucial role in sustaining organizational performance. HRM improves efficiency and contributes to the growth of revenue by setting up unique social structures that give their firm a competitive advantage over other firms (Becker & Gerhart 1996).

In performance management the human resource management is charged with the responsibility of making policies. In addition, the HR department also assumes the role of training and advisory. In this case, the human resource department plays the pivotal role of choosing the most appropriate appraisal method and also in the preparation of forms and procedures. It trains supervisors on how to appraise employees in the most appropriate manner. It is also responsible for monitoring the performance appraisal system to ensure that it complies with EEO laws and that it is up to date.

Human resource management is fast becoming an important tool in a lot of the organizations across the world that aspires to remain competitive. In the past, cutting down on labor costs by reducing the workforce within an organization was viewed as a good business move, times have changed. This has been necessitated by the tough economic times that we are faced with at the moment.

This coupled with the fact that the world has become a global market thereby prompting firms to remain competitive means that forward looking firms can no longer afford to see their running costs skyrocket. This prompted organizations to reduce costs while increasing efficiency by making use of the Human resources. The human resources have embraced a new face by adopting a strategic level, which has had a huge impact on the economic outlook of the firm, with the intention of ensuring value creating for the firm. In addition, the HR plays a pivotal role in ensuring that the strategic and operating goals of an organization are achieved (Otley 1999, p. 780).

Examples from the real world have been published detailing how performance management is applied in the workplace. Here is a case study of performance management in the French local government. This study by Fouchet and Genoun helps us to understand how performance information is used and by whom (Fouchet & Genoun 2007). In this research, data was collected using a web survey of intermunicipal authorities. The research also interacted with the French communities that represented intermunicipal administrations as well as elected officials.

The researcher also conducted interviews that involved intermediary workers in both the operational and technical units. According to the research findings, the implementation of performance measurements was not just as a response to internal demand, but also as a way of anticipating additional external pressures. The research study further revealed that the measurement of performance within the intermunicipal administration tends to be pluralisitc (Fouchet & Genoun 2007). Performance measurement is best done using several methods because most jobs cannot be measured linearly.

Another case study is one carried out by Kloot and Martin. The study may be seen as more of a balanced approach with regard to the issues of performance management in the local government. The report provides research findings on the development of systems of performance management involving operational and strategic issues may be formulated and integrated across the various local government organizations (Kloot & Martin 2000). Results provided evidence of the measurement of both efficiency and effectiveness. It led to the conclusion that performance management requires performance indicators because measuring performance was not sufficient (Kloot and Martin 2000).

One good real world example is a production company that I once worked for. That organization used to do annual performance evaluation. The performance was rated by the supervisor who would then call the employees one by one to the office to discuss their performance. Every year, the most outgoing person would score highest with the supervisor. This would have been acceptable if the employees were involved in sales or careers that involved networking.

This was not the case as the company’s only focus was on production and those who had the highest output spent less time socializing and more time working. Employees became more and more frustrated and there was confusion as to what qualities were the most desirable in the company. What the management did not seem to know was that a good appraisal method should not be subjective. It should focus on the measurable contribution of the employee. It should measure the extent to which an employee possesses job characteristics that are considered important for the organization.

There are two recommendations I would make to improve the performance appraisal of the organization sited above. A yearly appraisal may be counterproductive. It may have several surprises for employees and come off as negatively critical. Therefore, Instead of doing an annual appraisal, they should do an appraisal every three months. A quarterly appraisal would not demand too much time from the supervisor and at the same time it would ensure regular evaluation and hence constant improvement of the employee’s performance. The second recommendation would be to cease using the traits method of appraisal and to use the results method. The traits method has subjectivity bias problem while the results method looks at employee accomplishments and is less open to bias.

While choosing which method of performance management to use, managers should choose wisely as not all of them give good results. It is feared that traditional employee appraisals serve a negative purpose. To avoid these drawbacks, managers should give feedback frequently; they should use the right appraisal tool, keep a diary of critical incidents and reduce outside factors like union pressures and high employee turnover. They should be clear and concise and avoid rating all employees the same way. They should also refrain from rating all employees either too low or too high. Most importantly, they should avoid bias as this would make the employee act counterproductively.

Performance appraisals are prone to biases. Some of the most common types of biases are:-The halo effect which occurs when the rater perceives one factor as having the most importance and gives a high rating based on that one factor. The other type is the horns effect which is the opposite of the halo effect. In the horns effect, the rater focuses on one aspect of the employee that is unfavorable (Advanced Performance Institute 2011). The central tendency is another type that occurs when a rater avoids using high or low ratings and instead gives average ratings.

The leniency effect is where high ratings are given to all employees whether good or poor performers. The opposite of this is strictness. The contrast effect is a type where one employee’s ratings influence another’s. There is the similar-to-me error where employees who are similar to the rater are judged favorably. The ‘recency’ effect where a rater focuses only on the employees recent behavior and the relationship effect when employees are in relationships with supervisors and therefore get high ratings (Kumar 2005, p. 1). To avoid these appraisal problems, supervisors should use subjective ratings sparingly. They should also use multiple appraisers.

Conclusion

In conclusion, performance management is a new approach that is being used by organizations to add value to their list of desirable qualities. This is especially important for public service organizations where the management may not have quantifiable measures of performance. The rationale behind performance management is to lead, monitor and respond to how an organization delivers against its goals.

It requires a framework that integrates organizational, business and individual planning and performance (Australian Public Service Commission 2001). Performance management leads to higher performance and consequently, higher revenue. Integrating people, planning and performance with organizational objectives develops individual and organizational capability and leads to higher performance (Australian Public service Commission 2001).

For a firm to benefit fully from performance management, it should use the nine best practices listed in this paper. Firms are different and they have different goals therefore they should pick only as many practices as are suited to their organization. Organizations should set clear and realistic goals, define expected results, take part in performance reviews and always let employees know how they are doing and where they need to show improvement.

The Human resources should be a source of advice on the best tools to use to appraise employee performance. HR should also ensure that all methods used are within the law to avoid lawsuits and the subsequent loss of revenue. A good appraisal system increases commitment and reduces turnover. Performance management also assists in managing risk, planning and budget control and if appropriately used, can lead to a good work environment and high quality and quantity output.

Reference List

Advanced Performance Institute 2011, Performance management software-scope of Implementation, Web.

Australian Public Service Commission 2001, Performance management in the APS: A strategic framework, Web.

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Insala 2007, ‘Performance Management Research Review of Best Practices’, Web.

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Suliman, A 2003,’Self and supervisor ratings of performance: Evidence from an individualistic culture’, Employee Relations, vol. 25, no. 4, pp. 371 – 388.