Generally, businesses are run and directed by individuals. It is through these individuals that targets are set and objectives attained. Therefore, the performance of any business entity depends on the aggregate performance of its workforce.
The success of a business entity will thus depend upon its ability to accurately measure the performance of each personnel and apply it without prejudice to optimize their contribution (Performance Appraisal, n.d.). Individual performance can be described as an account of results produced by an individual in a given task. The assessment of a member of staff’s performance shows his/her contribution towards the organization’s goals or objectives (Performance Appraisal, n.d.)
In the last decade, a massive change in approaches to performance measurement has been witnessed. There has been an immense realization that is more significant to emphasize on describing, strategising and managing performance than simply evaluating or appraising performance (Performance Appraisal, n.d.).
Performance appraisal is a long-established approach to evaluating workers’ performance. Yet, many organizations still confuse performance appraisal and performance management. The two terms have absolutely different meanings (Actus, 2014).
The current business environment, which is very volatile and competitive, has prompted many businesses to shift from the knee jerk approach of performance appraisal to hands-on performance management approach to increase productivity and enhance overall performance.
This is one of the most welcomed changes of the last ten years (Actus, 2014). This essay will discuss the significance and tools of performance management. The difference between conventional and contemporary approaches to performance management will also be discussed. Last but not least, the essay will differentiate performance appraisal and performance management.
Significance and tools of performance management
As already been mentioned, individual performance is an account of results produced by an individual in a given task. An individual performance in an organization is very important since it contributes to the achievement of strategic goals and objective.
In addition, it contributes to growth, development and sustainability of the businesses at all levels (Performance Appraisal, n.d.). Everyday business environment is becoming more aggressive and complex. For this reason, businesses always strive to find novel ways of improving performance among employees (Actus, 2014).
Initially, businesses tried to achieve the above objective through employee performance appraisal, which was more focused on finding weaknesses in employees’ performance. Even though it served its purpose, it was not considered to be enough in optimizing performance.
As a result, businesses shifted to proactive performance management system to increase productivity and maximize performance (Actus, 2014). Performance management is a target-oriented process geared towards ensuring business processes is in the right position to optimize the efficiency of the workforce. It plays a big role in attaining organizational strategy because it entails evaluating and enhancing the value of personnel (Clausen, Jones & Rich, 2008, p. 64).
Performance management is a recurring process that is cyclical in nature. From a basic point of view, it consists of three stages: planning, midpoint discussion and performance evaluation. The planning stage entails meeting employees to establish main goals and actions that support realization of business objectives. The meeting also involves discussing employees’ career objectives, ambitions and other business related activities.
Mind point discussion, on the other hand, involves halfway review of the employees’ progress in realizing organization’s strategic goals and making adjustments where necessary. If possible, the management should carry out a progressive dialogue regarding job performance. Lastly, ultimate performance evaluation is based on the agreed goals. This is where necessary action is taken against poor performance, while excellent performance is recognized (Cornel University, 2014).
Performance management tools are increasingly becoming popular among medium-size and large enterprises. These enterprises use these tools to align employees to the tasks, strategies and processes, as well as influence financial determinants. The most commonly used tools are balance scorecard, Baldrige, Lean and Studer.
These tools can be used separately or in combination depending on the prevailing challenges. Baldrige is an all-inclusive approach to long-term quality excellence. It helps in building leadership skills that match thoughts and strategies (NRHRC, 2013, p. 1).
Lean, as the name suggests, is a fundamental theme of businesses that have effectively executed a lean performance management structure, that is, workflow process that is straightforward and consequential (Performance Appraisal, n.d.). On the other hand, Studer mainly focuses on the workforce.
It considers the employees as the most valuable asset in the organization. An enterprise that embraces Studer viewpoint usually tap into the interest and belief of what motivate workers to dedicate their entire life to an organization. The balance scorecard is the most popular of the above four tools. The scorecard approach offers both qualitative and quantitative measurements of contribution, and supply very important information (NRHRC, 2013, p. 2).
Scorecards take different shapes and forms, yet they have attracted a wide range of users across the board. This is because they allow for an immediate evaluation of key measures and the appraisal of individual status in an organization.
Thus, the scorecard is a very significant component in shaping the direction of the HR investment, performance enhancement and making use of prevention programs to sustain good results. The employee’s scorecard has three elements leading to the employee’s success; attitude and culture, ability and leadership and employees’ behaviour (NRHRC, 2013, p. 1).
The difference between traditional and modern approaches
The traditional methods and approaches to performance management are so basic due to the fact that they only provided a conservative view of an individual performance. They mainly focus on individual qualities and financial aspects. Therefore, the approaches are both counterproductive and do not guarantee 100 percent success (Performance Appraisal, n.d.).
The performance evaluation tools used do not provide a comprehensive view of the performance, hence the overall outcome and what the business should do to enhance the performance. The traditional approaches of performance management include straight ranking system, paired comparison technique, checklist system and critical incident technique among others (Performance Appraisal, n.d.).
The modern approaches are more dynamic, non-financial and tailored to specific business environments. The modern approaches use the traditional system, but add other aspects. They view an organization as a system of flows (information and financial) and resulting triads of logistical processes that help in evaluating employee performance (Performance Appraisal, n.d.).
It departs from the traditional approaches that were solely based on the financial indicators and certain individual attributes. In addition, they provide a comprehensive view of the performance and possible ways of enhancing overall results and performance. They represent the most effective methods of managing employees to achieve optimal performance. The modern approaches include balanced scorecard management system and strategic performance management system among others (Performance Appraisal, n.d.).
The difference between performance appraisal and performance management
The fundamental difference between performance appraisal and performance management is based on their scale of operation. They both entail setting of performance goals, performance review and formulating ways of realizing the set goals. They also set up clear vision and guideline on what is expected from employees, and attempts to spot obstacles to efficient performance.
However, performance appraisal is a restricted function of assessing past performance. It is normally conducted once or twice a year. In addition, it is distinct in nature and does not interfere with day to day work of employees (Richter, 2011, p. 3). On the other hand, performance management is a nonstop process of managing employees’ performance. It is proactive in nature.
Performance management makes sure that employees attain the set goals on actual time during the process, without future reassessments or corrections. It is a line activity, which means it is entrenched in the workers daily activities or operations (Richter, 2011, p. 4).
Performance management and appraisal also differ in their approaches. In performance management, the supervisors act as role coaches or advisers, while in performance appraisal they act as moderators.
A number of performance appraisal methods, for instance, management by objective draw near to performance management. This is because they permit joint setting of goals and frequent reviews. However, they still fail to match the real-time monitoring and evaluation of goals provided in performance management (Richter, 2011, p. 4).
The methodologies also differ. Performance appraisal is more strict and organized. Even though performance it allows for tailoring of fundamental areas, it is still rigid and based on equal rating. On the contrary, performance management is relatively informal and flexible. Akin to performance appraisal, it has well established procedures on what represents optimal performance.
However, since it entails real-time application, it permits adjustments on the established procedures. The adjustment depends on work conditions and circumstances (Richter, 2011, p. 4). Last but not least, performance management is normally tailored to particular job function or individuals, whereas performance appraisal is generally standardized (Richter, 2011, p. 5).
The success of any business entity depends on its ability to correctly gauge the performance of each personnel and apply it without prejudice to maximize their contribution. Individual performance can be described as a record of results produced by an individual in a given job function or specific period of time. Therefore, performance measure shows an individual’s contribution to the organization. In the last ten years, massive changes in performance measurement approaches have been witnessed.
This involves a shift from the knee jerk approach of performance appraisal to hands-on performance management approach. The traditional approaches only focused on individual qualities and financial aspects. However, the modern approaches are more dynamic, non-financial and tailored to specific business environments. Performance appraisal is one of the conventional approaches of measuring performance, while performance management is a contemporary approach.
The two differ in scope, approach and methodology. Performance appraisal is a restricted function of assessing past performance and is normally conducted once or twice a year. On the other hand, performance management is a nonstop process of managing employees’ performance. However, they both entail setting of performance goals, performance review and formulating ways of realizing the set goals. They also set up clear vision and guideline on what is expected from employees, and attempts to spot obstacles to efficient performance.
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Richter, L. (2011). The difference between performance appraisal and performance management.