Importance of performance management in  organization context

Performance Management

Performance management refers to the broad range of trial, policy, dealings, and interventions deliberate to help workers improve their performance. Performance management usually includes the constant method of finding, measuring, and increasing the performance of individuals and groups in organizations (Hooria, Lubna and Mattiullah, 2018).It is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities (Manchester Metropolitan University, ND).It is a holistic, goal-congruent and largely participatory process of managing and supervising work in their task, team or groups. It is more into organizational goals and objectives, manager recognition and awards corresponding to manager needs and aspirations (Davinder, 2010). Performance Management deals with the challenges organization face in defining, measuring and stimulating employee performance with the ultimate goal to improve organizational performance (Deanne, Paul & Jaap, 2004).

Performance management arises from the awareness that a systematic, organized approach to managing and rewarding performance better generates and sustains positive manager motivation (Davinder, 2010). It is the main vehicle by which managers communicate what is required from employees and give feedback on how well they are achieving job goals.  It brings together many of the elements that make up the practice of people management, including in particular learning and development. Performance management establishes shared understanding of what is to be achieved and provides an approach to leading and developing people that will ensure it is achieved (Manchester Metropolitan University, ND).

Objectives of Performance Management 

According to (Fadil and Geline,2012) objectives of performance management could be defined as follows 

     ·           To review the performance of employees for a period of time

·         To evaluate the gap between the current and desired performance

·         To support the manager in conducting the control/audit

·         To help in improving relationships and communication between managers and employees

·         To establish the strengths and weaknesses of employees, in order to identify training needs and future development

·         To provide the feedback from employees regarding their performance

·         To ensure the clarity of expectations and responsibilities of the functions to be performed by employees

·         To evaluate the effectiveness of other functions of the organization's human resources such as recruitment, selection, training and development

The Performance Management cycle 

Figure 1 :The performance management cycle 

      Source : Michael and Stephen,2013,pp.337

The Performance Management cycle in Delmege and Forsyth Company Ltd

Objective of this exercise is to enhance business results through continuous assessment and managing  of employee performance(HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company).  Hence the exercise should be completed within the defined timeline with utmost care. It is mandatory to discuss with employees about their performance and agree on future performance. Performance feedback will help and guide employees to perform better. Performance appraisal should be conducted in a fair and equitable manner (HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company)  . Performance evaluation year is from 1^st April to 31^st March of the succeeding year.

Performance evaluation consist of following parts(HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company).

o  Objective Setting-  by 30^th April every year

o  Mid-year Review of objectives - by 31^st October every year

o  Year-end Review of objectives - by 10^th April every year

o  Qualitative Factor Evaluation (Should be done at the year-end review)

o  Training Needs Identification

·         Performance planning and agreement

·         appraiser, appraisee and appraisee’s superior should sign the Performance Evaluation Form at the end of objective setting, Mid-year review and Year-end review (HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company).

·         Objective Setting - Following areas should be completed in objective setting (HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company).

§  KPIs/Quantitative Factors– Brief but clear description of the performance objective.

§  Target – Always should be quantified.

§  Weight – Weight given to each objective. Total weight of four objectives should be equal to 100%

§  Expected Achievement by Mid-Year – Percentage of achievement of the objective by the mid-year.

E.g. Objective is to introduce 50 new customers and at least 30 customers should be introduced by the mid-year. Hence the expected achievement by mid-year (30^th September) is 60%

·         Training needs identification(HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company).

§  Select 3 general skills by putting a tick.

§  Name the training requirements specifically needed according to area of work

·         Duly completed forms should be submitted to the HR Division by 20^th April

·         Act Performance Activities

·         Carry out day to day job role

·         Carry out training programs on performance improvement and personal development

·         Monitor /manage performance throughout the year  

·         Midyear review (HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company).

§  Objective of the mid-year review is to track the progress of the performance objectives and identify corrective actions as and when required.

§  HR Division will distribute performance evaluation forms to relevant Heads of companies / SBUs / Divisions, during the month of September.

§  Tick the relevant cage according to the agreement percentage.

E.g. Achievement by mid-year is 25 customers. Hence the achievement percentage is 50% ((25/50)*100)

§  Duly completed forms should be re-submitted to the HR Division by 31^st October

      ·         Review and Joint analysis of performance

Yearend review- Following areas should be completed in Year End Review (HR form10 -Performance Evaluation Form P2,Delmege Forsyth and company). 

§  KPIs/Quantitative Factors Year-End Evaluation.

§  Quantify the achievement of the objective.

§  If any employee has achieved more than 100%, mark the achievement accordingly.

§  Discuss the achievement % with employees. If any employee does not agree with the score, clarify his/her doubts

§  Obtain the achievement score by multiplying the weight of the objective by the achievement percentage (Refer A*B remark in the form).

§  Obtain the total year end %.

·         Qualitative Factor Evaluation

§  Refer Performance Factor Standards section for standardization of rankings.

§  Add the total score of six factors. Maximum should be 30 (6*5).

·         Divide the total score by 30 and multiply the answer by 100.

·         Performance Summary

§  Take Quantitative Factor Evaluation final score (X) and Qualitative Factor Evaluation final score (Y).

§  Multiply the score by respective weightings (80% and 20% respectively) and obtain the total. Add to totals together and obtain final score.

·         Duly completed forms should be re-submitted to the HR Division by 10^th April.

·         Conducting performance review joint discussions 

   Figure 2 :Performance Evaluation Form – Delmege Group of Companies

  

Establishing  Performance Management system in Organization

According to Madela and Dorin(ND),following nine guidelines and ideas can assist to develop a performance management system 

•  Motivational rather than confrontational  
• Take great care in establishing what it is that you want to measure 
• Develop effective measurements that tell people how they are doing 
• Establish straightforward, honest criteria that tell people exactly what they must do to achieve a particular score
• Communicate the established criteria to the people who need the information to perform effectively
• Obtain employee input when establishing the criteria and the measurements 
• Review the employee’s progress on the defined criteria, goals, and competencies regularly
• Avoid the “halo” effect, the employee needs to see and read his performance ratings, rankings, the judgment calls 
• Previously established criteria that came together to form his ratings.
  

According to Herman (2013),characteristics of a proper performance management system would be  Strategic congruence , Thoroughness ,Practicality ,Meaningfulness , Specificity , Identification of effective and ineffective performance ,Reliability , Validity ,Acceptability and fairness , Inclusiveness ,Openness , Correctability ,Standardization and Ethicality.

Further Brandon Hall Group Research team (2016) says  six critical characteristics of performance management system are 

• Make performance management people centric .
• Focus development on enhancing strengths and  not fixing weaknesses.
• Align performance goals to business goals. 
• Leverage technology to enable effective performance management .
• Train managers to be effective performance coaches .
• Recognize employees for small and large accomplishments .

Also a good performance management system should have top management support, involve employees in their development, ensure that those measures used are relevant to managers and employees in performing their day-to-day jobs, be part of a feedback loop that links them to manager and employee performance appraisals ,Primarily use non-financial performance techniques, vary between locations, change over time as the company needs change,  are intended to foster improvement rather than just monitoring (Paul.and Jim,ND).

Importance of having good  Performance Management system  

Performance management is expected to improve organizational performance generally by creating  a performance culture in which the achievement of high performance is a way of life. More specifically, effective performance management ensures that individual goals are aligned with organizational goals, so that key performance indicators for employees are linked to those of the organization, and the contribution people can make to organizational performance is therefore defined (Michael and Stephen,2013).

Further Davinder  (2010) identifies the benefits of performance management  as It  focuses on results rather than behaviors and activities , Aligns organizational activities and processes to the goals of the organization. Performance Management identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. This chain of measurements is examined to ensure alignment with overall results of the organization, It Cultivates a system-wide, long-term view of the organization.

Challenges in setting up  good Performance Management system

Organizations face various challenges when setting up a  performance management system(Fadil,Gelina ,2012). Further   some of the interesting challenges of performance management are content of appraisal nowadays goes beyond task performance to incorporate contextual performance. A key challenge in this area is determining what constitutes good performance and hence what should be measured and stimulated. They argue that as organization’s leading performance indicators shift towards innovation and the creation of knowledge, more non-routine work and interdependence between workers is found and performance criteria at lower levels should shift to reflect this( Deanne , Paul and  Jaap , 2004).

Also defining the evaluation criteria and Identification of assessment criteria is one of the biggest problems facing the executive manager ,creation of assessment instruments that focus on developing employees is another challenge  ,lack of competence in choosing the evaluation criteria, Errors in the assessment due to subjective assessment ,The assessment process can be faced to resistance from employees and trade unions for fear of negative assessment (Fadil,Gelina ,2012).The context of Performance Management is changing and cultural differences and the impact of new technology as interesting emerging areas . For instance, as more and more organizations work internationally, collaboration and coordination of people located in different nations increases. Often this collaboration within organizations takes the form of global work teams. Performance Management is problematic in such teams as members are likely to have widely differing viewpoints about appropriate ways to reward, recognize, evaluate and train and develop team members  ( Deanne , Paul and  Jaap , 2004).

Conclusion

Organization's human resources are of great importance to its success. Without effective employees, organizations would work so ineffective and would risk failing to enforce claims of its objectives and mission. Therefore, every organization within the strategy that has, it applies the most appropriate system of performance management, a process that helps in the commitment of all employees towards achieving the objectives of the organization (Fadil,Gelina ,2012).

Today, HR works towards facilitating and improving the performance of the employees by building a conducive work environment and providing maximum opportunities to the employees for participating in organizational planning and decision making process. Today, all the major activities of HR are driven towards development of high performance leaders and fostering employee motivation. So, it can be interpreted that the role of HR has evolved from merely an appraiser to a facilitator and an enabler. Performance management is a much broader and a complicated function of HR, as it encompasses activities such as joint goal setting, continuous progress review and frequent communication, feedback and coaching for improved performance, implementation of employee development programmes and rewarding achievements. The process of performance management starts with the joining of a new incumbent in a system and ends when an employee quits the organization(Sukanta and Chandan ,2015).

References

·       Brandon Hall Group Research Team,2016,’ Performance Management 2016: people Over Process’,1^st ed., Brandon Hall Group

·       Davinder,S.,2010, Performance Appraisal and Management,1^st ed.India,

Himalaya Publishing House

·       Deanne, N.D.H., Paul,B. and  Jaap,P.,2004, ‘Performance Management: A model and research agenda’, Erasmus Universiteit Rotterdam,pp.1-20

·       Fadil,O.,Gelina,M.,2012, ‘Performance Management, Its Assessment and Importance’, Audit Department, Post Telecom of Kosovo, Pristine, Kosovo b Finance Department, Faculty of Business Administration “Kristal” University, 41(1),pp.434-441

·       Herman,A.,2013,’ Performance Management’,1^st ed.UK, Edinburgh Business School  Heriot-Watt University

·       Hooria,S.,Lubna,K.,Mattiullah,B.,2018, 'Effect of Performance Management on Employees Well-Being via Perceived Job Control ',Macrothink Institute,2(1),pp.18-32

·       Madela,M.A.,Dorin,C.,ND,’The importance of implementing performance management system in Romanian firms ‘,University of Oradea

·        Manchester Metropolitan University,ND, ‘Performance Management An introduction’,1^st ed.UK, Department of Human Resources, Manchester Metropolitan University

·        Michael,A. ,Stephen.T.,2013, Armstrong’s Handbook of Human Resource Management Practice,13^th ed. India, Michael Armstrong

·       Paul,F.,Jim,B.,ND,’ A Review of Performance Measurement: towards performance Management ‘,Computer Integrated Manufacturing Research Unit (CIMRU), National University of Ireland

·       Sukanta,M.,Chandan,K.S.,2015,’ Organizational Effort towards Performance Management System: A Key to Success ‘,Industrial Engineering Letters,5(2),pp.20-25