It is none other than employees whose effective performance directs the organization clearly ahead of others (Smith cited in Armstrong and Baron 2005). The efficacy of an organization is seen as the contributions made and the value added by its employees towards the achievement of its objectives, which is measured through reviewing the performance of the employees (Nankervis and Compton 2006). Lansbury (1988) points out that the evaluation of the performance of the employees helps the organization identifying their performance strengths and weaknesses and thereby achieving the organizational goal through taking actions to develop their work performance. So, in order to be a successful organization, Managing Performance well has become a pre-requisite (Boxall and Purcell 2003).
According to Institute of Personnel Management (IPM) (1992: 1), Performance Management is-
A strategy which relates to every activity of the organization set in the context of its human resources policies, culture, style and communications systems. The nature of the strategy depends on the organizational context and can vary from organization to organization.
Communication of organizational strategy with employees by top management is, therefore, inevitable as Performance Management entails what employees are supposed to perform and why (Cokins 2004). Armstrong and Baron (2005) include that this provides an understanding of the goals employees need to pursue, the competencies required to achieve them, and the recognition, encouragement, guidance and training they need to achieve better performance that will lead the organization to perform better. Halachmi (2005) points out that this is how organizations should proceed to achieve the expected result.
In order to be effective, a performance management system should focus on a number of factors on the organizational culture and strategy, which are crucial for the successful introduction of performance management (HR Magazine 2004). According to the Magazine, organizations should align its vision, mission, values, and strategy with its performance management focus, produce performance plan and technique to measure, tie job analysis and pay with performance management, set up performance standards for their members in line with their expectations, develop programs to train employees to build their competencies and skills and train managers to effectively manage performance, validate to what extent the current system is effective and make adjustment in order to effectively apply the performance management system to achieve the efficacy of the organization.
An interesting view has been pointed out by Williams (1998) that the concept performance management has evolved due to the emergence of various issues such as dynamic business environment, intense competition, technological changes, change in management thoughts, strategic changes, impotency of performance appraisal and so on. Performance management deals with effective handling of these issues through communicating employees, improving their performance, developing their abilities, fulfilling their desires and others having interests in the organization (Armstrong 1994), which eventually help organizations achieve the desired outcome (Fletcher and Williams 1996). Bratton and Gold (2007) define the achievement as the effective application of performance management and appraisal process.
McCourt and Eldridge (2003) state that performance management does not appear in one day rather the concept is developed over a period of time that started with Annual Confidential Report to Performance Management via Management by Objectives and Performance Appraisal. They point out the limitations of earlier approaches, for instance, no or minimal feedback, lack of clear objectives, irregular performance review, not strategic, highly controlled and they prove ineffective in managing performance expectations of the organizations and employees, which result in the emergence of performance management. It is also revealed that the context in which the organizations are operating is also responsible how the organization will manage its performance because it is found that performance is highly influenced by culture, organizational and management structure, which also influence the way performance management is built up and applied (Armstrong 1994).
However, McCourt and Eldridge (2003) mention that regardless of the context there are key features of performance management, which are defined as ‘Good Practice’ against which an organization’s performance management position is compared, which helps in identifying to what extent an organization follows the good practice model of performance management.
Good Practices in Performance Management
Objectives Setting – A good performance management system must entail well defined objectives that it needs to pursue (Levinson 1976). Objectives should be set to provide a clear picture of the expectations that are to be met by the employees within a specific time period and should be defined in terms of SMART (Specific, Measurable, Attainable, Relevant and Time framed) proposition (Armstrong 1999; Armstrong and Baron 2005). The focus is fulfilling the organizational objective while achieving the individual efficacy as well (Weightman 1999). Fletcher and Williams (1996) state that performance objectives should be set in line with business objectives in order to ensure that employees understand what the organization is trying to achieve and should be done in a participative way. Molleman and Timmerman (2003) assert that there should be a match between organizational and individual objectives, which will be stimulating for the individual employee to contribute well in the attainment of the objectives.
Continual Assessment Process – Glendinning (2002) points out performance management is about concentrating the future performance aspects of employees and at the same time dealing with their past performances as well. He denotes that the focus of performance management is to work constantly to improve the performance of the employees through continuous review rather than monitoring their performance once in a year. Antonioni (1994) states that once objectives are set and agreement on performance is reached, continuous monitoring and feedback are carried out and formal interviews are conducted to ensure expected performance is achieved. Under performance management process, regular informal advice is offered while periodic formal review is conducted (Waite and Stites-Doe 2000).
Focus on Individual Performance Development – According to CIPD (2008), another aspect of performance management is its focus on improving the performance of the individuals where it is important to understand the current aspects of individual performance. Antonioni (1994) states that the contemporary performance position of individual employee gives an indication of different issues (quality, efficiency, on time implementation of tasks etc.) of his/her performance and provides performance managers a direction of what to improve, how and when. Waite and Stites-Doe (2000) illustrate that performance management puts its emphasis on the development of the performance individual employee in order to ensure its effectiveness.
360 Degree Appraisal – According to CIPD (2008), 360 degree feedback is a system, which gives information regarding behaviors, competencies, performances, and relationships of the people working within an organization. 360 degree feedback accumulates performance related data of the individual, groups and teams from a variety of sources (stakeholders), the feedback of which is used to evaluate their performance against the standards (Ward 1997). According to Rowe (1995), besides the upward and downward appraisal of performance, 360 degree feedback also involves the appraisal of colleagues and self appraisal, which gives an all round appraisal of employees’ performance. The use of 360 degree feedback provides an overall performance picture of the organization and helps determine the need for motivation, participation, training and development, counseling, coaching, communication, team work, remuneration and others (Ward 1997). Bracken et al. (2001: 4) specify that the characteristic of a good 360 degree feedback is that it
… creates focused, sustained behavior change and/or skill development in a sufficient number of people so as to result in increased organization effectiveness.
360 degree feedback provides an effective basis for managing performance due to its all round appraisal process and its diverse use in different HR areas (CIPD 2008).
Performance Related Pay (PRP) – The very name of PRP indicates that it is a technique of rewarding employees based on their given performance and this is aimed at promoting employees to give their best performance (CIPD 2008). Kessler and Purcell (1992) define PRP as a method of communicating employees, which indicate the organization is moving to a high performance culture that is necessary for achieving organizational performance efficacy. They also provide a picture of the PRP process which connects employee’s performance to pay by evaluating to what extent the employee met the standards against objectives set. Procter et al. (1993) illustrate PRP as a link between effort and reward where it is pointed out that control over employees’ performance is exercised through the effort-reward relations, the aim of which is to bring positive attitude in employees’ performance.
Performance Management helps employees through recognizing their expectations that helps organization achieving its desired purpose, in most cases it is only focused on organizational benefits, not the employees and an effective performance management system must focus on employees benefits while pursuing organizational benefits(Lansbury, 1988). McCourt and Eldridge (2003) emphasize that in order to ensure organizational and employee benefits through improving the performance of the organizations, performance management system should have a link between ‘good practice’ of performance management and the internal and external conditions of the organization. According to them, ‘good practice’ model provides a view and organizations should adopt, adapt or reject it on the basis of organizational and country contexts.
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