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 a whole 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, and may include specifying tasks and outcomes of a job, providing timely feedback and coaching, comparing employees’ 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.
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.
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. Many types of organization use performance management systems (PMS) to evaluate their business according to their targets, objectives, and goals to achieve the vision of their organization. For example research institute may use PMS to evaluate their research success in achieving specific development targets in line with the institute vision. Complex multifaceted performance drivers such as societal contribution of research may be evaluated along with many other complex performance drivers like research commercialization, research collaborations, in focus of many development areas such as commercial agriculture sector. In such cases research institute may use data-driven real-time PMS to deal with such complex performance management challenges and to be on track of research practices towards development needs of a country in achieving innovations for development of agriculture sector.
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 return on investment through a range of direct and indirect sales benefits, operational efficiency benefits, and by unlocking the latent potential in every employee workday (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
- 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 the 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
General Appraisal: In this type of performance management there is continuous communication between the manager and employee regarding the performance throughout the year. They communicate about the pre-set goals, the objectives, the performance feedback, and set the new goals.
Technological Performance Appraisal: This appraisal is totally based on the technical knowledge of the employee. The technical expertise and capabilities of the employee are throughput and identified by the manager.
360-Degree Appraisal: In 360-degree appraisal the feedback about the performance and behavior of the employee is provided by peers and the manager of the employees.
Employee Self-Assessment: The employee compares their own performance with the standard performance expected from them. The manager has discussions with employees about their performance achievements or failure.
Manager Performance Appraisal: This system is designed for the appraisal of the manager. Here the feedback from the team members and client is collected to evaluate the performance of the manager.
Sales Performance Appraisal: A specific monthly or yearly sale target is assigned to the employee at the beginning of the year. At the end of the financial year, the salesperson is judged on the set target and the sales result of the employee. In this system, it is important to set a realistic sales target for the employee.
Project Evaluation Review: This is considered the best way to identify the performance of an employee at work. After completion of each project, the performance of the employee is evaluated, and based on the review another project is assigned to the employee.
Development Concern: It addresses the development issues in the organization. It recognizes the skill and knowledge development required in the organization and facilitates the training programs which are appropriate.
Feedback Mechanism: The purpose of the performance management system is to develop a systematic feedback mechanism. It creates a pathway through which the employees become aware of their contribution to the organization in terms of performance. It also conveys to the employee the improvement required in the performance to meet the set standards.
Documentation Concern: It creates a database for the organization in which all the information about the employees is collected. The information about the performance level, skills, knowledge, expertise, and regular rewards received by the employee is maintained in this database.
Employment Decisions: Based on the performance management records various important decisions are taken by the management. The decision includes an arrangement of training and development programs, promotion, increase or decrease in compensation, hiring decisions, and many more.
Diagnoses of Organizational Problems: The up and down in the performance of the employee is recorded using a performance management system. This record helps to diagnose the organizational problems. It provides an idea about where the work is going wrong and what improvements are required to improve the performance status of the organization.
A performance appraisal, also referred to as a performance review, performance evaluation, (career) development discussion, or employee appraisal, sometimes shortened to “PA”,[a] is a periodic and systematic process whereby the job performance of an employee is documented and evaluated. This is done after employees are trained about work and settle into their jobs. Performance appraisals are a part of career development and consist of regular reviews of employee performance within organizations.
Performance appraisals are most often conducted by an employee’s immediate manager or line manager. While extensively practiced, annual performance reviews have also been criticized as providing feedback too infrequently to be useful, and some critics argue that performance reviews in general do more harm than good. It is an element of the principal-agent framework, that describes the relationship of information between the employer and employee, and in this case the direct effect and response received when a performance review is conducted.
There are a number of potential benefits of organizational performance management conducting formal performance appraisals (PAs). There has been a general consensus in the belief that PAs lead to positive implications of organizations. Furthermore, PAs can benefit an organization’s effectiveness. One way is PAs can often lead to giving individual workers feedback about their job performance. From this may spawn several potential benefits such as the individual workers becoming more productive.
Facilitation of communication: communication in organizations is considered an essential function of worker motivation. It has been proposed that feedback from PAs aid in minimizing employees’ perceptions of uncertainty. Fundamentally, feedback and management-employee communication can serve as a guide in job performance.
Enhancement of employee focus through promoting trust: behaviors, thoughts, and/or issues may distract employees from their work, and trust issues may be among these distracting factors. Such factors that consume psychological energy can lower job performance and cause workers to lose sight of organizational goals. Properly constructed and utilized PAs have the ability to lower distracting factors and encourage trust within the organization.
Goal setting and desired performance reinforcement: organizations find it efficient to match individual worker’s goals and performance with organizational goals. PAs provide room for discussion in the collaboration of these individual and organizational goals. Collaboration can also be advantageous by resulting in employee acceptance and satisfaction of appraisal results.
Performance improvement: Well-constructed PAs can be valuable tools for communication with employees as pertaining to how their job performance stands with organizational expectations. “At the organizational level, numerous studies have reported positive relationships between human resource management (HRM) practices” and performance improvement at both the individual and organizational levels.
Determination of training needs: “Employee training and development are crucial components in helping an organization achieve strategic initiatives”. It has been argued that for PAs to truly be effective, post-appraisal opportunities for training and development in problem areas, as determined by the appraisal, must be offered. PAs can be especially instrumental for identifying training needs of new employees. Finally, PAs can help in the establishment and supervision of employees’ career goals.
- To identify the strengths and weaknesses of employees to place right men on right job.
- To maintain records in order to determine compensation packages, wage structure, salaries raises, etc.
- To maintain and assess the potential in a person for growth and development.
- To provide a feedback to employees regarding their performance and related status.
- It serves as a basis for influencing working habits of the employees.
- To review and retain the promotional and other training programmes.
- It helps the organization to decide the compensation of the employee. Also, based on the performance and the additional efforts put by the employee the extra benefits and allowances can be decided using records of performance appraisal.
- It helps the supervisors to chalk out the promotion for performing employees and dismiss the inefficient workers.
- Special actions can be taken for the development of the employees. The performance appraisal system will highlight the weakness of the employee based on which the training program arrangement can be carried out by the organization.
- The performance appraisal further suggests the changes in the selection process which will help to hire better employees.
- Performance review is an effective way to communicate the status of the performance of the employee. It is a way to provide feedback about how the employees are doing on their job.
- The evaluation of the performance can act as a motivational tool. It provides a picture of the efficiency of the employee and motivates the individual to improve their performance.
- Sometimes the vital factors responsible for the performance are ignored during performance appraisal.
- Performance appraisal totally depends on the factors used for the evaluation of the performance. The use of incorrect or irrelevant factors can lead to the failure of performance appraisal.
- The factors like attitude, abilities, and initiative are very vague and difficult to gauge.
- Sometimes the managers who carry out the performance appraisal are not qualified enough to properly assess the abilities of the employees. Thus, it leads to irrelevant data collection and failure of performance appraisal.
|Performance Management||Performance Appraisal|
|Meaning||Managing the human resources||Analysis of employees’ performance|
|Purpose||Developing employee growth strategies||Determining compensation|
|Orientation||Processes to get the best out of employees||System involving assessments|
|Flexibility||Supple as per organizational goals||Rigid following set procedures|
|Type of Tool||Strategic Tool||Operational Tool|
|Aim||Reaching business development goals||Improving employee efficiency|
|Ownership||Team managers/multiple stakeholder||Human resources department|
|Time-frame||Regular & ongoing||Annually|
|Approach||Based on team values||Individual employee-based|