20th, February, 2012
The process of performance management is important to organizations, and therefore, the management should be sure to incorporate this process into their organizations for increased productivity. The process of performance management is whereby an organization assesses the performance of its employees using various tools of assessment, to ensure that the performance of employees is aligned with the objectives of the organization. During this process, objectives are set for employees, their performance is rated against the set objectives, and their future development activities are outlined in order to contribute to achieving of the set objectives. Therefore, the system of performance management generally involves evaluating and developing the skills, behaviors, and the performance of individual employees, for ensuring that the organization competes favorably in the market through its high performance.
Performance management is used as a measuring and management instrument of employees in the organization. This process mostly benefits the big international companies, and those companies, whose workforce is greatly distributed. As a process, performance management comprises different types of activities aimed at achieving the objective of the general process. These include reward and remuneration for employees, coaching and mentoring of employees, team working, measuring, competencies, and personal development plans, among others. Today, performance management is characterized by various changes, as the way it is approached today differs with how the process was approached in the past centuries. The changes in performance management today have contributed to its increased efficiency, and help organizations retain their high-performing employees. Performance management today is a holistic process, which embraces different processes, and this is efficient in people management in companies (Kreitner 2008).
Armstrong & Baron (2005) note that performance management is not a new process. This has lasted for the past seventy years, since its inception in the 1940’s. Initially, managers of companies developed performance management during this period, in order to establish whether the different salaries and remuneration for the employees were justified or not. The difference between performance management of those days, and the performance management today, is reflected in the complexity of the process. Today, performance management process is more sophisticated, as managers have incorporated more elements, which lacked in the past. For instance, managers have incorporated the aspects of development planning, competencies, and 360-degree feedback, among others, in the recent times (Armstrong & Baron 2005).
According to Hale and Whitlam (2000), it is possible to trace the roots of performance management back to through the various past themes of organizational development. In this case, there was a work-study performed. Work would be broken down into different tasks in a way that is analytical. This helped with time planning, supervision, and cost planning. Additionally, this would help in determining the incentives for employees on the job. In this case, the aspect of competency took a different approach, as we know it today, since this did not apply to more diverse work, and not only limited to work-study (Hale &Whitlam 2000).
Another situation in past organization that reflects performance management is the use of merit schemes. The merit schemes in organizations were historically used to provide the generic definition of effective performance, in addition to providing a scale, with which performance would be assessed and rated against. However, today, the merit schemes have been disregarded due to their weaknesses. For instance, merit schemes cannot be used to measure aspects of a job that are unique, therefore, this is limiting. Additionally, the merit schemes could not be used to measure behavioral characteristics, which were more subjective. These are among some of the limitations of the past approach used in performance management (Hale and Whitlam 2000).
Today, the growth and evolution of performance management has been influenced by a variety of factors, including the social, economic, and organizational factors. First, there is the issue of high competition among organizations today. This has forced organizations to develop performance management that will maximize the individual and team performance among employees in the organization, to ensure that this is reflected in the general performance and productivity of the organization. Generally, the introduction of human resources management and integrated approach in organizations, as strategic drivers for the development and the management of employees has accelerated the process of performance management from how it was practiced in the past. Additionally, the fact that performance management today is a continuous process in the organization, as opposed to the past where it was performed annually, has helped boost the effectiveness of the process in different organizations (Kreitner 2008).
The performance of an organization is not only determined by its financial results and achievements. Performance of a company equally relies on the sustainability of its actions. In the past, most organizations based on financial performance only as a way of assessing their performance. However, today most managers feel that this kind of measurement system is not satisfactory. This is because, too much attention and emphasis on financial measures alone, such as earnings and financial returns, leads to less attention being given to some other important drivers of value, such as quality, employee satisfaction, innovation, and customer satisfaction. This is the reason why organizations today are implementing changes in their performance management, with regard to their measurement systems. Owing to the ineffectiveness of the financial measures, organizations have turned to non-financial indicators, including intellectual capital and intangible assets. This also includes the balanced scorecard, which is an integrated financial and financial measures (Parmenter 2011).
Non-financial measures are linked with long-term organizational strategies, as opposed to financial measures, which addressed annual or short-term strategies of an organization. Financial measures do not also address the customer concerns or issues concerning the competitors or profitability of the organization. However, the non-financial measures are more concerned with profitability of the organization, customer requirements, and long-term goals of the organization, among others. Non-financial measures can be used as indicators of the organization’s future financial performance. This is because, these unlike the financial measures, can capture the long-term benefits of the organization’s present decisions. Since non-financial measures are concerned with customer requirements, this helps boost the profitability of an organization, investments in customer satisfaction attracts new customers to the organization (Parmenter 2011).
Different theorists in the past contributed to the development of some of the management theories today. Frederick Taylor, in the early 19th Century, developed the scientific management theory, which aimed at developing ways of increasing efficiency in jobs. He proposed work-study, to establish the most effective way of accomplishing tasks. He also advocated job specialization for increased efficiency. Additionally, monitoring employee performance was critical to him, to ensure employees work in alignment with company objectives. This theory was put into practice for some years, before being dropped. However, teamwork is the important aspect that was adopted from this and is still in use today. Nonetheless, this contributed to performance management by introducing systematic training and selection of employees, workplace efficiency, and it promoted systematic organizational design (Hale and Whitlam 2000).
On the other hand, Abraham Maslow’s hierarchy of needs identified different elements that must be fulfilled, for an individual to achieve self-actualization and satisfaction. These include basic and physiological needs, love and belongingness, and self-esteem. Equally, in organizations, for effectiveness to be achieved, employees must be satisfied with their job. Just like in Maslow’s hierarchy of needs, employees must have resources, stability, business purpose, and esteem, in order to achieve delivery actualization. This then translates into improved performance of the employee, and the company. It is therefore, the responsibility of company management to ensure that these aspects are available to their employees. In this case, Maslow can be seen to emphasize the non-financial measures in performance management. He as well holds motivation as core to performance of employees (Goel 2008).
Douglas McGregor in 1957, attacked performance appraisal, in his article, “An uneasy look at performance appraisal,” which was published in the Harvard Business Review. Here, he argued against the approach employed by performance appraisal. Instead of focusing on the past, McGregor suggested that performance appraisal should be concerned with the future, and conduct more analysis, instead of appraisal. He also proposed that employees should be left to make their own decisions, and have their supervisors as their mentors or coaches. Therefore, of the three theorists, McGregor can be regarded as a pioneer of the human resources practices today, which have boosted the current performance management (Armstrong & Baron 2005).
Most organizations choose the strategy of management by objectives to achieve increased productivity. This is whereby employees and managers work toward a set of goals, which they collectively determine. Although this is instrumental in achieving positive results in the organization, this might also result in considerable drawbacks. First, this strategy puts more emphasis on goal setting rather than a working plan. Therefore, managers might concentrate more on setting goals, and forget to participate in helping employees meet the set goals. Additionally, because of the dynamic nature of the external business environment, goals are for short-term use, as the requirements in the external environment keep changing. Goal setting can also influence negatively on employees, especially when they fail to achieve the goals. In this case, it is unadvisable for managers to capitalize on goal setting as the core strategy in the organization (Kreitner 2008).
According to (Parmenter 2011), in the process of performance management, it is important that organizations adopt the best key performance indicators. These help in defining and measuring a company’s progress toward achieving its objectives. These differ in various organizations. For instance, a humanitarian organization might have its key performance indicator as the number of customers assisted during a specific period. Nonetheless, these must be in line with company goals, measurable, and have long-term considerations. Generally, organizations must choose the best practices in their performance management, as this is a critical process, which influences the productivity of an organization.
Armstrong, M. & Baron, A 2005, Managing Performance: Performance Management in Action,
CIPD Publishing, New Jersey.
Goel, D 2008, Performance Appraisal, and Compensation Management: A Modern Approach,
PHI Learning Pvt. Ltd., New York.
Hale, R. & Whitlam, P 2000, Powering Up Performance Management: An Integrated Approach
to Getting the Best from Your People, Gower Publishing, New York.
Kreitner, R 2008, Management, Cengage Learning, New York.
Parmenter, D 2011, Key Performance Indicators: Developing, Implementing, and Using
Winning KPIs, John Wiley & Sons, New York.
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