Components of an Effective Performance Management System

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The components of an effective performance management system

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According to Cascio (2015), the role of human resources in the present scenario has undergone
diverse changes which focuses on building functional strategies which enable the
implementation of important corporate strategies. As opined by Bratton and Gold (2017), human
resources and corporate strategies go hand in hand. The function of HR is not only to facilitate
jobs to employees but also improve their performance by building a favorable work environment
thereby paving ways to gain maximum opportunities to contribute to organizational planning and
decision-making process. According to DeCenzo, Robbins, Verhulst (2016), the HR department
performs the activity of developing leadership qualities among its employees and fostering
employee motivation. Therefore, the role of HR has changed in recent years stating the fact that
HR managers in any modern organization act as a facilitator, appraiser, and an enabler. Every
organization has to face the rising competition which raises the demand for measuring the
performance of its employees. Performance management is a broad term and one of the most
important functions of an HR as it enables an organization to understand the current progress of
its employees by use of different performance management strategies and tools. Performance
management is a systematic approach which helps an organization to improve its overall
performance thereby improving the performance of its employees. This approach has gained its
popularity from a very long time which now facilitates companies to design tools such as job
training and reward system, developing leadership qualities, framing a job design and
performance appraisal. According to the Van Dooren, Bouckaert and Halligan (2015), the aim of
performance management is to develop a high-performance culture for both employees and their
teams to contribute to the overall productivity of an organization on a continuous basis. In any
contemporary organization, performance management has become an indispensable process to
ensure employees are working towards the achievement of the goals of the organization.
In the era of globalization and rising competition, organizations have felt the need for better and
enhance HR practices in order to gain a competitive advantage over the competitors. According
to Buckingham and Goodall (2015), a performance management system plays an important role
to streamline the activities of employees and work in alignment with the vision and mission of
the organization. Managing employees can be challenging for organizations since the
performance of employees depends upon their commitment to work, their skills, and clarity of
performance. This can only be managed by building a robust performance management system
that enables a reward and feedback system to retain the motivation of employees. The

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effectiveness of performance management systems can be determined from components like
Performance Planning and appraisal.
According to Hassan (2016), Performance planning is the first important step or component of a
performance management system thereby creating a basis for performance appraisals. The
performance planning process begins with conducting a performance session between the
employee and the reviewer. During the performance session, employees can specify their
performance areas and the targets to be achieved within a period of 1 year within the
performance budget. The employer and employee mutually agree on the key performance areas,
targets and the budget for accomplishing the next steps.
According to Cappelli and Conyon (2018), Performance appraisals are generally conducted two
times in a year in an organization. Previously organizations lost their employees due to their
bureaucratic approach of performance appraisals which mostly concentrated on identifying the
flaws and inabilities of an employee without identifying the need of developing and training the
employee. But in the current scenario, organizations have become more focused on managing the
performance of employees rather than simply appraising them. The later stages of performance
appraisal will be able to enhance the competencies of employees. The first review is performed
in the mid of the year whereas the second review is performed at the end of the year. In this
process, the employees are required to undergo a self-appraisal by filling out the self-appraisal
form and describing their notable achievements. As opined by Cravens, Oliver, Oishi and
Stewart (2015), after the self-appraisal process, the filled out form is rated by the appraiser on the
basis of the achievements provided by the employee. The process of performance appraisal and
reviewing is considered to be highly engaging since it requires the active participation of both
employer and employee to analyze the gaps in employee's performance. Once the loopholes are
identified, feedback will be provided to the employee to improve their performance.
The performance management process provides appropriate feedback as well as counselling of
employees to understand their performance gap and how they can be overcome. At this stage,
employees become aware of their areas of improvement and understand the level of performance
among others in the organization. Necessary feedback is provided to the employee to improve
their performance. Along with that training and development suffices the need of improving
employee performance. According to Latham (2015), a detailed feedback session is conducted