Performance Management System – A Complete Guide

The performance management system is a method for systematically assessing employee performance. It is the process by which an organization's mission, goals, and objectives are aligned with available resources (e.g., manpower, material, etc.), processes, and priorities.

1. Introduction:
Performance is related to an institution's ability to achieve its objectives following its stated
objectives. It includes the outcomes that have been produced or gained as a consequence of
personal or group efforts to achieve organizational goals. Businesses can use a variety of
performance management procedures, technology, and methodologies to engage, monitor, and
control their Personnel. The Human resources, supervisors, and employees must commit to and
dedicate themselves to a successful performance management system. The term "performance"
refers to various political, economic, and psychological results
Every firm strives to outperform its competitors. It learns how to recruit, develop, maintain, and
connect employee performance with organizational objectives to remain effective (Talbot,2005).
The Performance Management System has been used for various purposes, including enhancing
work efficiency, directing merit pay, informing employees of job expectations, counselling staff
members, making the hiring decision, empowering staff, evaluating employees' potential, and
identifying training requirements, among others. The performance of the company workers has a
significant impact on its success. As a result, every company must make sure that its employees
are not only trained but also driven to create significant results. The inadequacy of an efficient
plan for managing, assessing, and paying employees may be shown in the instance of Omega
Inc. and its franchise-based employment. The corporation needs to persuade its franchised
retailers to implement a new performance management system to improve
things(Armstrong,,2000).
2. Scope and Objective:

According to this study, the Omega Manufacturing Company financially supported their
franchised dealers who operated individually to improve the efficiency of their sales agents.
They had developed a performance management system, but it had several problems that they
were attempting to address to increase corporate revenue. As an outcome, they will need to
develop a new Performance Management System, which will be a systematic, thorough, and
holistic plan with full equality from both employers and employees. It allows employees and
managers to collaborate on a plan to achieve common goals and meet career development needs
simultaneously(Buckingham,2015).
Objective: Because Franchised Dealers had linked the PMS to their aims, Omega employees
were unsure of the company's objectives. The HR Manager should have defined the Omega
objectives and linked to the organization's mission and vision. The goals of each section must be
determined. Personal aspirations should be in line with organizational and company goals. To
guarantee that everything has been made clear, an official statement route must be in place.
Some staff talents will aid in determining the standard of achievement of the Personnel.
Everything that's been planned must be documented so that all efforts can be monitored. It can
take months or even years because it is not a one-day surgery(Lawler,2003).
3. Significance:
The most current performance management analysis is Performance Management Practices. It
demonstrates that profitable entrepreneurs understand the importance of performance
management in transforming vision into outcomes.
Key Statistics: The large percentage of the 88 CEOs polled said their performance management
system is responsible for the fundamental variables influencing both business and cultural

strategy. Financial results, efficiency, quality of products and services, customer happiness, and
job satisfaction of employees are all directly influenced by performance management
systems(Talbot,2005).
Individuals who are enthusiastic, motivated, and consistently perform their jobs perfectly and
surpass expectations are needed in every organization. Individuals, on the other hand, are
defective. On some days, we may be inspired to finish, while on others, we may face obstacles
and blockages that prohibit us from moving forward and being productive.
Recognizing and Rewarding the employees: Acknowledging and appreciating your employees
can be extremely beneficial to your business. From American Express research, 33% of
companies believe that reward and recognition systems boost employee engagement, and 50%
believe that providing incentives motivates employees more. In firms, influential award and
recognition systems can function when there is a precise and visible process of performance

evaluation and discussions. 83 per cent of employees that work in an atmosphere with the strong
award and recognition systems are satisfied with their jobs.
If they know their job is acknowledged and valued, 69 per cent of employees will work more.
Businesses with successful incentive schemes see a nearly 50% increase in employee
engagement(Buckingham,2015).
Employee Development Strategies are aided by performance management: Continuous
improvement entails constantly developing Personnel by addressing their training needs. You
may initial approach performance improvement with regular get-togethers since you can often
meet to assess each worker's performance, future growth opportunities, and expansion plans. .
Utilize techniques that capitalize on employees' innate strengths while also reflecting the
company's direction. Having a clear understanding of your workers' abilities, as well as a skilled
platform that allows you to switch priority areas on a routine basis - and move on to new
developmental areas - creates an environment where your employees are constantly moving in
the direction that is most beneficial to your company. The employee-business centre can become
misaligned, objectives can become obsolete, and worker potential can be lost if performance
appraisal is overlooked(Armstrong,,2000).
Exchange of feedback: The importance of feedback in performance management cannot be
overstated. Feedback must be given on a regular basis to workers. Individuals must be aware of
their current situation and how they might be better.
Clarification on SMART Objectives: It's both unexpected and concerning to see that over half of
employees are unsure of exactly what their position in the office entails for the long or short-term
goals they're attempting to achieve(Lawler,2003).

Performance Management Process : The stages of the performance management process do
not have a clear endpoint, necessitating ongoing adjustment and reevaluation. As a result, they
might be depicted as a cycle. Even before planning can begin, the corporation must first define
its aims and values. As it involves several stages, performance management in an organization is
a continuous engagement. It's a systematic approach to organizing, training, and evaluating
workers' performance. Managers must provide legitimate and constructive feedback to
employees who are not collecting performance expectations.( Kagioglou ,2001).
Pre-planning: Omega, Inc.'s case study demonstrates that implementing a performance
management system is a continuous process that necessitates more attention to identifying and
resolving problems in order to meet objectives. First and foremost, the franchise owners finished
the pre-planning stage by adopting a stated mission to deliver excellent customer service and
design jobs description for salespersons(Cheng,2007). This information was derived from an
investigation of the impact of the employee in their companies and the business at Omega. When
comparing their acts to the actions stated in the research, one may conclude that the firm's initial
measures were adequate for the cycle's development.
Planning: The next phase is planning, and franchisees have taken steps to personalize their focus
on employee success. All employees were given a copy of the mission statement, and their
managers addressed how their activities led to the organization's growth. It is critical to
emphasize that the connection between sales reps and clients was at the heart of the conversation.
Following that, franchisees set personalized performance targets for each employee, focused on
sales goals, according to the report. While the main objective is in line with the performance
management method, it's uncertain whether such targets followed the SMART technique.
Monthly market expectations can be assessed, but they can't be separated from dealing with

customers, which is another important aspect of the company's goals. Furthermore, employees'
goals lacked relevant information on meeting sales quotas, which could have aided in making the
process more open.
In the instance of Omega, there are both benefits and drawbacks to this activity in terms
of training. While , the programme was designed to improve employees' knowledge and
abilities, which is an essential part of their professional development. However, the case
demonstrates that each employee had a distinct educational level and expertise.
( Kagioglou ,2001).The feedback on performances during the training program is insufficient to
determine whether Personnel are sufficiently equipped to provide service. Their comprehension
of the course material is also undocumented, raising the possibility that workers are not
responding to learning.

Acting: Sales representatives perform the acting phase, and the scenario does not include
information regarding the employees' success rates in attaining their goals. This is a problem that
will become apparent in the next step, tracking. Supervisors failed to collect or preserve any
information and data relevant to their performance management procedure. There were no
written records in either paper or digital format. As a consequence, the evaluation was based on
sales figures, which presented an inaccurate understanding and perplexed staff. In franchising,
tracking entails regular mutual feedback and performance assessment, which did not occur.
Workers, for example, had no idea if they were meeting their quotas(Lawler,2003). Employees
have been found to be demotivated and less committed to superior efficiency due to a lack of
knowledge.
Reviewing: Finally, the franchise managers lacked practical methods for evaluating and
adequately compensating employees' accomplishments. Because performance evaluations were
informal, there was a higher possibility of bias in discussions. Furthermore, because employees
were unaware of their progress toward targets, each evaluation came as a shock, which did not
motivate or inform them in a significant way. In addition, a lack of feedback resulted in blunders
and poor customer service. These blunders suggest that the franchise owners were unable to
discuss future expectations for employees and focus on areas where their productivity needed to
be improved(Selden,2011).
1. Recommendations:
Rewarding system:
The scenario at Omega demonstrates that employees do not place a premium on customer
satisfaction while they strive to fulfil sales targets. As a result, the incentive structure must
emphasize client-salesperson connections, but also revenues achievements. There are numerous

ways to show appreciation for employees, and a whole incentive system incorporates both
financial and non-elements. A pay scheme that rewards salespeople based on their performance
will encourage them to work more. Unlike the cost of most common things, the basic wage has a
significant impact on motivating employees to improve their performance. Currently, the
implemented performance management method does not include a compensatory system. The
usage of variable compensation in the workplace, where representatives are compensated based
on their overall performance, can have a significant impact on their effectiveness. The process
eliminates representatives' attitudes of privilege. Gainsharing, incentives, organization
motivators, and benefit-sharing are all possibilities for prizes(Cheng,2007).
The companies should then assess whether bonuses are acceptable by setting SMART goals that
are directly related to the mission. The solution recommended in this example combines both
strategies to provide an incentive that acknowledges work while avoiding a competitive
atmosphere.
S stands for specialized.
Measurable is a term used to describe something that can be measured.
A - Attainable/Achievable
R stands for "results-oriented," "real," and "relevant."
T stands for Time-Bound.
The application of the above criteria results in a goal that is both justifiable and quickly
envisioned and measured. Making a target concrete, quantifiable, and time-constrained increases
the ability to make progress toward the goal and track it. If a person understands that their
actions support a particular area of the business, for example, the consequences of not meeting

cutoff timings are more evident. Using the SMART structure brings clarity to the foreground for
representatives who will be evaluated in light of these goals(Aguinis,2011).
Workers' work/life balance is one of the most important variables that influences their
performance. Company owners may raise morale and dedication while also improving customer
service quality by creating comfortable working environments both inside and outside of
working hours. Childcare costs, health and wellbeing services, and sick leave, for example, are
factors that minimize workplace stress and reduce the likelihood of illness, burnout, delinquency,
and poor performance(Selden,2011). As a result, employees will understand that their personal
concerns will be taken good care of the outside of work, and they'll be able to focus on their
work without being distracted. Furthermore, good services encourage employees to stay with the
company and provide elevated service.
Performance Management system:
Company owners must change their policies and implement new monitoring and evaluating
procedures based on the outlined cycle and incentive system. To begin, companies should
develop SMART performance targets for every worker and assess their past performance.
Although some goals may include sales quotas, the user experience should have been at the
forefront of goal achievement. Second, franchisees should gather information about employees'
experience, education, and expertise to see if they require more training. They must also collect
data on present issues as well as incentives that workers would like to see adopted (Folan,2005).
Because the current methods are inadequate, the monitoring stage must be drastically altered. For
management to collect all the information relating to comments, performance, consumer surveys,
and corporate goals, an official structure of records must be built. Supervisors should keep an
eye on staff at all times, whether or not such a review meeting is scheduled. Personnel have

access to information about themselves, such as their progress towards goals, prospective
incentives, and previous approaches to solving(Aguinis,2011).
The issue of whether the form of documenting should be adopted is critical. There are numerous
electronic solutions to these problems currently available, and franchisees are strongly
encouraged to engage in quality management software. This technique will not only ensure that
all information is collected and kept in one location, but it will also give a data representation.
Supervisors will visit with staff on a regular basis (weekly or monthly) to address their progress,
objectives, and any additional comments. This practice will enable franchisees to change short-
term goals and identify difficulties early. Managers' comments should not surprise employees; all
data must be clear and timely. At these sessions, it's critical to talk about ways to get rid of
roadblocks.
Finally, the procedure of performance evaluation and compensation will be based on the
information gathered and processed, as well as advanced assessment methods. Sessions to
discuss accomplishments will be more formal and infrequent than meetings to discuss criticism.
For example, they could occur once or sometimes a year, while yearly reviews could lead to
biased judgment. As described in the preceding section of the article, the franchisees'
requirement to compensate staff is addressed in the final phase(Folan,2005).
1. Conclusion:
A suitable performance management method can have a significant impact on how employees
work, which can help the firm achieve its goals. The cycle consists of four linked stages:
planning, executing, monitoring, and reviewing, and also a data collecting preparation step. In
the context of Omega, franchise owners were only capable of completing the first few steps,

which included gathering information and defining the company's objective as well as the
personal goals of its employees, with varying degrees of success. However, they struggled to
monitor performance as well as provide helpful feedback to employees, resulting in uncertainty
and low motivation. The proposed sales reward scheme is driven by customer feedback, with
some consideration for sales quotas. Work-life harmony, acknowledgment, peer support, and
amount proportion are all recommended to boost employee morale.( Gruman ,2011).Clear
feedback, regular meetings, career advancement, and constant rewards are all part of the
leadership program management approach.

References:
Talbot, C., 2005. Performance management. In The Oxford handbook of public management.
Armstrong, M. and Baron, A., 2000. Performance management. Human resource
management, 69.
Lawler, E.E., 2003. Reward practices and performance management system
effectiveness. Organizational Dynamics, 32(4), pp.396-404.
Buckingham, M. and Goodall, A., 2015. Reinventing performance management. Harvard
Business Review, 93(4), pp.40-50.
Cheng, M.I., Dainty, A. and Moore, D., 2007. Implementing a new performance management
system within a project‐based organization: A case study. International Journal of Productivity
and Performance Management.
Selden, S. and Sowa, J.E., 2011. Performance management and appraisal in human service
organizations: Management and staff perspectives. Public personnel management, 40(3), pp.251-
264.
Aguinis, H., Joo, H. and Gottfredson, R.K., 2011. Why we hate performance management—And
why we should love it. Business Horizons, 54(6), pp.503-507.
Folan, P. and Browne, J., 2005. A review of performance measurement: Towards performance
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Kagioglou, M., Cooper, R. and Aouad, G., 2001. Performance management in construction: a
conceptual framework. Construction management and economics, 19(1), pp.85-95.
Gruman, J.A. and Saks, A.M., 2011. Performance management and employee
engagement. Human resource management review, 21(2), pp.123-136.