Performance Management in Organizations

This report provides an integrable comprehension about the general framework of performance management in organizations. It discusses the positives and negatives in the approaches to performance management and explores the tools and techniques used in performance management systems.

HI6005
Management and Organizations in a Global Environment
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Contents
Management Summary......................................................................................................3
Introduction.........................................................................................................................3
Main Body...........................................................................................................................4
Conclusion..........................................................................................................................5
References........................................................................................................................12
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Executive Summary
The key purpose of this report revolves around in providing an integrable comprehension
about the general framework of performance management in the context of determining
the related school of management theory. In addition to this, positives and negatives in
the approaches to performance management will also be identified. Efforts have been
made in presenting the general framework of a performance management system with
intent of describing the management control and PM systems structure and operation in
a manner that is more holistic in comparison to literatures described earlier. For
characterizing the core subject matter mainly the works of previous researchers will be
mostly used all through this report. Moreover, current works breaking new ground have
been considered for moving the study towards the accomplishment of desirable results.
It is revealed from the analysis of different academic papers and reviews that an
important role is played by the concept of performance management system
empowering organizations to reap remarkable outcomes. This study has been initiated
as a step towards the effective fulfilment of the strategic direction of an organization in
terms of performance measurement.
Introduction
According to Yadav, Sushil and Sagar (2013), organizations are increasingly dependent
on management and decision makings that are based on facts. These activities are
enabled by the systems of performance management to help organizations in deriving
“business intelligence” from digital data that is expanding at a rapid amount.
Furthermore, performance management systems have been designed in a way for
providing its users with crucial information related to performance with the help of
effectual representations. The performance management systems developers at this end
come across technological solutions that are increasingly complicated to implement
within organizations, which presides over the needs of different information and at times
multiple stakeholders conflicting interests. According to Parida, et al., (2015), a typical
performance management system usually comprises of performance appraisal and
employee development widely perceived as the Achilles’ heel of human resource
management. With employees and managers deploring their inadequacies repeatedly, in
many organizations performance management system suffers from flaws. It is revealed
from a recent survey that out of ten employees only three agree that the performance
management system of their companies has helped them in improving performances. In
addition to this, lesser than 40 percent of employees agreed that clear performance
goals was established by their systems besides generating honest feedback or use of
technology for streamlining the process. This report study intends of making discussions
about the performance management in order to identify the relevant School
of Management Theory besides the positives and negatives in its approaches.
Main Body
What is Performance Management?
According to Deepa, (2012), performance management can be described as an
organizational approach that is continuous and systematic, widely used to improve
results with the help of decision makings based on evidences, continual learning and
focus on performance liability. It has been observed that evidences from measurement
for supporting administrative planning, funding, and operations are used by performance
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management. With the help of better information, organizational officials and managers
become empowered in better comprehending the concerns of different stakeholders,
recognizing success, identifying the areas of problems and responding with suitable
actions — for learning from experiences and applying that insight for better serving the
customers. According to Sharma and Sharma (2017), organizations concerted actions
are included with the general framework of performance management for applying the
objective information into management and policy making with intent of improving the
outcomes. Although the terms performance management and performance
measurement are interchangeably used often, an active approach is implied by
performance management, which indeed is perceived as a difference that is relatively
significant. The outputs and inputs, efficiency, and overall effectiveness have been
measured by many public and private organizations over the years. This measurement
and reporting no doubt is a crucial performance management element. However, it has
been observed that measuring and reporting by own seldom leads towards
organizational learning and improved outcomes. On the other hand, measurement data
is used by performance management for facilitating learning and improvement apart
from strengthening the focus of organizations of outcomes.
According to Jyoti and Rani (2017), with the development of information and
communications technology at an explosive rate has increased has significantly
contributed in the intensity of information within businesses. Organizations as a result of
this are in the continuous need of increased amount of data that might be utilized for
decision makings based on facts. A significant section of this data are derived from the
internal processes and systems of an organization however, an increased share of data
gets generated from resources that are external, say for example, web based platforms
and inter-organizational systems. According to Tibyan, Wibisono and Basri (2019),
increasing pressures on organizations are relatively imposed by competitive
environments, industry changes and public regulations for seeking ways of utilizing this
data into performance management. Therefore, performance management systems are
implemented by a large number of organizations for aiding them in this struggle.
Basically a performance management system revolves around an amalgamation of
different processes, metrics, and technical architecture that has been created for
optimizing both the formulation and implementation of organizational strategies.
Improvements made in technology coupled with the need of an organization for
supporting and controlling their decisions have precipitated the evolution of performance
management systems from just simply being a management accounting activities and
financial reports to progressive business intelligence systems and applications.
Objectives of Performance Management
According to Kuhil and W/Michael (2019), different researchers emphasise that the aim
of performance management revolves around the development of employees with the
help of requisite dedication and proficiencies to work towards the shared meaningful
objectives in an organizational framework. It has been observed that the general
framework for performance management has been created by taking into account the
objective to improve the performances of both individuals and organizations. This is
done through the identification of performance needs, providing feedbacks regularly and
helping the employees in developing their careers. The sole purpose of performance
management is to cultivate an organizational culture of high performance for
employees---- both as individuals and in teams. According to Brauns (2013), it is done so
that the accountability to continuously improve the business processes is jointly taken by
the employees. In addition to this, raising their individual competency bar through skills
upgradation in a framework of leadership is also aimed by performance management.
The primary focus of performance management is to enable clarity of goal with intent to
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make people in getting done the right things at the right time. It might be contemplated
that performance management system’s main objective revolves around achieving the
employees complete potential in the favour of both them and that of the organizations.
According to Sudnickas (2016), it intends of doing so by well defining what is expected
from them --- roles, responsibilities and accountabilities, requisite competencies and
behaviours. It has been observed that performance management’s key goal focuses on
ensuring that organizations as a system works together with its subsystems in a
coherent manner in order to accomplish optimal results.
Performance Management: Prerequisites
According to Ukko, et al., (2017), performance management system are when designed
and implemented precisely can result into increased productivity, improved
communications and various other decisive impacts on both individual employees and
the organization as a whole. However, it is important that certain tasks are completed by
the organizations ahead of getting a performance management system designed and
implemented. Whether the PMS will focus on giving support into decision-making such
as increase in pays and promotions or facilitate development of employees in terms of
training & developmental activities must be first defined clearly. This should be followed
by setting the field for PMS in being rewarding by taking into account its incorporation
with other HR systems besides ensuring its fits into the corporate culture. According to
Tabatabai, Karbasian and Mirbagheri (2014), performance management system is
designed in-line with the strategic objectives of organizations through translation of their
goals into branch/unit/team/individual goals. In addition to this, need for qualified and
motivated assessors besides top management’s commitment are the factors that are
also critical at this stage. It is equally important for organizations in having job
descriptions that are result-oriented and clear reporting lines and relationships before
placing a performance management system. The HR managers once all the
prerequisites are placed can begin working-out the PMS for their firms. According to
Blahova, Palka and Haghirian (2017), it is difficult to develop an appraisal system
reflecting the performance of employees accurately. It has been observed that the nature
of performance management system is not general neither it can be passed on from one
company to another simply. Moreover, they should be designed and administered in a
customizing way for matching the characteristics and qualities of both employees and
organizations.
Framework of Performance Management System
According to Flumerfelt, Calvo-Amodio and Porter (2017), the five steps that should be
systematically considered while a performance management system is being designed
are a competency model or the corporate values perceived as a point and guidance for
starting. This is followed by the second step of transferring the goals into measures for
the employees. Defining the rating sources is the third step while the development of
well-crafted templates to measure the performances is the fourth step, and defining the
utilization of the ratings in the evaluation is the final step. According to Sangwa and
Sangwan (2018), a competency model as a framework to identify the competencies for
being measured and developed within the PMS is used in the performance management
based on competencies. Competency model one can be described as the assemblage
of key competencies i.e. expertises and insight for together defining the successful
performance of a job. The advantage of this model revolves around the inclusion of both
hard and soft skills such as technical, leadership and interpersonal; enabling feedbacks
of the achievements and work performances.
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According to Şerban (2017), performance Management that is based on values is built
on the core values of an organization, which is perceived as the framework. The
organizational values are being utilized to identify the issues that will be measured and
developed within the PMS. However, having a value framework, which underlies all the
processes of HR, is very important. Balanced scorecards can be used in order to align
the performance plans of every employee with that of the goals of an organization.
Perceived as a framework for performance measurement a balanced score card makes
significant contributions to define the goals and objectives besides translate them into
definite measures for the employees. A fusion of financial and non-financial measures is
been used by this PM framework such as customers, business and learning, with each
comparing to a “targeted” value.
According to Ghatak (2018), inputs are provided by all rating sources should be taken
into consideration while the rate sources are being defined apart from how this input will
be collected, managed and controlled. By making use of the information gained from the
managers, peers, direct reports or customers a 360-degree feedback is conducted.
Employees’ familiarity with the work is profited from self-reviews eventually resulting into
more liability within employees. Moreover, it also enables them in examining and
clarifying their goals and weakness. On the other hand, a two-way communication is
enabled by the upward feedbacks (for example behaviourally anchored scales and
upward reviews), further assisting the leadership skills development. Components such
as determining information, instructions, objectives and measures (or competencies
when applicable), rating scales, training and development plan of employees and a sign-
off section should be included in all the templates of evaluating performances.
Positives and negatives in the approaches to performance management
Positives
1. Conversations based on performance: according to Almeida and Azevedo
(2016), busy in the execution of routine responsibilities, employee interactions
often get neglected by the managers and the opportunity of providing coaching
and feedbacks. However, a PM system enforces managers in discussing the
performance issues with employees, impacting their behaviours and growth.
2. Targeted employee development: with the employees being on the journey of
professional growth, organizations are accountable to prepare them for added
responsibilities. A PM system when implemented effectively contributes in
determining the opportunities of employee development besides being a critical
part of the process of succession planning.
3. Employee encouragement: for keeping the employees encouraged, their
contributions are recognized through performance appraisals. Issues are
addressed immediately
Negatives
1. Time taking: managers are expected in spending an hour per employee in
maximum to write performance appraisals. According to Almeida and Azevedo
(2016), depending on the number of employees being evaluated, the process can
extend to hours in writing the department’s PA besides meeting with staffs for
reviewing the performances.
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2. Inconsistent Message: Managers’ failures in maintaining précised records of
employee behaviour might lead towards conveying inconsistent messages to
them.
3. Biases: keeping biasness away from the process of performance
management is difficult, which needs a mature manager for remaining
unbiased throughout the process.
Performance Management System tools and techniques
Management by objectives (MBO)
According to Nadeem, Riaz and Rizwan (2019), this PMS tool can be described as the
process that defines clear-cut objectives followed by setting out how they can be
achieved. MBO is extremely powerful for specific works that are done in one step at a
time. Moreover, it is also perceived as a great way for creating an organizational culture
that works towards common goals. The core idea behind using this tool is achieving
each objective within the organisations, making others aware of their accomplishments,
boosting morale and motivation of the employees in return. Measurement of individual
performances and make their comparisons with the preset standards in an organization
is what involved in this PM tool.
Review and Agree
According to Holderness, et al., (2016), managers periodically keep checking with their
teams and employees for providing feedbacks thereby, reinforcing stronger skill sets and
decisive behaviours whilst helping to identify the opportunities having a clear way to
improve. Such feedbacks should be given in real time and integrated into company
culture. By reviewing and agreeing to their performances is perceived as the ideal way of
affirming the employees besides effectively giving shape to their work.
360-degree Feedback
According to Drago-Severson and Blum-DeStefano (2018), this PM tool focuses to
answer the question how well employees perform according to people having a stake in
their performance. A wider assessment of an employee’s performance is provided with
this tool on the basis of views derived from supervisors and/or managers, direct reports,
peers, customers, and suppliers etc. The outcomes are tallied behind the closed doors
and conveyed to the concerned employees generally by the managers. The insights
gained from this tool are utilized in designing the training and development plans of
employees. An effectively concluded 360 degree feedback significantly contributes in
democratising the process of performance review through the evaluation of different
people’s opinions rather than just depending on the line manager of an employee.
Compare and contrast strengths and weaknesses of cohesive versus non-
cohesive teams and the application to High Performance Organizations
According to Hussain, et al., (2016), cohesive teams significantly contributes in
increasing the productivity of the individuals owing to members experiencing lesser
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stress level; reduces absenteeism and turnover rates; experiencing more job satisfaction
and persistent individual productivity outcomes in the teams. However, the weakness of
a cohesive team is that productivity largely depends on the performance objectives that
have been agreed while their strengths lies in higher productivity and higher norms thus,
achieving highest results. On the other hand, the productivity of non-cohesive teams is
off the rails, where the outcomes range from disappointing to harmful. The weakness of
a non-cohesive teams hides in the possibility of rise in conflicts of interests, lack of
collaboration and mutual trusts, unrealistic or inadequate goals, imprudent
competitiveness with others outside the group, detachment from other groups and
individuals further negatively impacting the team’s productivity and that of the
organizations. However, there are no such strengths of non-cohesive teams.
According to Hussain, et al., (2016), the vision, goals, metrics are commonly shared by
the cohesive teams within high performance organizations further collaborating,
challenging and holding one another liable for attaining phenomenal outcomes. Such
teams when are applied in high performance organizations contribute in having a clear
vision of where the business is heading and what it wants to achieve. Apart from acting
out of clearly defined priorities such teams measure their success and receive feedbacks
about performance. Moreover, open communication and healthy mutual relationships are
also maintained by them helping in immediate decision-makings. However, non-cohesive
teams can reduce the business productivity of high performance organizations causing
them losses.
Performance Management from a Control Theory Perspective
According to Sageder and Feldbauer-Durstmüller (2018), focus of control theory is on
implementing control across all departmental levels of organizations, which can use
different forms of control such as organizational structure, behavioural controls (e.g.
organizations norms and policies) and performance measurement for gaining desirable
outcomes, consistent with their objectives and goals. Control theory helps performance
management to evaluate the system’s outcomes to determine its persistency with
predefined parameters. According to Alexander, Havercome and Mujtaba (2015),
variations, get adjusted by the controller within PM system thereby, helping the
managers in controlling the employees’ performances. Likewise, it also helps in
generating quicker and better results through routine monitoring and feedback.
Organisations effectively and efficiently executing control and performance are likely in
coping with the external environment changes easily.
The Balanced Scorecard Approach
According to Kopia, et al., (2017), the focus of most private sector businesses while
measuring their performances revolves around the financial measures of their bottom
line, ROI, market share, and per-share earnings. While the focus of federal agencies is
on the internal or process performance, considering factors like number of full-time
equivalents allocated, programs controlled, or budget size for the financial
year. However, any of these approaches alone fails in providing organizations complete
perspective of performance that is effectively needed by managers to manage. Hence, a
balance between the internal and process measures with the outcomes and financial
measures contributes in providing a more complete picture to the managers, helping
them in knowing the areas of improvements.
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Conclusion
Finally, it can be concluded that a critical role is played by an effective performance
management system of organizations in the long-term success of their businesses.
Performance management with the help of its both formal and informal processes
significantly contributes in aligning the employees, resources, and systems for meeting
the organizations strategic objectives. Additionally, the implementation of performance
management system further helps organizations to identify early warning signals of
possible problems thus, empowering the managers in better comprehending the areas of
adjustments for keeping the business of right track. It has been further revealed from the
above study that organizations getting right performance management system are
relatively more likely in becoming intimidating competitive machines.
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