Key Components of Effective Performance Management System

This article discusses the key components of an effective performance management system, including performance planning, appraisal and reviewing, feedback, rewarding good performances, and performance improvement plans.

Running head: MANAGEMENT
Management
Name of the Student
Name of the University
Author Note

1MANAGEMENT
Introduction:
The conceptual definition of the Performance Management System defines it to be a
systematic approach for the measurement of the performance of the employees of a particular
organization (Van Dooren, Bouckaert and Halligan 2015). It is considered to be a process that
is significantly aligned with the mission, vision and objectives of the organization. In addition
to this, Rajnoha and Lesníková (2016), commented that the performance management system
is seen to be dependent on the available resources of the organization such as the manpower,
inventories and the material of the organization. The importance of the Human Resource
management of the organizations is observed to be significant as the managers of the
mentioned departments are responsible for the effective evaluation of the performances of the
employees. However, in context of the human resource, it is considered to be a substantially
complicated function. According to Buckingham and Goodall (2015), the performance
management system includes the activities such as joint goal setting, frequent
communication, continuous review of the progress, feedback and meeting the developmental
needs of the employees for the much required improvement in the performances of the
employees along with the employee engagement programmes and the rewards. The paper is
focused in the elaboration of the key components of the effective performance management
system.
Key Components of the effective Performance Management System:
In the modern business world, the importance of the performance management is seen
to be notably high. With the increasing level of competition in the modern business
industries, the organizations are facing the need of establishing an effective performance
management system so that it be able to help them in assessing the individual performances
of the employees and the overall performances of the firms as well. With a precise focus on

2MANAGEMENT
the increasing work pressure as a result of the increasing demands of the market, the
employees of the modern organizations are seen to be in significant need of the motivation. In
such case, the performance evaluation of the employees enables the organizations to
recognize the good work of the employees and motivate the employees through the
production of the lucrative rewards that can be intrinsic and extrinsic.
Talib (2013), highlighted the fact that the key components of the performance
management system includes the aspects such as the performance planning, performance
appraisal and reviewing, feedback on the performance, rewarding good performances along
with performance improvement plans.
Performance planning:
The performance planning is considered to be the first step in the process of the
performance management. The mentioned step forms the basis of the performance appraisals
and the activities that are to be conducted under the step are jointly managed by the appraisal
and reviewee at the beginning of the performance sessions (Balabonienė and Večerskienė
2015). The step is significant for the organizations in identifying or setting the targets and the
key performance areas for the employees to cover over a time period of 1 year within the
boundaries of the performance budget. The identification of the objectives for the employees
is conducted through the mutual agreement between the employees and the reporting officer.
The identification of the objectives is considered to be notably important for the organization
in enabling the employees to be aware of the expectations of the senior level management of
the organizations (Babafemi 2015). In addition to this, the process of the identification of the
objectives also helps the organizations to set a benchmark of excellence for the employees.
Performance appraisal and reviewing:

3MANAGEMENT
The performance appraisal is considered to be one of the key component of the above
mentioned system and it helps the modern organizations in motivating the employees. The
performance appraisal or the review is generally conducted twice a year in the form of mid-
review and annual review (Pollitt 2013). The first step of the process of the review is
concerned with the appraisee offering the self-filled up ratings in the self-appraisal form and
then describing his or her achievements over a span of time (Aggarwal and Thakur 2013).
With a precise focus on the description of the achievements in the quantifiable terms, the next
step will allow the appraiser to provide the final ratings on the basis of the quantifiable and
measurable achievements of the employee. The process of the review is significantly
important in identifying the factors that have played a crucial part in the reducing the
effectiveness of the performances of the employees and at the same time, it becomes vital in
effective identification of the activities that are much required for the improvement of the
employees and mitigate the impact of the identified factors responsible for decreasing the
effectiveness of the operations of the employees. The effective evaluation of the process of
the review is to be conducted in the feedback section and requires active participation of both
appraiser and appraisee.
Feedback in the performance of the employees:
Apart from the process of the review, the feedback from the part of the appraisers is
observed to be of great significance as it enables the employees of the organization to be
aware of the areas of their operations which are in need of improvement and at the same time,
process of the feedback is notably crucial for the employees as they receives an open and
transparent set of information that have the potential to contribute in the improvement of the
performances of the employees. In addition to this, the appropriate feedback on the
performances of the employees has the potential to figure out any scope or need of training
and the developmental activities of the employees (Budworth, Latham and Manroop 2015).

4MANAGEMENT
This helps the employees to meet the developmental needs of them in an efficient manner and
improve their performances in effectively managing their responsibilities inside the
organizations. Though the mentioned step involves both the appraiser and the appraisee, the
importance of the appraiser is seen to be notably high as the he or she has the responsibility
of providing accurate feedback to the employees. The accuracy in the production of the
feedback from the part of the appraiser plays a crucial role as that has the potential to provide
the perfect direction to the employees of the organizations in terms of meeting the
developmental needs (Balabonienė and Večerskienė 2015).
Rewarding good performances:
The process of the appropriate rewarding to the good performances of the employees
is significantly important in the modern business world. As mentioned earlier, with the
increasing work pressure in the modern business world, the level of dissatisfaction or the job
stress of the employees is increasing in a significant manner. In addition to this, the
inappropriate wage or the rewarding policies are seen to be one of the crucial factor
responsible for the enhancement of the level of dissatisfaction for the employees which
results in the increment of the employee turnover rates (Pollitt 2013). With a precise focus on
this, the human resource management of the modern organizations are seen to be notably
focused in rewarding the good performances of the employees in an attempt to provide the
much needed motivation to the employees in improving their performances (Miller and
Babiarz 2013). The process of the recognizing the good performances of the employees is
significantly crucial in influencing the self-esteem and the achieve orientation of the
employees. Apart from this, the recognition of the good performances of the employees
enables the managers of the organization to set the benchmark for the other employees of the
organizations. This becomes significant for the employees in proving the excellence of
themselves and helps them to recover from the impact of the previous failures.

5MANAGEMENT
Performance Improvement Plans:
The stage relates to the progress in the performances of the employees and is
concerned in setting up new goals and the objectives for the employees. During this stage, the
managers of the organizations have the idea of the improvement in the performances of the
employees of the organizations. As a result, the managers are focused in setting higher targets
for the employees and the performance improvement plans provide the perfect scope to the
managers. The performance improvement plans enable the managers to set improved targets
with a reduced deadline for the employees and as a result, that increases the efficiency of the
employees and the organization as well (De Waal 2013). The plans are of great significance
for the managers in making sure that the employees have the idea of the areas in which they
need to improve and within a stipulated time, the employees are expected to show the
improvement. The formation of the plans are conducted with the active participation of both
the appraiser and the appraisee.
Conclusion:
On a concluding note, the improved performances of the employees is seen to be
significantly crucial for the organizations in the effective management of the impact of the
competition. With a precise focus on the increasing intensity of the competition, the
organizations are facing the significant need of assessing the performances of the employees
and with the effective evaluation of the identified factors that reduce the effectiveness of the
performances of the employees, the human resource management of the respective
organizations have the possibility to meet the developmental needs of the employees. Hence

6MANAGEMENT
it is pretty evident that the performance management system will be significant for the
organizations in improving their overall performances.

7MANAGEMENT
References:
Aggarwal, A. and Thakur, G.S.M., 2013. Techniques of performance appraisal-a review.
International Journal of Engineering and Advanced Technology (IJEAT), 2(3), pp.617-621.
Babafemi, I.D., 2015. Corporate strategy, planning and performance evaluation: A survey of
literature. Journal of Management Policies and Practices, 3(1), pp.43-49.
Balabonienė, I. and Večerskienė, G., 2015. The aspects of performance measurement in
public sector organization. Procedia-Social and Behavioral Sciences, 213, pp.314-320.
Buckingham, M. and Goodall, A., 2015. Reinventing performance management. Harvard
Business Review, 93(4), pp.40-50.
Budworth, M.H., Latham, G.P. and Manroop, L., 2015. Looking forward to performance
improvement: A field test of the feedforward interview for performance management.
Human Resource Management, 54(1), pp.45-54.
De Waal, A., 2013. Strategic Performance Management: A managerial and behavioral
approach. Macmillan International Higher Education.
Miller, G. and Babiarz, K.S., 2013. Pay-for-performance incentives in low-and middle-
income country health programs (No. w18932). National Bureau of Economic Research.
Pollitt, C., 2013. The logics of performance management. Evaluation, 19(4), pp.346-363.
Rajnoha, R. and Lesníková, P., 2016. Strategic performance management system and
corporate sustainability concept-specific parametres in Slovak Enterprises. Journal of
Competitiveness.
Talib, F., 2013. An overview of total quality management: understanding the fundamentals in
service organization. Talib, F.(2013),“An overview of total quality management:

8MANAGEMENT
understanding the fundamentals in service organization”, International Journal of Advanced
Quality Management, 1(1), pp.1-20.
Van Dooren, W., Bouckaert, G. and Halligan, J., 2015. Performance management in the
public sector. Routledge.