Performance Management System: Components and Effectiveness Report

This report provides a comprehensive overview of performance management systems within organizations. It emphasizes the importance of performance management in today's competitive business environment, highlighting the shift from traditional HR practices to technology-driven systems. The report breaks down the essential components of an effective performance management system, starting with performance planning, where employees and managers collaboratively set goals and define performance areas. It then delves into performance appraisal and reviewing, including self-appraisal and feedback mechanisms. The role of feedback is further elaborated, stressing the importance of open and transparent communication for employee development and training. The report also discusses the significance of rewarding good performance to boost employee motivation and the implementation of performance improvement plans. Finally, it covers potential appraisal, which aids in career development and succession planning. The report concludes by reiterating the integral role of performance management in human resource management and the importance of aligning technology and processes for optimal effectiveness.

PERFORMANCE
MANAGEMENT

1
Introduction
Every organisation is facing huge amount of competitive rivalry. In such an environment, it
has become essential for the firms that their employees perform well both in terms of quality
and quantity. Performance management has become very essential for the business in the
modern days business. Previously it was done through the own efforts of the Human resource
managers but now it is done through the help of technology (Noe, et al. 2017). Performance
management systems are installed in most of the companies so as to monitor the performance
of the employees that are present. There are different types of components of any
performance management system. Effective performance management depend on the way in
which organisations utilises different components of the performance management system.
Efficiency of the performance management system depends on how transparent and fair that
performance review is. The more the transparency in the process, the more is their chances of
success. Timely performance appraisal is necessary for the ensuring its effectiveness. Use of
advanced technologies such as database management system and other data management
tools are very helpful in making the successful system.
Body
Effective performance management system has different components. First component in the
list is performance planning. It is highly crucial component of this process which acts as a
measure through which performance appraisal is done. In the beginning of the performance
monitoring system reviewee and the appraisee does the planning about each and every aspect
of the performance planning system. In this time period, employees find out the targets and
the major performance areas on which this performance review will be based on (Stanton and
Nankervis, 2011). This must be done within the performance budget which needs to be
decided wisely by a mutual agreement among the employees and the reporting officer. This is
a very essential part of the performance management system. This is because the way in
which the planning is done has a critical role in the effectiveness of the system. If the
planning is done wisely then the chances of the success of the overall process will be more
(Jiang, et al. 2012). If there are loop holes in the planning process then there is always a
chance that company might not be able to achieve what they aim to. This might waste the
time of the people and may dissatisfy the people that are linked with this performance review
process. In this performance planning there are various kinds of objectives and goals that can
be set. There must be an active participation of the employees in this process so that their

2
viewpoint can be clear and they also know what companies wants from them (Hassan, 2016).
This helps the company to manage the motivation of the employees. All the employees from
basic level to management levels must be included in this process.
Other important component in this process is performance appraisal and reviewing. In any
organisation performance review is done twice in a year in the form of mid reviews and
annual review at the end of the financial year. This is done by first filling the self-appraisal
form when he or she self-rates him and hence describes his or her achievements over a
specific period of review. Through different communicational methodologies, appraiser
interacts with employees and measures its achievements on the basis of which he or she will
be appraised (Parry, 2011). An important part in this process is about seeking an active
participation of employees and appraiser for knowing the reasons of loopholes in their
performance and the ways in which it can be overcome. An effective performance
management system consists of different types of technological tools for the performance
review. Documenting each and every part of the process and the way in which employees
have performed has played an essential role in the giving review (Hameed and Waheed,
2011). In this there must be use of advanced technologies so that effective monitoring of the
process can be done.
Third component that makes a performance management system effective is the feedback on
the basis of the performance. It is always necessary that a proper feedback is given to the
employee on the basis of way in which he or she had performed. These feedbacks are given
by the personal counselling and performance facilitation (Becker, Antuar and Everett, 2011).
This is necessary as the employee comes to understand that what the specific areas in which
they need improvement are. Appraiser gives a light on the ways in which he or she can
improve their performance. Appraiser also suggests about whether the employee is
performing in an expected level or not. An effective performance management system is
where the employees receive open and transparent feedbacks. This helps the company and the
individual to understand the areas where they need training and development. Appraiser
ensures that they adopt all the necessary steps to make sure that employee meets the desired
outcomes made by the organisation. This can be done through effective guidance and
personal counselling, training and development program that improve its overall productivity.
It is crucial that the major focus of the company in this process of developing new
competencies inside the employees. The better the feedbacks, the better is the chance of
development. The effectiveness of this component depends on the way data is being gathered,

3
the way these data are documented and the way in which it is observed (Gruman and Saks,
2011). It is always necessary to measure even the minute data so that each and every aspect
of the employees is found out.
One of the crucial components of the performance management system is the rewarding good
performance. This is crucial as it determines the employee’s working motivation. In this
process there is recognition of the good performance done by the employees. This is
generally done publicly. It is a stage which is sensitive for an employee as it may have a
direct impact on the achievement orientation and self-esteem of the employees (Baird,
Schoch and Chen, 2012). This type of rewards from the side of the employers helps an
organisation in coping up with the failures appropriately and work on their strengths in future
so as to work in a better manner. It boost up the morale of the employee which is very much
necessary in the increasing the quality and quantity of work done by employees. This is a
sensitive phase in the performance management system for any employees. As if the
employee feels that his contributions are not noticed by the firm or there is a failure in
understanding them from the side of the organisation, then their motivation can be on the
poor side. This might lead to poor performance in the future or lack of commitment from the
side of the employees (Buckingham and Goodall, 2015). This sometimes also results in the
form of turnover hence a sensible appraisal is always required by the firm.
Other important component in the effective performance management system is the
performance improvement plans. In this process, a company must set a fresh bunch of goals
for their employees. These goals must be time-bound and employees must be forced to
achieve these objectives in this time frame only (Markos and Sridevi, 2010). The employees
are clearly being stated about the areas in which they must look and needs improvement.
There is a specific deadline given to any employee in which they will have to do
improvements. This plan needs to be jointly developed by appraiser and the appraisee on the
basis of mutual agreement. The plans must be specific and should meet the criteria of
development. Individual can take help of the senior management and the experienced
personals to know the way they are going to change things. In case employee feels that
improvement is not done appropriately then there must be change in the plans. In this also the
help of senior management can be beneficial for the firm. The efficiency of the performance
management system depends on the efficiency of the performance improvement plan.

4
Another crucial component of the efficient performance management system is the potential
appraisal. This is an appraisal that acts as a base for both vertical and lateral movement of the
workers. With the help of competency mapping and different other assessment techniques,
this appraisal is being performed (Mone and London, 2018). Potential appraisal gives
important inputs for job rotation or succession planning. In this process, more leaders are
being developed so that company is ready for their future with new set of people able to take
the position of the existing employees.
Conclusion
A conclusion can be drawn from the above based report that performance management
system has become an integral part of the human resource management in any industry. The
effectiveness of the performance management system dependents on the technology being
used in the organisation and the way process are being carried out in the firm. First a proper
planning needs to be done about the whole performance management process, then
performance appraisal review needs to be done first by employee himself and them by the
appraise. Later on appropriate feedbacks needs to be given to the employees about their
performance based on which performance appraisal needs to be done. This is followed by
making a performance improvement plan and the potential appraisal of the employees.

5
REFERENCES
Baird, K., Schoch, H. and Chen, Q., 2012. Performance management system effectiveness in
Australian local government. Pacific Accounting Review, 24(2), pp.161-185.
Becker, K., Antuar, N. and Everett, C., 2011. Implementing an employee performance
management system in a nonprofit organization. Nonprofit Management and
Leadership, 21(3), pp.255-271.
Buckingham, M. and Goodall, A., 2015. Reinventing performance management. Harvard
Business Review, 93(4), pp.40-50.
Gruman, J.A. and Saks, A.M., 2011. Performance management and employee
engagement. Human Resource Management Review, 21(2), pp.123-136.
Hameed, A. and Waheed, A., 2011. Employee development and its affect on employee
performance a conceptual framework. International journal of business and social
science, 2(13).
Hassan, S., 2016. Impact of HRM practices on employee’s performance. International
Journal of Academic Research in Accounting, Finance and Management Sciences, 6(1),
pp.15-22.
Jiang, K., Lepak, D.P., Han, K., Hong, Y., Kim, A. and Winkler, A.L., 2012. Clarifying the
construct of human resource systems: Relating human resource management to employee
performance. Human Resource Management Review, 22(2), pp.73-85.
Markos, S. and Sridevi, M.S., 2010. Employee engagement: The key to improving
performance. International journal of business and management, 5(12), p.89.
Mone, E.M. and London, M., 2018. Employee engagement through effective performance
management: A practical guide for managers. Routledge.
Noe, R.A., Hollenbeck, J.R., Gerhart, B. and Wright, P.M., 2017. Human resource
management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.
Parry, E., 2011. An examination of e-HRM as a means to increase the value of the HR
function. The International Journal of Human Resource Management, 22(05), pp.1146-1162.

6
Stanton, P. and Nankervis, A., 2011. Linking strategic HRM, performance management and
organizational effectiveness: perceptions of managers in Singapore. Asia Pacific Business
Review, 17(01), pp.67-84.