Importance of Performance Management System in Human Resource

This essay discusses the concept of an effective performance management system and its components in the context of human resource. It highlights the importance of aligning workforce, systems, and resources to meet strategic objectives.

Running head: PERFORMANCE MANAGEMENT
Performance Management
Human Resource

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Performance Management
The intent of this essay is to discuss the concept of an effective performance management
system and its components. In addition, the essay is highlighting the different major aspects
of the performance management system in the context of human resource. Effective
performance management is essential for every business. Through the informal and formal
procedures, it supports businesses in aligning their workforce, systems, and resources in order
to meet their strategic objectives. It operates as the dashboard to provide the warning of the
issues and enabling managers to understand when they should have to make the adjustments
in order to maintain the track of the business operations. Businesses that get the right
performance management become challenging competitive machines (Buller and McEvoy,
2012).
Performance Management System
Performance Management System is said to be the organized approach that is utilized to
evaluate the employee’s performance. It is a procedure by which the business line up its
objectives, goals, and mission with accessible resources such as material, manpower, etc.,
systems and priorities (Kehoe and Wright, 2013). The framework of execution administration
is a continuous procedure of describing and assigning the activity parts and responsibilities,
execution needs, objectives, and set their requirements between boss (administrator) and
subordinates (workers). It united association, office, and representative shared goals and aims
which are lined up with the assets and frameworks. It is said to be the channel of offering
clarity regarding the objectives and enhance the procedures of the businesses by a number of
mechanism and methods.

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The knowledge, skills, and competency gaps are also recognized by this procedure which
could be enhanced by offering direction, training, mentoring, and coaching to the workforce
or team members at diverse designations and levels. It works to adjust the outcomes by a
proper channel and procedure which decreased the struggles and criticisms among employees
or team members. Because every person is very much clear regarding the expectations of his/
her part and put their exertions in order to meet the standards of the performance (Gruman
and Saks, 2011).
Components of Performance Management Systems
Performance Planning – It is said to be one of the first vital constituents of any of the
procedure of the performance management system that creates the base of the performance
appraisals. Performance planning is mostly done jointly by the appraiser as well as a reviewer
at the starting of the performance session.
Performance Appraisal and Revising - The appraisals are commonly done two times in a year
in all the businesses. In this procedure, appraise is the one who provides the ratings that are
filled by him in the form of self-appraisal and also elaborates his/her accomplishments in a
specified period in measurable terms (Markos and Sridevi, 2010).
Performance Feedback monitored by personal analysis and performance assistance –
Counselling and Feedback is given major priority in the procedure of performance
management. Through this, the workforce gain awareness from the evaluator regarding the
areas of enhancement and also how much the worker is contributing and meeting the
expectations of the organization. At this stage, the workforce gains actual and open feedback.
Rewarding Performance - It is one of the most critical components because it defines the
work motivation of the worker. At this stage, the worker is renowned for his/her good

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performance and provided reward. This stage is said to be a sensitive one for the worker as
this can have major effect on the self-esteem of the employee (Management Study Guide,
2019). Recognition by the employer for the contribution of the employee supports the worker
in covering the failures effectively.
Performance Improvement Plans - It is the component that works in setting the fresh goals for
the employees and new deadlines are provided to them for attaining the goals. The worker is
evidently communicated regarding the aspects on which worker is anticipated to enhance and
the specified target is also allocated within which he/she has to reflect their improvement.
Potential Appraisal - Potential appraisal creates a base for the vertical and lateral
enhancement of the workers. By executing the capability mapping and numerous assessment
methods, a potential appraisal is done. Potential appraisal offers vital inputs for the
accomplishment in scheduling and job rotation (Bhattacharyya, 2011).
Methods of Performance Management System
360 Degree Feedback - It is one of the most valuable methods of performance management.
It is the method that is offered to the management of the company to provide the constructive
feedback of the employees from his/her direct reports, managers, and peers. This provides
employees a complete overview of their strengths. 360 Degree feedback generally comprises
competencies and skills which explains the performance of the employees (Mahar and
Strobert, 2010).
Management By Objective – It is the procedure through which the management of the
company recognize the desired goals to be attained and provide every employee a key area of
accountabilities to attain the goals and results anticipated by the employee. These measures
are then utilized by the management to evaluate the contribution of every employee in the

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organization. Management by Objective method is a time saving and cost effective tool in
comparison to another method of performance management (Bernard Marr, 2019). Through
this method, the company can recognize whether or not the specified targets are attained or
not.
Behaviourally Anchored Rating Scale – It is a method that has been introduced recently and
is said to be an effective tool in comparison to all other present methods. This method is the
combination of the traditional rating scale and essay evaluation method. However, it is one of
the expensive methods in comparison to other methods but it is known for offering guarantee
results (Bhattacharya, 2016).
Critical Incident Method – It is the method through which the manager or executive of the
company apprises an employee based on some of the events called as the critical incidents
where the worker performed something great or something which is not great according to
the perspective of the company’s management. The evaluator must maintain a physical or
digital journal in order to keep the track of every incident taking place inside and outside of
the company. It is very useful for the development of the workforce as it offers
comprehensive information in comparison to other methods of performance management
(Mir and Pinnington, 2014).
Levels of Performance Management System
Managing and measuring the performance of the organization and enhancing the performance
in the business could be observed and analyzed on three diverse levels. The key three levels
are the individual performance, team performance, and organizational performance.
Organizational Performance – At the superior level of the organizational performance all the
key performance indicators and supporting metrics must be straight related to the entire

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targets and objectives. For instance, at the company’s level, key performance indicators such
as profitability, return on investment, and sales growth can be evaluated and associated
directly in contradiction of the complete organizational strategic goals and targets of the
performance (Infosdm, 2013).
Team Performance – The next level is dependent on organizational metrics and KPIs. The
key performance indicators of the team should be designed such that it can support
organizational performance. The performance of the team could be also observed as the
group level performance and department level performance based on the structure of the
organization. For instance, the performance of the team could be the complete performance
of the complete entire sales force. In this case, the sakes key performance indicator and
metrics are straight related to the entire objective of the business.
Individual Performance – The final level of individual performance, every member of the
team must be assessed and the progress at the individual levels towards attaining the
objective must be measured. Considering the sales force, every sales representative must be
assigned to his/her individual targets, objectives, and goals. The continuing pursuing and
monitoring the performance individually is very operative because it discloses all the gaps in
the performance of the worker on time and enables the management of the company to
provide feedback to every member of the team on time.
The above essay has provided detailed information regarding the importance of performance
management system in the context of the human resource of the company. The paper has also
discussed the key components of the performance management system such as Performance
Planning, performance appraisal and appraising, performance feedback, rewarding,
performance management plans, and potential appraisal. In addition to this, the essay has also
provided little details regarding the methods and levels of a performance management system

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that are generally utilized by the businesses. From the analysis, it has been identified that
through the informal and formal procedures the performance management system assists
businesses in aligning the system, resources, and workforce to encounter company’s strategic
objectives.

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References
Bernard Marr (2019) Key Tools And Techniques For Performance Management [online].
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2019]
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https://www.keka.com/effective-performance-appraisal-methods/ [accessed 30 April 2019]
Bhattacharyya (2011) Performance Management Systems and Strategies 1st ed. India:
Pearson Education.
Buller, P.F., and McEvoy, G.M. (2012) Strategy, human resource management and
performance: Sharpening line of sight. Human resource management review, 22(1), 43-56.
Gruman, J.A., and Saks, A.M. (2011) Performance management and employee engagement.
Human Resource Management Review, 21(2), 123-136.
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https://www.infosdm.com/the-3-levels-of-performance-management/ [accessed 30 April
2019]
Kehoe, R.R., and Wright, P.M. (2013) The impact of high-performance human resource
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Mahar, J.A., and Strobert, B. (2010) The Use of 360-Degree Feedback Compared to
Traditional Evaluative Feedback for the Professional Growth of Teachers in K-12 Education.
Planning and Changing, 41, 147-160.

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Management Study Guide (2019) Components of Performance Management System [online].
Available from https://www.managementstudyguide.com/components-of-performance-
management-system.htm [accessed 30 April 2019]
Markos, S., and Sridevi, M.S. (2010) Employee engagement: The key to improving
performance. International journal of business and management, 5(12), 89.
Mir, F.A., and Pinnington, A.H. (2014) Exploring the value of project management: linking
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management, 32(2), pp.202-217.