Performance Management: Components, Systems, and HR Role (HC2101)

This essay explores the multifaceted realm of performance management, emphasizing its critical role in modern human resource practices. It delves into the evolution of HR, highlighting its shift from a mere facilitator to a strategic partner in organizational planning and employee development. The essay dissects the key components of a robust performance management system, including performance planning and appraisal, emphasizing their interconnectedness and impact on employee motivation and organizational success. It examines the importance of setting clear objectives, providing constructive feedback, and implementing reward systems to foster a high-performance culture. The essay also addresses the significance of competency mapping and other assessment techniques, such as Management by Objectives, in evaluating employee potential and facilitating job rotation. Ultimately, the paper underscores the indispensable nature of performance management in establishing a thriving business environment where both individuals and teams can continuously enhance their skills, driving overall company growth and competitive advantage.

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The components of an effective performance management system

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According to Cascio (2015), the role of human resources in the present scenario has undergone
diverse changes which focuses on building functional strategies which enable the
implementation of important corporate strategies. As opined by Bratton and Gold (2017), human
resources and corporate strategies go hand in hand. The function of HR is not only to facilitate
jobs to employees but also improve their performance by building a favorable work environment
thereby paving ways to gain maximum opportunities to contribute to organizational planning and
decision-making process. According to DeCenzo, Robbins, Verhulst (2016), the HR department
performs the activity of developing leadership qualities among its employees and fostering
employee motivation. Therefore, the role of HR has changed in recent years stating the fact that
HR managers in any modern organization act as a facilitator, appraiser, and an enabler. Every
organization has to face the rising competition which raises the demand for measuring the
performance of its employees. Performance management is a broad term and one of the most
important functions of an HR as it enables an organization to understand the current progress of
its employees by use of different performance management strategies and tools. Performance
management is a systematic approach which helps an organization to improve its overall
performance thereby improving the performance of its employees. This approach has gained its
popularity from a very long time which now facilitates companies to design tools such as job
training and reward system, developing leadership qualities, framing a job design and
performance appraisal. According to the Van Dooren, Bouckaert and Halligan (2015), the aim of
performance management is to develop a high-performance culture for both employees and their
teams to contribute to the overall productivity of an organization on a continuous basis. In any
contemporary organization, performance management has become an indispensable process to
ensure employees are working towards the achievement of the goals of the organization.
In the era of globalization and rising competition, organizations have felt the need for better and
enhance HR practices in order to gain a competitive advantage over the competitors. According
to Buckingham and Goodall (2015), a performance management system plays an important role
to streamline the activities of employees and work in alignment with the vision and mission of
the organization. Managing employees can be challenging for organizations since the
performance of employees depends upon their commitment to work, their skills, and clarity of
performance. This can only be managed by building a robust performance management system
that enables a reward and feedback system to retain the motivation of employees. The

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effectiveness of performance management systems can be determined from components like
Performance Planning and appraisal.
According to Hassan (2016), Performance planning is the first important step or component of a
performance management system thereby creating a basis for performance appraisals. The
performance planning process begins with conducting a performance session between the
employee and the reviewer. During the performance session, employees can specify their
performance areas and the targets to be achieved within a period of 1 year within the
performance budget. The employer and employee mutually agree on the key performance areas,
targets and the budget for accomplishing the next steps.
According to Cappelli and Conyon (2018), Performance appraisals are generally conducted two
times in a year in an organization. Previously organizations lost their employees due to their
bureaucratic approach of performance appraisals which mostly concentrated on identifying the
flaws and inabilities of an employee without identifying the need of developing and training the
employee. But in the current scenario, organizations have become more focused on managing the
performance of employees rather than simply appraising them. The later stages of performance
appraisal will be able to enhance the competencies of employees. The first review is performed
in the mid of the year whereas the second review is performed at the end of the year. In this
process, the employees are required to undergo a self-appraisal by filling out the self-appraisal
form and describing their notable achievements. As opined by Cravens, Oliver, Oishi and
Stewart (2015), after the self-appraisal process, the filled out form is rated by the appraiser on the
basis of the achievements provided by the employee. The process of performance appraisal and
reviewing is considered to be highly engaging since it requires the active participation of both
employer and employee to analyze the gaps in employee's performance. Once the loopholes are
identified, feedback will be provided to the employee to improve their performance.
The performance management process provides appropriate feedback as well as counselling of
employees to understand their performance gap and how they can be overcome. At this stage,
employees become aware of their areas of improvement and understand the level of performance
among others in the organization. Necessary feedback is provided to the employee to improve
their performance. Along with that training and development suffices the need of improving
employee performance. According to Latham (2015), a detailed feedback session is conducted

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with the employee to ensure that the employee expectations of the organization through effective
counseling session and guidance to improve their productivity. Mentoring and training sessions
can also be helpful to develop the skills and competencies and overall performance of the
employee.
According to Shields, et. al. (2015), the process of rewarding good performance is a major
determinant of employee motivation and intention of working better for the organization. There
is a direct connection between employee motivation and the rewards they receive for their
performances. At this stage where employees are rewarded for their good performance, either in
the form of monetary or non-monetary terms. But on the contrary, this stage can be highly
sensitive for employees and may hurt their self-esteem if not appreciated for their work. This can
be demotivating for some employees and while some of them would take it as a challenge to try
harder and improve for the sake of being noticed and rewarded for their performance. Since
being rewarded or appreciated gives a sense of joy to employees, organizations must recognize
the hard work and efforts put by their employees and accordingly reward them to ensure they
remain loyal to the organization. When employees feel they are being valued, they aim to
perform better either for the sake of achieving rewards which is likely among middle-level
employees or gaining recognition which is more likely among senior employees.
Every quarter or year there can be several employees seeking recognition for their efforts put in
the company. Some might be appreciated and rewarded with different monetary or non-
monetary, while some might be motivated by the organization to improve in certain areas to
deliver a better performance. Once the appraisals are conducted, the employees lagging in their
performance will be provided with a set of new goals to achieve within a stipulated time frame.
The objectives are clearly defined to the employee with an expectation of showing significant
improvements in their performance. Each employee is given a separate plan based upon the gaps
in their performance and objectives to be improved. This plan is mutually approved and
developed by the employee and the reviewer.
The future appraisals form a basis for moving employees laterally and vertically within the
organization. The potential future appraisals of employees are dependent on their current
performance after the appraisal review. According to Islami, Mulolli and Mustafa (2018),
implementation of competency mapping and other assessment techniques like Management by

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Objectives (MBO) can be useful in performing potential appraisal which also forms a basis for
employee job rotation.
Organizations in the present scenario have shifted their focus from using the traditional methods
of appraising and rewarding their employees to identifying the gaps in their performance and
constructing a proper planning process to address the performance gaps. Employees can lose
track of their performance due to several external and internal factors which is important to be
addressed by the organizations. This can be achieved through a performance management system
in order to identify the issues employees are facing and how can the organization overcome
them. The HR functions have become more complicated in the current scenario due to more
emphasis on enhancing the competencies of employees. The performance management approach
can be highly beneficial for organizations since the focus lies in identifying the results from
previously framed smart objectives. Performance management helps in improving the
relationship between employer and employee as it facilitates better understanding and
communication between them. The process of performance management is indispensable as it
helps in establishing a succeeding business environment where individuals and teams are able to
continuously improve their skills in order to grow within the company. Performance
management signifies that the development of employees and talent management should be of
prime focus for any organization to maintain leadership in the competitive market. An
organization which understands the needs of its employees will be able to identify solutions to
address those needs specific techniques and strategic human resource policies. Therefore, the
importance of performance management is sure to attract more organizations which will help
them to grow and foster processes like career management, talent management, pay based on
performance and development plans.

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Reference List
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