Techniques of Performance Management Used by Different Organizations - Essay Example

• Performance Management
• Introduction

Human resource management of organizations has a significant role in planning, administrating programs and policies designed for maximum utilization of human resources. HRM is a part of organization which is concerned with the people of the company and their relationship with it. The main objectives of HRM are maximum individual development; effective utilization of human resources of a company and maintaining stable relationship with the workers and the organization. The organizations cannot build good teams without the aid of HRM. HRM practices are viewed with the overall strategic goals instead of standalone goals of each department in the company. Adoption of holistic perspectives of HRM by companies will ensure that focusing on piecemeal strategies will not yield desired result. However, HRM policies enmesh it with the organizational goals. HRM practices required integration of overall strategy of the company which results in effective use of human resources and in turn it will provide better result in terms of return on investment. Performance management is the topic selected for this research. The study will focus on different aspects and techniques of performance management practiced by different organizations. Performance management is a very important aspect of HRM practices of modern companies.

• Definition and objectives

Performance management (PM) includes different activities of HR professionals responsible for ensuring organizational goals and objectives which are consistently practiced efficiently and effectively (Van Dooren, Bouckaert and Halligan 93). Performance management is often described as the process in which different organizations can allocate their resources, employees and systems to strategic goals and priorities. PM is used by different enterprises where people are involved in it. It enhances the productivity and profitability of enterprises. PM is the process used by HR managers to control, monitor the performance of employees and their contribution towards the company (Cameron and Green 43). Annual performance review is practiced in every company by using different techniques of PM in order to set goals and objectives; providing on-going feedback and training to employees and assessing their rate of progress towards their goals as well as organizational goals.

The objectives of performance management can be categorized into three spheres such as motivated employees; direct financial gain; improved management control. Impact of PM on direct financial gain of companies enhances growth of sales; reduced overrunning of projects; aligning company’s goals towards CEO’s goals; reduced time for creation of strategic changes through communication of changes via new set of goals. PM has a significant impact on improved management control such as: flexibility in management needs; complying with legislative needs and helping audits; displaying data relationships; enhancing communication of scenario planning; providing improved documentation process (Frangopol 393). PM has unavoidable impact on motivated employees of organizations such as maintaining transparency while achieving goals; optimizing incentive plans for deserved employees for motivational purpose; creating high scales in payment of bonus; improving employee engagement in order to enhance performance of the company as a whole; development of professional employee development programs which are directly aligned to achievement of strategic organizational goals. PM also helps in recognizing and identifying accomplishments of employees.

• Relationship with organizational performance

Good performance management system of a company has a positive and significant impact on the overall development of organizational performances by measuring individual performances and team performances which will ensure the achievement of goals and objectives of the company. An effective PM system is responsible for managing the performance of organization by many ways. PM system will ensure that all the employees must understand the impact of their contribution towards company’s aims and goals. It also ensures that individual employees must have a clear understanding of the expectations of the company from them. It will also ascertain the fact that they should possess required skills and competencies for fulfilling the expectations of the company. Performance management enhances proper alignment and appropriate linkage with the objectives and facilitating effective communication among the mangers of every level in a company (Austin 65). Due to good performance management system, it facilitates harmonious and cordial relationship between line managers and individual employee which is based on commitment and trust. Effective performance management in an organization needs creation of congenial, conductive work climate and culture. It would encourage employees in sharing their experiences, information and knowledge for fulfillment of aspirations of senior managers aligned to organizational goals. Individuality should also be a part of performance management system so that employees can work independently and are responsible for innovation and better productivity. Effective PM System will co-operate the managers rather than controlling their powers (Walker, Damanpour and Devece 368). Nurturing employees by their managers in order to get their work done through consensus of the managers. Proper feedback should be enhanced by PM system for performances of teams, individuals, departments which should be monitored continuously in order to track the loopholes in the progress of performances. Hamper in the team performance will lead to poor performance of the company. Scope of PM is directly related to organizational goals and objectives (Becker, Antuar and Everett 258). PM assumes that team members and managers should share accountability for their performance by agreeing with the policies of the company about the way of doing their work. Both company and their employees jointly implement the shared and agreed plans and motives in order to monitor the desired outcomes.

• Techniques of PM used by different organizations

Performance management system uses many tools and techniques while measuring performances of employees and organization as a whole. The first tool for measuring performance management in organizations is integrating non-financial and functional performance measures. Integrated performance management system depends on integrated and comprehensive set of key performance indicators which is responsible for managing performances across all levels of the company. IPMS integrate the non-financial and functional areas of organization are responsible for providing timely feedback and leading indicators to the management (Gruman and Saks 125). It is necessary for identifying the opportunities which will lead to taking initiatives in correction of the wrong procedures of the company. The diagram shows the strategic objectives, core strategies, critical success factors and the key performance indicators of the PM of the company.

Figure 1 Functional and non financial performance measures

(Source: Institute of Management Accountants)

Elements of Integrated Performance Management System of General Electric are directly linked with the strategic objectives of the company. Profitability, shareholder concern are measured by the residual income of the company. Long term growth of General Electric is related to personnel development which is responsible for measurement of inventory of people. Performance measurement of GE establishes significant link between the current and expected future performance of the company. The following diagram describes the relationship of the strategic goals of the company with performance indicators of the IPMS of GE.

Figure 2 GE Performance Indicators

(Source: Institute of Management Accountants)

The organizations cannot implement IPMS without the involvement of senior managers. They are familiar with the results of different performance management techniques within the organization. Experience about existing performance management system will help them in integrating the new model with the old model of PM. Many companies uses Awareness, Buy-in and Ownership model for gauging the commitment among the top level employees and level of support. Awareness is implemented when the employees are seeking initiative and gathering information about the potential benefits and implementation (Bakker and Leiter 65). In Buy-in stage, executives are committed for allocation of resources and time to the project by using PMS. The third stage of ownership signifies of taking ownership of the executives while taking responsibility of the success of PMS. This system of PM is known as ABO Continuum.

Figure 3 ABO Continuum

(Source: Institute of Management Accountants)

• Impact on employee productivity

Performance management system of organizations is directly linked with the productivity of the employees. Performance management of employees is related to the culture and strategic goals of the organization. It includes many things such as performance appraisals, learning, training of employees, career growth, 360 degree feedback of employees, customized training for improving performances of employees, etc. Different performance measurement techniques are described above which are used for measuring performance of the employees. Employee performance played a significant role in organizational performance. Productivity of employees includes quality of input, timeliness of output, quality of output, cooperativeness, presence of work (Hatry 22). Individual improved performances of employees are directly proportional to the organizational performance. Performance appraisals include several items like bonuses, rewards, non-monetary benefits, promotions, etc which will motivate the employees for doing their work more effectively. The employees of the organizations are monitored continuously by different techniques of performance management for their continuous improvement. Many big companies like General Electric, IBM, and Apple have advanced system of PM for the growth of the employees. The introduction of new technologies and new software in a company requires training of the people who will be handling it. Without training, employees will make mistakes in using it which will lead to degraded output of the project. It will be responsible for poor organizational performances as well as poor employee performances. PM not only provide feedback to the employees but also to the other functionalities of the organization. By the implementation of PMS, employees are able to find their areas of department in the particular functional areas of the organization. Finding loopholes in their field of work will not only improve their performance but also it will help in gaining confidence for completion of error free work.

• Pros and Cons

Performance management mechanism is considered to be most profitable for organizations. There are certain benefits strongly linked with performance management system. Firstly, performance-based conversations are the most preferred way of interacting with team members. Managers are often busy with their daily schedule; hence, it becomes difficult to interact with team members. However, such conversations are the most appropriate way to identify performance loopholes of team members and consistently coach them. Performance management can even enable the department heads to identify appropriate employee development opportunities. Appraisals are definitely a source of employee motivation, thereby, increasing overall organizational productivity. On the basis of performance management, it becomes easier to avoid undesirable employee behavior (Yeoh, Richards and Wang 107). A documented history of team performance can be maintained with the support of PMS. Such historical records are beneficial for proceeding with employee development programs. Motivated employees form the basis of organizational growth. Effective performance management facilitates team members to outperform in assigned fields.

The major drawback of performance management is that it restricts employees from exploring their creative skills. As per the framework, team members have some set targets which need to be accomplished. The burden of set goals restricts team members from approaching a problem in a creative manner. Employee morale can even be decreased due to PMS. Increased internal competition is the major obstacle which degrades the desirable level of team performance. There are basically few employees who are consistent with their performance, hence, promotional opportunities cannot be provided to all team members. PMS can even constitute faulty criteria established for evaluating individual’s performance. Organizational strategies and growth plan can be adversely affected because of such faulty criteria. For instance, faulty criteria can initiate unethical employee behavior that hinders organizational mission or goals (Haines III and St-Onge 1160). On the other hand, performance management is a time-consuming process. Hence, it is often avoided by many firms because the average time-consumed in this procedure can be utilized in formulating business strategies.

• Recommendations

In real-world scenario, there are many such companies which incorporate PMS in order to upgrade their profit margins. However, the loopholes prevalent in PMS negatively influence organizational growth at times. It is highly recommended that organizations should firstly establish some criteria for measuring employee performance. Employee engagement needs to be the primary goal while implementing PMS. The organizations should be focused on employee development without neglecting underperforming employees. PMS should not be a medium for differentiating between team members. It needs to be integrated as a framework for enhancing overall team performance. PMS can yield desirable outcomes only when every team member is actively indulged in the process. Team members should be knowledgeable about performance management parameters prior to implementing such framework within the business process. The management needs to consider employees for determining some areas where high employee performance is necessary. The organizational growth is dependent on the extent to which employees collaboratively work for achieving set targets. It is even advisable that companies need to focus on collective performance appraisals more in comparison to individual’s performance. In overall context, difference between team members can be reduced only when employees collectively perform for accomplishing framed objectives. Flexibility and creativity can be denoted as certain parameters which are inter-linked with organizational growth. It is recommended that performance standards need to be structured in accordance with creativity skills of employees.

• Conclusion

As per the above study, it can be concluded that performance management is an important mechanism for every organization. PMS allows a firm to upgrade employee performance along with driving organizational profit. The study has clearly revealed that every firm needs PMS to remain competitive in the marketplace. There is a strong association between employee productivity and organizational growth. It can be summarized that high employee productivity ensures that organizational goals can be accomplished with desirable time-frame. In real-world context, there are many firms which have adopted PMS in order to evaluate efficiency level of team members. Employee development opportunities can be successfully explored through implementation of PMS. Apart from performance appraisal, development of underperforming employees is also equally important. An entire team can perform appropriately only when the management undertakes suitable measures for developing required skills or competencies. The major advantage of performance management is that it helps an organization to determine key operational areas where employees are lacking. There are wide-scale PMS techniques that have gained significance in real-world context. Companies need to emphasize on the performance criteria which needs to be reflected upon before setting plans for establishing PMS.