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The Role of Performance Management Systems in Driving Organisational Success - Essay Example

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The paper "The Role of Performance Management Systems in Driving Organisational Success " is a great example of an essay on business. There have been increases in the number of organizations that have implemented the PMS. The PMS is based on critical success factors and key performance indicators…
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Factors Influencing Performance Management Systems in Organisations 1.0 INTRODUCTION There have been increases in the number of organisations that have implemented the PMS. The PMS are based on critical success factors and key performance indicators. A survey conducted by Bain and Company in 2004 found that 64% of companies in Northern America and 57 percent of the respondents across the globe were using or in the process of implementing the PMS. In the contemporary society, the business landscape has been changing. Competition has become very intensive; therefore, businesses have to put in place strategies that will help to gain competitive edge (Kuhuman, 2010). The key to the strategies is the initiation of performance management and performance management systems. According to Behesht (2010), effective management of the performance of the employees is paramount to the execution of institutional strategy. Behesht (2010) noted that the efficient management of human resource capital plays an integral role in the achievement of strategic objectives. Performance management system is a strategy that is applied to enhance productivity in the organisation (De Klerk, 2010). Therefore, the following paper will review literature that relate to performance management (PM) and performance management systems (PMS). The main goal of management is to ensure that productivity is enhanced in the different sectors of an organisation or institution. As a result, since the 1980, the PMS has played an integral role in the enhancement of productivity. The recent years have witnessed increased interest in the enhancement of service delivery in the various organisations. Townley and Oakes (2003) noted that service delivery acts as the key driver for organisational growth and in overcoming competition. The aim of the review will be aimed at providing succinct understanding of the role of PMS in driving organisational success and the factors that inform usefulness, effectiveness and implementation of PMS. 2.0 LITERATURE REVIEW In an organisation, there are different management disciplines that coordinate to ensure that smooth running of an organisation is achieved (Kahn & Ishaq, 2013). In the past, the performance management and performance management systems have mostly been associated with the human resource management. The emphasis has been on the contribution of the employees on the achievement of the organisational goals. However, there has been a shift in which the aspects of performance management have started being spread throughout the organisational disparate management disciplines. Fryer (2009) noted that performance management is strategic and integrated. The major goal of the Performance Management is to align strategically the organisation to achieve its goals. Performance measurement is the process applied to quantify the efficiency and effectiveness of action. In order to measure the performance, Hisano (2011) identified three crucial elements that are interrelated. The first element entails quantification of actions and effectiveness. The second element of performance measure entails the combination of the performance of the entire organisation. While the third element is the quantification of the supporting infrastructure that aid in the acquisition, collating, sorting, interpreting, and dissemination of the data (Hisano, 2011). On the other hand, Elia & Scarbrough (2004) defined performance measurement as the process of quantifying the effectiveness and efficiency of the actions. Fenwick (2011) defined performance measure as the process of evaluating the process of managing organisations. The performance is concerned with ascertaining the value created for the customers and stakeholders. Performance management (PM) includes the activities that ensure the various goals of an organisation are achieved through implementation of strategies to achieve organisational goals (Luthans & Perterson, 2003). The key dimensions of the performance management include the performance of an organisation, the workforce and employee and the processes that are involved in the building a product or service (Mitchel, 2008). Performance appraisal involves the systematic undertaking that is used to assess the performance of an employee and the overall productivity of an organisation. The appraisal is normally carried out on a periodic basis and is based on the organisational objectives. The performance appraisal serves as the basis for establishing the level achieved in the process of aligning the organisation to the strategic goals (Kagaari, 2010). Performance appraisal of employees is also used to point to the areas of weaknesses, promotions or in termination of employees’ contracts. According to Naranjo (2010) the success of an organisation relies on the performance of its employees. Performance entails working towards a common goal in which all the employees in an organisation are actively involved (Nkwa, 2003). Performance measurement entails the initiatives initiated by the manager to keep on track performance of the system. The performance management entails the holistic process and approach applied towards the improvement of groups and or an individual to ensure that the goals of an institution are achieved. According to Reid (2008), performance management is an approach used to manage the employees. It comprises the various practices that are applied by the managers to improve, direct the output of the employees with the aim of achieving the strategic objectives. According to Boland and Fowler (2004), performance management system involves a holistic plan that ensures that an organisation achieves maximum performance geared at improving productivity. It is involves laying down strategies to transform inputs into outputs and at low cost and efficient manner. The performance management systems; thus, incorporates the performance management, the performance measure, and appraisal to result in a holistic system that focuses on achieving organisational goals. Importance of PMS Bento and Bento (2006) noted that performance management acts a means of obtaining better results in an organisation. The PMS is a process that starts with the integration of overall organisational or institutional goals into objectives that are clear. According to Cobbold, Lawlie and Issa (2009) PMS targets employees and sets the agenda for the appraisal of their performance. Through the set management systems, it becomes easy to quantify the performance of the employees. The indication of the output by employees helps an organisation in ascertaining whether inputs results in the projected outcomes. Therefore, PMS provides a basis for establishing performance indicators. Through the component of the performance measures, an organisation is at a position to determine the direction of performance based on individual achievements. There are different dimensions of performance management. The key dimension entails the improvement of productivity to ensure that a company is guaranteed effective and efficient delivery of services. In the public sector, PMS plays a critical role in streamlining the service delivery. Halachini (2011) noted that the public sector presents a complex situation to measure the performance productivity and improvements in the performance. The reason for the complex scenario is due to the difficulty in measuring outputs, i.e. the outputs in the public sector are intangible. For example, the satisfaction of society and the general welfare extended to the public. Performance management helps in establishment of the precepts for quantifying the employee’s performance (Mothusi, 2008). The performance management systems link the individual performance to that of the institution. Therefore, in the public sector, policies and procedures act as the guide for the establishing the goals and increases service delivery to the customers; hence, enhancing productivity. Effective application of performance management results in satisfaction of the employees. According to Clardy (2013) satisfied employees play an integral role in increasing the productivity of an organisation. Kloot and Martin (2000) noted that the most important aspect of the performance management system is to improve the overall performance of an organisation. Kloot and Martin (2000) retaliated that the increased productivity of an organisation depends on focused employees. Therefore, the factors that influence performance management systems should relate to employee motivations. Dzimbini (2008) argued that performance management is achieved by implementing individual objectives, putting in place proper communication channels and continuous evaluation to bridge the gaps that may hinder coordination in the organisation, skill development and training of the employees. The stimulus to the PMS is based on the integration of an incentive programme. Essentially, Cheng et al. (2008) argued that a performance management system should be designed in a manner that helps in the management and coordination of the individual employees and should incorporate the various programs for training and enhancing the capability of the employees. For instance, it should have a well laid out strategy that guarantee that the employees are aware of the of the management system. Failure to have a comprehensive and inclusive PMS may result in poor outcome. For instance, a research carried out by Marabela (2011) in Botswana’s public service sector pointed to conflicting aims, poor communication systems , lack of validation system and poor design of the system which leads to gaps in the system. Furthermore, Nelly, Greogory and Plattz (2005) noted that the a performance management system, should include a system that is discriminatory free and should be synchronised to the objective and goals of the organisation and that of the employee. Bitici (2006) noted that the factors that affect performance management system occur due to failure by the management to be actively involved in the process. Bitici (2006) noted that on many occasions, management puts in place rules and regulations to then leaves it to supervisors to coordinate. Therefore, there is a resulting gap of lack of leadership skills to encourage the employees to increase productivity. Saudi, Mold and Haizam (2014) added that effective performance management systems are based on the transformational and intelligent quotient leadership that resonates with needs of the employees. Organisations are faced with different levels of uncertainty. Rompho (2012) noted that the uncertainty relates to the differences between the available information and the amount of information that is necessary for the performance of a desired level. Therefore, PMS must be designed in a manner that meets the scope of the operations, the organisational size and the industry. However, the design of the or a PMS can be influenced by a myriad of factors. Burkett (2010) outlined the a technological, organisational, contextual and environmental as some of the factors that influence the PMS. In the contemporary society, technology has become an integral component in the running of a business. There are different dimensions of technology. However, Aksal (2011) noted that there is a positive relationship between the PMS outcome and the technology employed in an organisation. Purbey and Bhar (2007) added that technologies enhance the process of processing information, increase efficiency and synchronise the system to ensure that coordination is achieved. Ryan and Awais (2009) stated that technology provides the basis of management to apply hands-on monitoring of the PMS. The organisational factors relate to the structure and the management style employed by an organisation. According to De Waal and Gerritsen (2006) organisational factors affect the capability of processing information in an organisation. The organisational structures are key determinants of how the communication process takes place in an organisation. The organisational factors also have a direct impact on the other factors such the contextual and the technological factors. For instance, a study carried out by London and Mone (2008) found that the structure of an organisation has direct impact on the PMS outcomes. Vorhies and Harker (2000) noted that the structure affects the quality of information; therefore organisations with complex structures may have negative outcomes. In a study carried out by Bourne, Nelly, Platts and mills (2002) the management, the style was found to influence the PMS. Collaborative management styles such as organisations employing transformational leadership and collaborative management had a significant influence on the PMS. The appraising performance of the employees plays an integral role in performance management. In order to have effective PMS, Sergent, Hyland and Sawang (2012) noted that the context of the implementation of the PMS plays a paramount role in an organisation. The contextual dimension relates to factors that affect the employees such as the cultural factors. Ittner, Larecker and Randall (2009) added that contextual factors affected the performance of the employees. They relate to the integration of the organisations, beliefs and perceptions towards the various issues that may directly or indirectly affect the operation of the business. The context is not limited to culture; Ochoti and Ronoh (2012) noted that there are national issues that influence PMS. In the argument, Moynihan (2009) retaliated that the cultural and national contexts are likely to be reflected in the nature of the objects and goals set. In addition, the cultural and the national context have a relation to the possible competencies. A case example of the contextual influence relates to cases in which the managers with European origin are best suited to the drive for results than the Asian and North American counterparts. In addition, there is the tendency of low individualism in the Asian culture, which prioritise personalised relationships. An effective PMS entails an integrated system in which individual objectives are linked to the goals of the organisation. Therefore, the stakeholders to the PMS influence factors that affect the acceptance and selection of the PMS. According to Premkumar, Ramamurthy and Saunder (2008) the benefits, usefulness and the goals of an organisation influence the need for a PMS. Rationale for examining the factors that influence PMS Organisations encounter different levels of uncertainty. This is based on the difference between the amount of information that is available and the information that is needed to perform a task to a desired level (Saltmarshe, 2003). The differences are basis for necessity of the examination of the factors that influence PMS. The PMS must be in position to meet the scope of operation, the organization size and in line with the industry mechanisms. According to Rompho (2012), different industries vary in their level of organization and therefore the requirements for the PMS vary. The performance management process entails the identification of common goals that relate to the organization. There are factors that influence performance management. According to Premkumar, Ramamurthy and Saunders (2008), the factors that influence the PMS include technological, behavioural, organisational requirements and capabilities. The examination of the factors helps in identification of the indicators that can increase or reduce the systems outcome. For instance, the measuring of the technological factors such as internet can be used to point to the effectiveness, usefulness and the quality of the technological factors put in place. The examination of the factors determines the degree of success and establishes whether the factors are in line with the organisational strategies put in place. Thus, the underlying principle for measuring the factors that affect PMS is to investigate their contribution in promoting the organisational development. The analysis of the factors that influence PMS provides the basis establishing whether the ultimate goal for the organization is on course (Premkumar, Ramamurthy and Saunders, 2008). One aspect of determining whether the ultimate goal for the PMS is on course is based on the quantification of the employees. In addition, Rompho (2012) noted that examination of the various factors that influence PMS helps in the accreditation and in the identification of the indicators that contribute to the organizational development. Therefore, the rationale for examining the factors is to point to the areas of progress and strategies that can be incorporated to enhance quality in the PMS system. Outcomes of Performance Management Systems The success of PMS is influenced by various factors. The factors relate to the overall design of the PMS. According to Kennerly and Nelly (2002) one of the important factors that affect the PMS include continuous monitoring and communication. Communication plays an integral role in quantifying the progress achieved in the PMS cycle. A study carried by Lavertu and Weimer (2010) found that over 79% of the employees attested that continuous monitoring enhances the process of the PMS and ensures that it is on track. Another factor that influences the PMS is the frequency of the performance reviews. Though closely related to the continuous monitoring, Franco and Bourne (2003) noted that the continuous frequency of performance reviews ensures that the employees understand the progress. The reward that result or reprimands puts the process on the check and motivates the employees to be more focussed on the goals. In any organisation, policy and regulatory framework plays a crucial in the implementation of the processes geared to increasing efficiency. A PMS that is implemented without a clear policy is bound to fail (Lohman, Fortuin & Woutes, 2004). In a study conducted by Harbour (2009) to investigate the effectiveness and success of PMS in a school setting, it was found that lack of clear policy and guidance hampered the success of the PMS. The culture of an organisation plays a significant role in the implementation of the PMC. According to Analoui (2007), culture dictates the organisational operations and strategies. Culture dictates the strategic goals of an organisation. Jenning and Haist (2008) culture also influences the work habits, the responsibility and boundaries of work and communication. Therefore, culture may result in efficiency or failure of PMC. Usefulness is the degree to which the stakeholders believe that the PMS would improve the performance of an organisation. According to Bento and Bento (2006) usefulness is normally related to the concept of volunteering. Usefulness is based on the perception developed by the employees and the level of engagement in the design and implementation of the PMS. According to Kagaari (2010) the management plays a critical role in ensuring that employees resonate with the goals for the PMS. For the employees to realise the usefulness of a PMS, they must be motivated and focused on the individual and organisational goals. On the other hand, Effectiveness of PMS is the extent to which the system ensures that it helps in achieving the set goals. Effectiveness helps an organisation in planning and controlling performance. The specific factor that affect effectiveness includes the leadership and the overall design of the PMS. Communication is key to achieving effectiveness. 3.0 Models, Theories and Conceptual Framework The PMS is a system that is applied by organisations and institutions to enhance the productivity of the human resource capital by managing the performance of the individual employees. The core need of implementation of PMS is to enhance accountability, efficiency, communication, performance and hence result in increased productivity. PMS is based on goal setting. According to Olsen and Padunchwit (2007) the implementation of PMS should be drawn as a joint activity that involves employees and the managers. The idea of the employee participation is to enhance the acceptance of PMS in an organisation. The level of acceptance is crucial in enhancing integration of the PMS objectives. Te managers are required in the implementation in order to motivate, coach and avail resources and capability development among the employees. Goal setting theory is an example of a theory that relate to PMS.Edwin Locke proposed the theory. The theory stipulates that individual goals that are set by employees play a critical role in motivating the employee for better performance. Therefore, the achievement of individual goals result in the attainment of the performance management systems goals (Bento & Bento, 2006). The other theory associated with PMS is the expectancy theory. Victor Vroom proposed the theory in 1964. The theory leverages on the hypothesis that employees adjust their behaviours in a company in expectation of achieving satisfaction (Wisnsewski & Stewart, 2001). The theory underscores the concept of performance management because it is based on the believe that PMS is influenced by expectation to achieve future goals. 4.0 . CONCLUSION Findings The organisational structures are key determinants of how the communication process takes place in an organisation. The organisational factors also have a direct impact on the other factors such the contextual and the technological factors. The structure affects the quality of information; therefore organisations with complex structures may have negative outcomes. Therefore, PMS plays a critical role in ensuring that an organisation forges towards it set goals. The review of the literature has also established that all stakeholders play a critical role in the success of a PMS. Implications of Findings Nudurupet & Bititei (2011) stated that performance management is a continuous process of establishing, appraising and developing the performance of individual employees in order to align the performance with the strategic goals f the organisation. Therefore, the findings provide the basis of organisations to understand the dimensions of PMS and the factors that influence effective PMS. Therefore, managers can effectively implement the PMS in order to enhance individual goals and hence those of an organisation. Recommendations The review has pointed to various factors that relate to success or failure of PMS. The review has also established the core issues that affect performance management in an organisation. 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Undoubtedly, the process of change is exceedingly tough and essential for organizations and may drive the organization towards the success path (Kempster et al.... … The paper 'Change management - the Super Star University " is a good example of a management case study.... The paper 'Change management - the Super Star University " is a good example of a management case study.... The argumentative essay seeks to analyze the Super Star University case study relating to organizational leadership during change management, the change process, and resistance to change management....
10 Pages (2500 words) Case Study
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