The Importance of Employee Performance Management - Essay Example

?The Importance of Employee Performance Management Introduction Performance management is one of the key drivers of success in business in the contemporary age. This is the reason why organizations all over the world are spending a lot of money in establishing an effective performance management system. The idea of management of performance is not new; the need of managing performance has long been recognized (Williams, 2002, p. 1). Nowadays, organizations have developed systems of performance management which cascade the strategy starting from the executive suite down the line till the basic level in the organizational structure (Eckerson, 2010, p. 72). “Given the current challenges of the economic climate and high rates of unemployment, performance management and employee evaluation is likely to remain a hot topic” (Gliddon, 2004 cited in Newman, 2008, p. 172). In simple words, performance management of employees is a process of getting the most out of employees. In order to achieve this, organizations need to work on a range of factors that include but are not limited to employees’ motivation, continued learning, skill improvement, allocation of right jobs to the right people, fostering teamwork, and providing the employees with an environment where they can thrive with their capabilities. Performance management has probably never been as important in the organizational context as it is today since the workplace is more dynamic than ever before with new kinds of technology surfacing and being integrated into the work setup so frequently. Managers in the contemporary age not only face the challenge of keeping updated with the latest advancements of technology and integrating them into the workplace, but they also have to take the required measures to enable the employees to make effective use of those technologies. This makes it a continuous process with great margin of trial and error, requiring great knowledge and experience to handle the intricate issues with respect to performance management. “If you are a manager, the progress principle holds clear implications for where to focus your efforts. It suggests that you have more influence than you may realize over employees’ well-being, motivation, and creative output. Knowing what serves to catalyze and nourish progress—and what does the opposite—turns out to be the key to effectively managing people and their work” (Amabile and Kramer, 2011). Discussion Why is performance management important? Performance management of employees in an organization derives its importance from the fact that it is a way to reinforce the decisions related to organizational personnel like those related to transfer, promotion, compensation and reward, training and skill development, planning of human resources, and development of the organization as a whole (Bhattacharyya, 2011, p. 58). The level to which each of these factors is considered important may vary from one organization to another but all of these factors govern the performance of employees in any organization. Besides the primary importance of the different factors in different organizations, performance management strengthens the relationship between the management and the subordinates, and improves motivation and flow of communication in the organization, thus improving its overall performance. From the perspective of human capital, performance management plays a very important role in the development of the human capital of an organization (Smither and London, 2009). The importance of performance management of employees in the organizations is elaborated with the help of some case studies below: Case Study 1 One of the prime motivations behind conducting performance reviews is eradication of bad performers from the organization. This is a case in which performance management helped in the identification and weeding out of a bad leader. Usually organizations tell their managers to establish a paper trial to justify the termination of an employee that is deemed a poor performer. In such cases, performance management is used to develop a case against the employee rather than to identify the bad performers. This process can be avoided by conducting honest appraisals. This case study starts with a problem with conducting such honest appraisals. It happened at a South Asian collegial educational organization with a polite environment (Creelman, 2012, p. 3). The institution had a performance management system that rated almost everybody, at least good. Although employees’ performance was criticized at the lower levels, yet the bosses were highly reluctant to give poor scores to any employee in the formal rating. The change started with the addition of anonymous multi-rater feedback in the system of performance appraisal. Feedback in the modified appraisal system was brutally honest for the first time since the rating given by the bosses was only one among several. The scores of one department head were terrible as everybody had expected them to be. The only difference this time was that the terrible scores had been placed on record. The department head was given an opportunity to show improvement in a year but one year later, his scores were just as terrible and this was when the organization took an action against him. The organization had thus developed an effective system that would act rather than sliding the poor performance like before. The lesson that can be drawn from this case study is that bad performers can be identified and removed with the help of an effective performance management system. However, such a system needs to be enabled by the concerned authorities through honest and tough appraisals so that the process’s value becomes readily apparent. Case Study 2 The function of a good performance management system is to not only identify bad performers for firing but also to save good performers from getting fired because of faulty assessment of their performance. The meetings of performance management in many organizations are disappointing and tedious to conduct. This case tells how performance management can protect a good employee from getting fired. It happened in a large Canadian retailer when a female employee working in another department was assigned an important HR role (Creelman, 2012, p. 4). It did not take long for the complaints to surface that required the management to conduct an unpleasant performance review in the mid of the year. Her boss asked the employee her future plan in his attempt to develop some perspective with respect to the situation at hand instead of coming directly to criticizing her work. Since she had no answer to his question, the boss asked her what was her goal in this job that she wanted to achieve. The employee avoided to answer directly and eventually asked the boss why he was asking her that and that she loved the job, bursting into tears. The boss was aware of her good performance in her past role and was convinced that she was motivated. In spite of the complaints raised by the internal clients, he decided to sidestep the issue and let her report to a different manager who was famous for good mentoring skills. It took very little time for the new manager to figure out that the root problem was lack of knowledge and experience of the employee of her new role, which was a fixable issue. All it took was a little guidance to get her on track. With the right mentoring, she not only fit in the new role but also proved to be the best employee ever seen by that company in that role. She had gone beyond everybody’s expectations. This case is suggestive of the significance of a good performance management system as a lasting value not only to the organization but also to the employees. This case also suggests that if performance reviews are conducted more frequently than just once a year, problems can be detected and responded to earlier. The dedication and sincerity of the top management with the employees can make a lot of difference like it did in this case; not only her boss decided to give the employee another chance, but he also found the right mentor for her who exactly knew what sort of guidance she required to achieve her maximal potential in the new role. While writing the performance appraisal, it is very important for the managers to be unprejudiced, objective, and fair. This does not confine them to using only numerical or quantitative metrics while they make their assessment. The appraisal process equally demands their personal judgments, feelings, and perspectives. Managers even have to make the judgments with non-availability of complete facts. In other areas of management, what managers are paid for is their ability to make informed decisions with the constraints of limited time and data. It is just while doing performance appraisal, that managers feel unnerved regarding the fact that their judgment and experience are would be used rather than provable metrics. Outputs of performance management Money is a principle output that is closely linked with performance management at the employee level (Cardy and Leonard, 2011, p. 14). Compensation mostly as merit pay is the outcome closely examined by some workers as a measure of the fairness of treatment offered by the top management to the employees and also as an indicator of the extent to which their efforts are valued by the top management. Merit pay is integrally linked with the performance management and can also be thought of as a component of the process than as a result of the process of performance management. The reality is that in many organizations, the evaluator of the performance and provider of the feedback to the employees does not assume the authority to decide the merit pay or the size of budget for the merit pay. Lack of direct control of the evaluator makes the compensation effects of the performance management a part of output. Personnel decisions are also actions that happen to be the result of performance management. These decisions may be related to a number of factors including promotion and termination. The importance of continuous feedback Effective system of performance management extends beyond mere evaluation of employees to include providing the employees with constructive feedback and using the development activities to enhance their performance. Perhaps, the most important function of performance management system is the fact that it teaches the employees how they can improve their performance continuously (David, 2009, p. 11). Continuous feedback is necessary to administer employees’ performance. If the employees are not provided with continuous feedback, they tend to assume that their performance is already acceptable and that no effort is required to improve it. It is not necessarily negative feedback that is required continuously to let the employees know how they can improve their performance, but also employees need positive performance reviews when they are performing good so that they feel that the management is noticing their hard work and appreciates their efforts. Performance reviews develop this feeling in the employees that management is not neglectful of their efforts. This feelings helps foster a strong relationship between the employees and the management that works in the best interest of the organization. Existence of the perception of equity in the minds of the organizational personnel increases their motivation (Kandula, 2006, p. 20). An effective performance management system fosters this perception of the employees. Rather than expecting the employees to reach out to the management with their problems, management itself should “make it a habit to get out among their employees throughout the day or week and not wait for their employees to come to them” (Sims, 2002, p. 201). Performance management as a means to fosters clarity Performance management helps reduce ambiguities and spreads clarity regarding organizational goals and culture. The process of performance management takes place in the organizational as well as a global context. The performance management system comprises the phases of “design, implementation, and evaluation” (Varma, Budhwar, and DeNisi, 2008, p. 17). The design phase involves the decisions made by the management with respect to the performance management system. This fosters clarity with respect to organizational goals and the strategies adopted by the management to achieve them. These decisions are about the purpose of conducting performance management, the frequency with which performance would be evaluated, identification of the rater, and the establishment of approach that would be adopted. When the management lays down the objectives of each phase of the performance management process, it gives them the direction in which they need to advance in order to stick to their goals and not get distracted. Performance management as a means to raise the confidence of the organizational personnel Performance management is often understood as a process in which the management evaluates the performance of an employee by sitting down with him/her once a year. The results of the employee’s performance are rated over an evaluation form with respect to certain items listed on that form. Those ratings are then used to discuss the raises of merit appropriately as well as the promotions. However, establishment of a good performance management is not all that simple. “Much like with incentive systems…the criteria that managers use to evaluate their employees need to represent the attitudes and behaviors managers expect of their employees” (David, 2009, p. 11). In the process of implementing a performance management system, management has to communicate the performance criteria clearly to the employees. This helps the employees develop a fair understanding of the steps needed to take their performance to the level desired by the top management. Alignment of these performance criteria with the goals of the organization makes both the managers and the employees more confident that their attention is being focused on the most important areas. Performance management as a tool to improve employee retention Millions of employees leave their jobs every year just because they are not satisfied with the evaluation of their performance by the top management. In the absence of a proper performance management system, the criteria against which the performance of employees is assessed are known only to the management. The employees are kept oblivious of these factors as a result of which, they do not know what aspects of their performance they need to improve the most. In such cases, when an employee is terminated by the top management because of poor performance and another is granted a bonus because of the perceived good performance by the top management, other employees tend to think of it as favoritism and lack of fair treatment of all employees by the top management. Even the top management itself is not objectively clear about the criteria of assessment when they have not been properly defined and laid out as part of a performance management system. The employees lose confidence in the management and tend to look for better job opportunities elsewhere where management is more clear about what it wants from the employees and clearly communicates those factors to the employees also. In contrast to this, when there is a proper performance management system, top management knows the criteria of assessment, and knows when and how to communicate those criteria to the employees so that they understand them to their best and can adjust their performance according to them. Performance management as an administrative tool “The importance of performance leads to a need for a system that focuses on an administrative purpose where decisions are made about employees based upon their performance (Tansky and Heneman, 2006, p. xvi). In many organizations, performance management system plays an administrative role. For instance, some of the common and important administrative purposes served by performance management include legal defensibility, return on investment (ROI) estimates, and establishment of validity. Performance management may be primarily considered as a system directed at the improvement of employees’ performance in an organization. This emphasizes upon the significance of this system as a development tool. However, the function of performance management is also the application of the established criteria and evaluation of their effectiveness. In the role of assessment of effectiveness, performance management helps laying down of standards against which the judgments like validity and legality are made. Managers should be aware of this context provided by the administrative purpose of performance management. “…a cadre of agency leaders use administrative systems such as performance management to add value to their organizations, and…the interaction between leadership ambitions and vision, and the management reform in question, shape management capacity” (Moynihan, p. 78). Evaluation of performance in the performance management system often serves as one of the criteria with which different sorts of measures can be compared. For instance, performance process’s evaluations can be used as the criteria in the estimation of the validity of a selection tool like a specific interview or test that is part of the recruitment process. Performance management as a motivational tool Resource managers use the statistics of performance as a motivational tool form in which they can use reward the good performance through the resource increase and punish the poor performance through a decline in resources that can be either direct or indirect. There are a number of positive and negative effects of performance management. The positive effects of performance management generally include increased transparency of the system, strong accountability for everybody in the organization, increased incentive and motivation for the employees to show good performance, and organizational growth. The negative effects of performance management include increased motivation for game playing, blockage of innovation, addition to internal bureaucracy of the organization, blockage of ambitions, and excessive focus upon the clearly defined aspects (Waldt, 2004, p. 52). Performance management as a tool to foster ethics The first step needed to improve an organization’s ethical performance is the establishment of the ethical conduct’s importance. Performance management is the next step of the process. In this step, the management emphasizes upon the establishment of the criteria of performance. Nevertheless, performance management in such a model can be broadly defined as “a concept that, in addition to performance appraisal, can include selection, training, and compensation” (Deckop, 2006, p. 73). The components of ethical performance can be compiled in the form of this equation; “performance = ability x motivation” (Deckop, 2006, p. 73). While the organizational personnel are motivated by the recognition of ethical performance’s importance, they do not have the capabilities or means to work upon the plan of this conceptual intention unless this concept is operationalized in the step of performance management. Performance management enables the organizational personnel to take their ethical conduct to a higher level. For instance, employees get explicit guidance with respect to the desired ethical conduct when they have clearly defined behavioral criteria. The functions of automated performance management systems There is a long history of the attempts made by organizations to enhance the efficiency and effectiveness of work with the help of performance management systems. “From the advent of repetitive flow production in the early 1900s, to the use of Total Quality Management in the 1980s, to the recent trend to outsource non-mission critical functions, organizations continually strive to increase their effectiveness through increased efficiency” (Pulakos, 2009, p. 104). As a result of this, the automated Human Resource Information Systems (HRIS) have been widely implemented in the recent years to deliver the business functions related to human resources more effectively. HRIS is offered by numerous popular vendors like Oracle, People-Soft, and SAP that enable the organizations to track the employees and manage their performance as they advance through the lifecycle of employment from the pre-recruitment to the post-recruitment duration (Pulakos, 2009, p. 104). These performance management systems typically automate such functions of human resources as attendance, pay, time, benefits, recruitment, staffing, and leave. Automated systems of performance management have been evaluated to show that most people hold positive perceptions about them (Pulakos, 2009, p. 105). The functions performed by the automated performance management systems include but are not limited to reduction of workload, development of widespread access, and the development of a standardized format for the obtainment, storage, and reporting of the data. How to make performance management system work? There are a number of requirements that need to be met to make the system of performance management effective in an organization. When these conditions are satisfied, they play the role of a foundation over which an effective system of performance management can be built. These requirements are communication of expectations, employees’ involvement in the process of performance management, use of a systematic approach throughout, determination for hard work, and commitment of the management to success (Caldwell, 2000). The goal of the management while establishing the system of performance management is to construct it technically rather than socially so that the system can be effective and practicable both for the implementers and the followers (Halachmi, 2005, p. 514). This requires the top management to work in close collaboration with employees. “Incorporating self-assessment as part of a performance management/review process is most likely to be successful when all concerned fully understand the purpose of self-assessment and both managers and employees understand their respective roles in the review meeting and how they should be carried out” (Armstrong, 2009, p. 138). Conclusion A performance management system is very important because it enables the top management to use the organizational resources in the most effective way. Performance management is more of a need than a choice in the highly competitive business environment of the contemporary age. A good performance management system is required not only to identify bad performers in the organizations operating at lower levels, but also the bad leaders that often survive poor performance management systems because of having the entire authority in their hands. In order to derive maximum benefits from a performance management system, it is imperative that it is designed by highly experienced and loyal top managers because the quality of employees’ work is fundamentally determined by the quality of the performance management system. Another major function of a good performance management system is to protect the good performers. Hence, this system works both ways to ensure that the organization is equipped with the team of right people that have the potential to help it achieve its goals. However, in order for a performance management system to be this effective, it needs the presence of caring and responsible managers in the top positions. A good performance management system cannot be established unless everybody from top to bottom is held accountable for his/her actions. Considering the important role played by performance management in the development and growth of an organization and the employees, the goal of the top management should be to establish such a system of performance management that is effective and monitors and manages the performance overall rather than appraising the performance once a year. References: Amabile, TM, and Kramer, SJ 2011, The Power of Small Wins, Harvard Business Review, [Online] Available at http://hbr.org/2011/05/the-power-of-small-wins/ [Accessed: 29 June 2013]. Armstrong, M 2009, Armstrong's Handbook of Performance Management: An Evidence-Based Guide to Delivering High Performance, Kogan Page Publishers. Bhattacharyya, D 2011, Performance Management Systems and Strategies, Pearson Education India. Caldwell, CM 2000, Performance Management: EBook Edition, USA: American Management Association. Cardy, RL, and Leonard, B 2011, Performance Management: Concepts, Skills, and Exercises, M.E. Sharpy. 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