The characteristics of performance management - Essay Example

?Running Head: essay Identify the characteristics of performance management and examine how this approach differs from performance appraisal. Why do you think there is confusion between these two areas of HRM? [Name of the Writer] [Name of the Institution] [Name of the Professor] [Course] Performance management has been promoted, researched and emphasised upon in small and large enterprises since long. The topic has evolved from much technical performance appraisal system. However, with the passage of time, increased complexity in businesses and emerging concepts of knowledge transfer, innovation, strategic human resources and greater attention on capabilities of human assets have transformed the way performance has been perceived, measured, judged and understood in organizational perspective. Even its application to subsequent HR policies and strategies has also changed drastically with the advent of information systems, international operations and establishing cultural symmetries between multinational offices of firms. In such context, it becomes essential to revisit the definitions of these two areas of HRM, chalk out differences between the two and identify reasons for prevailing confusion. Performance management can be defined as “a process for establishing a shared understanding about what is to be achieved and how it is to be achieved, and an approach to managing people that increases the probability of achieving success” (Armstrong 2009). Thus, thriving on this basic definition of performance management, it can be deciphered that performance management is concerned with synchronisation of individual and organizational goals, setting up of expectations, duties and responsibilities and providing for the development of employees through a modification in their attitude, work behavior, skills and abilities. The characteristics of performance management can now be charted out. Armstrong (2009) next opines that performance management system is the sum total of five basic elements- agreement, dialogue, measurement, feedback and reinforcement. Agreement takes place between what organizations want to achieve with the help of contribution of its employees and what employees want to achieve with the help of organizational culture, structure and policies. Dialogue is the sharing and dissemination of ideas, data and information to and fro employer and employees. In this respect, not only the managerial heads, but also line managers are responsible for the establishment of a two-way communication channel that exhibits transparency, reliability and truthfulness. Measurement of individual performance is based on continuously evolving standards, indicators and targets. Combination of these three tenets serve as foundation for constructive feedback mechanism through which employees identify their own deficiencies and shortcomings and policy makers also allow and arrange for their development and reinforcement of positive behavioural traits. Secondly, performance management is a flexible, continuous and evolving process which takes note of both past experiences and future requirements to chalk out present policies and strategies. It is not in the nature of authoritative or bureaucratic management where commands and orders follow from the upper echelons of hierarchy. Rather, it is a process done in partnership with employees themselves. As such, continuous changes in role expectations, job requirements, skills and competencies needed and other work aspects keep on surfacing out. Known by various names like merit rating, merit evaluation and others, performance appraisal is a narrower concept with respect to performance management. It is more formally and operationally focused upon evaluating the performance and work behavior of employees through the use of various rating techniques. Grote (1996:3) state that performance appraisals serve to fulfil three major objectives- one organizational and two individual. Organizations use it as a tool to determine the contribution of employees towards the achievement of organizational goals and use its results to frame strategies for promotions, demotion, transfers and terminations. For individuals, performance appraisals serve as means to know their standing and worth for the organization in terms of their skills, behaviour, talent, creativity and attitude. Supervisors even use it to conduct mentoring or counselling of employees to bring about improvements in employee performance. In general, performance management is used synonymously with performance appraisal. However, the two differ to a great extent in their significance, spirit, contribution and emphasis. Deb (2006:202) highlights the critical dimensions of performance as input, output, time, quality, cost and focus. When functions of management, namely planning, controlling, decision making and organizing are applied to these dimensions of performance, the bigger environment of performance management is created. As mentioned above, performance management is more strategically intended in its perception and implementation as it seeks to add value to the abilities and performance of employees through careful setting of benchmarks, continuous monitoring of those benchmarks and executing it at all hierarchical echelons of organization. Nickson (2007:169) gives a new dimension to the differential meaning of the two in terms of ‘hard’ and ‘soft’ HRM. Performance appraisal inclines more towards hard aspects of HRM which are measured by compensation, benefits and other monetary terms. On the other hand, performance management is more focused on securing and delivering the ‘soft’ aspects of HRM which are creativity, commitment, collaboration, development, et cetera. Unlike performance management, performance appraisal depends upon performance which is already exhibited and is a matter of past. Evaluation criteria in performance appraisal take note of static goals and objectives throughout the year and employee performance is judged on the basis of these. Additionally, performance appraisal also fails to incorporate the elements of total reward strategy- conducive work environment, job security, career development and others. It rests solely on the premise of associating appraisal with the compensation of employees and is more tangible in nature. It is the penultimate activity of the entire performance management cycle which starts with performance planning; continues with performance analysis and finally ends at performance development (Figure 1). Figure 1: Performance Management Process/Cycle With respect to the gamut of purposes served by the two; performance appraisal is mostly used for administrative purposes in the form of promotions, transfers, salary and wage administration and devising training and development session for employees based on rating results. On the contrary, performance management is bigger in its contribution and implications as it tends to fulfil purposes of motivation, information, management and development. Planning of individual needs and its alignment with strategic objectives falls under management purposes. Their subsequent execution while keeping the current abilities of individuals in mind falls under development purposes. Communicating all the rules and policies, ratings, results and standards is the subject matter of informational purposes while establishing collaborative employer-employee relations, promote innovation at work and encourage team building is the essence of motivational purpose. Total Quality Management (TQM) which is ever increasing in its applications in today’s organizations’ also applies differently to the two concepts. Deb (2006:206) further asserts that with performance appraisal, TQM is dysfunctional because of its features of being static, not promoting any kind of collaboration, team work or innovation and not including the intangible aspects of employee performance. Most importantly, while performance attributes changes and surrounding environmental conditions change dynamically, performance appraisal sticks to benchmarks and standards set year ago and results are also evaluated based on these outdated standards. Continuous improvement which is at the heart of TQM is not one of the constituents of performance appraisals; rather it is one of the cornerstones to performance management. Other stark differences include multi-functional scope of the two. Performance appraisal is the whole sole responsibility of HR department and because only compensation and monetary policies are to be executed, other departments generally do not intervene. The case is entirely different with performance management system. It is a multi-functional and inter-departmental activity wherein development objectives are entrusted to be fulfilled by the line managers of all departments within the organization. Also, in performance appraisal; development needs are set at the end after relative evaluation and comparison of results. Performance management, on the other hand, uses development needs of individuals as the basis for determining and judging the competencies of individuals in their behavior and team work. It is surprising to note that despite increased mention of performance management systems in organizations; there exists widespread confusion between the two. The reasons are also not very complex to be deciphered. Prime culprit is the philosophy and very fine line of demarcation between performance management and performance appraisal which often misguides managers. Being a part of the bigger performance management process, performance appraisal is considered fit and adequate by managers and organizations in fulfilling their strategic as well as operational needs. Most of the time, planning does not incorporate dynamics of surroundings into action and hence, appraisals become the subject matter of evaluating performances (Meyer et al. 1965). Moreover, individual employees too remain sceptical of performance management system because they are unsure of the policy adopted by the organization in case their current performance does not match future expectations. Past performances can be manipulated or small deviations overlooked, but when strategic intent comes into picture, both employees and managers feel wary of a performance management system in place (Harper 1983). Repercussion of job insecurity, pay cuts, demotions and other painful results hamper the clear understanding and careful implementation of performance management systems. Busi & Bititci (2006) assert that emerging global perspective and unclear demarcation between leading and lagging measures has led to some of the confusion between performance appraisal and performance management. Most of the organizations, even today, rely on evaluation and feedback systems which are based on past goals and targets. This is what remains the essence of performance appraisal till date which is formulated on the lines of lagging measures. However, contemporary business practice demands leading measures wherein goals should be set with reference to future plans and benchmarks and current performance should be judged within this balanced framework. HR managers and policy makers tend to overlook or undermine this fine thread of differentiation between these two areas of HRM and as such, performance management is still a distant reality for many to implement. Also, performance appraisal is thought of merely as a tool of increasing pays or criticisms by bosses. Inclusion of total reward strategy which is the optimum mix of both tangible and intangible benefits remain absent from the perception and understanding of managers (Williams 1970). Amaratunga and Baldry (2002) state that the bottom line of difference and between performance appraisal and performance management is the emphasis on measurement and management; the former still influencing the decision making process in HRM. All in all, after delving deep into the aspects of performance management and performance appraisal system, it becomes clear that the road to implementing performance management systems is still full of misconceptions, execution hurdles and lack of consensus in philosophy between employees and employers. While employers think of performance management system as time consuming, irrelevant, expensive and almost similar to performance appraisal with undue emphasis on future; employees feel insecure of their jobs and compensation with performance management system in place. This brings in both confusion and resistance in the implementation of more strategic and beneficial performance management system in organizations. Although performance management has received less reception and recognition than deserved; it will become the talk of the town soon and will replace the traditional methods of evaluating performances on the basis of past objectives and static organizational proceedings. Human assets have already gained much attention from upper ends of management hierarchy; soon will their performance management also come in the list of organizational goals and objectives. References Amaratunga, D. and Baldry, D. (2002). “Moving From Performance Measurement to Performance Management”, Facilities, 20(5/6), 217-23. Armstrong, M (2009). Armstrong’s handbook of human resource management practice. 11th Ed. London: Kogan Page. Busi, M. and Bititci, U.S. (2006). “Collaborative performance management: present gaps and future research” International Journal of Productivity and Performance Management, 55(1), 7-25. Deb, T (2006). Strategic Approach to Human Resource Management. New Delhi: Atlantic Publishers. Grote, R.C (1996). The complete guide to performance appraisal. USA: American Management Association. Harper, S.C (1983). “A developmental approach to performance appraisal” Business Horizons. Meyer, H.H, Kay, E, French, J.R.P. Jr (1965). “Performance appraisal: A new approach” Harvard Business Review, Jan-Feb. Nickson, D (2007). Human resource management for the hospitality and tourism industries. Elsevier. Williams, A.P.O (1970). “Increasing the value of management appraisal schemes: An organizational learning approach” The Journal of Management Studies, February. Read More