Historical Development of Performance Management - Essay Example

Module: Module BAC 5010 Lecture: Introduction Performance management is a system through which organisations evaluate and develop people skills, behaviours and attitudes of individual employees with the aim of attaining pre-determined organisational objectives (Aguinis 2012). Typically, majority of the performance management systems incorporate performance reviews, learning activities, coaching and mentoring, performance measurement metrics, rewards, team work and training and employee development programs (Aguinis 2012). Historically, performance management was used to determine the wage based compensation of employees and drive employee behaviours that aimed at attaining organisational objectives. Performance management concept links the individual interests and objectives with the mission and strategic objectives of the organisation thus enabling employees to focus on the performance objectives (Aguinis 2012). Historical development of performance management Some of the earliest theorists of scientific management include Fredrick Winslow Taylor who advocated for scientific management concepts with the aim of improving the productivity of each individual employee. According to Taylor, simplification of the jobs would increase employee productivity, and enable cooperation in the organisation. Ideally, Fredrick Taylor contributed to performance management through advocating for the replacement of the ‘rule of thumb’ and replace it a scientific method that could enhance the efficiency of work in the organisation. Taylor’s second scientific management principle is geared at matching workers to their jobs depending on the job description, skills and capabilities of each individual inn the organisation. In this case, Fredrick Taylor contributed to performance management since he introduced the concept of simplification of jobs through job descriptions, job analysis and job assignment methods that consider the skills and attitudes of each employee (Grote 1996). Fredrick Taylor third scientific management principle was based on the need to monitor work performance, provide instructions to all employees and supervise the work in order to ensure efficiency. In addition, the fourth principle advocates for the allocation of the work between management and workers in a manner that managers spend most of their work time while laying out strategies and training while workers perform the routine activities in an efficient manner. Taylor made a contribution to performance management through ensuring job description, task specialization and incentive schemes for the highly performing employees (Aguinis 2012). Another early theorist of performance management in organisations was Mc Gregor. He came up with improved performance appraisal methods and measures of improving organisational effectiveness. According to Mc Gregor, performance management should involve appraisals that cater for administrative needs such as salary levels and promotion opportunities, information need such as the need for feedback and suggestion and finally motivation of the workforce. McGregor challenged the original notions of Taylor since employees could not be machine parts that can be redesigned or even eliminated. He perceived employees as individuals with unique needs thus introduced a human relations approach to performance management. According to his theory X and Y, theory X asserts that average employees dislike work and thus individuals must be coerced since they tend to avoid both work and responsibility. Some of the modern methods that have been implemented in order to encourage this category of employees perform effectively include punishments and rewards (Bacal 2011). Theory Y asserts that work is natural just like play and people will apply self-direction and control in attaining organisational objectives, thus eliminating the need of coercion and punishments. In addition, employees will accept and seek more responsibility if rewards are associated with achievement and creativity of the individual employee. McGregor suggested that independent teams with high self-direction and proper leadership skills will improve the organisational performance. Abraham Maslow contributed to the theory of performance management through his theory of hierarchy of needs. The theory asserts that employees have a hierarchy of needs whereby individuals seek to fulfill the lower needs in order to move to higher needs and expectations (Bacal 2011). According to Maslow, motivation is the leading contribution to higher organisational performance. The first level needs include physiological needs such as food, shelter and clothing thus employees are motivated by the pay structure. The second level includes safety needs that include job security and tenure thus organisations should support the employees’ children education and provide job security. The next level includes the belonging needs that require organisations to establish cordial working relationships, teams and groups within the organisation (Grote 1996). The next level entails ensuring that employees build self-esteem through the provision of career progression and professional growth opportunities that culminate to the final level of self-actualization that involves personal growth and sense of achievement. Peter Drucker expanded the concept of performance management by introducing Management by Objectives theory that seeks to align goals individual employee to those of the organisation. The concept was introduced in 1950s and starts by setting the organisational goals and make sure employees understand the objectives of the organisation. The goals and objectives should be realistic, measurable, time bound and agreed upon by all employees. Management by Objectives is a tool of performance benchmark setting, delegation and reviewing the performance of the organisation (Aguinis 2012). Management by objectives later paved the way for key non financial measures of performance such as customer service; business processes efficiency and learning and growth opportunities in the organisation. For instance, the balanced scorecard balances the objective and subjective measures of performance and both internal and external expectations of the performance (Grote 1996). For instance, the customer perspective measurements of performance will identity the level of customer satisfaction, the market share in the market and customer loyalty. The business processes perspective of measuring the performance will highlight the improvement in the internal processes such as a reduction in costs, and elimination of wastage thus creating efficiency in production. Key benefits of performance management Effective performance management focuses on results and not activities of the organisation and cultivates a system-wide and long term perspective of the organisation. Performance management should identify the goals, results and measurements that are needed for the effective and efficient attainment of the organisational goals (Grote 1996). Efficient performance management systems ensure that employees contribute to organisational objectives through facilitating cordial working relationships in the organisation. Performance management will increase the morale of employees through ensuring proper job descriptions, performance linked compensation and career progression opportunities (Bacal 2011). Some of the challenges involved in implementing techniques of performance management include difficulties in identifying performance evaluation dimensions, and challenges associated with making clear job descriptions. Other challenges include difficulties encountered in linking the job description with performance management (Grote 1996). Methods of performance management and their shortcomings A common technique of individual employee performance management is ranking method whereby each employee is ranked against each other. The relative performance of each employee is reviewed in terms of a numerical rank. Some of the shortcomings of this technique include difficulties in ranking all employees due to differences in job descriptions, and lack of acceptable procedure for ranking. The Critical incident technique manages the performance of employees through preparation of a list of acceptable and unacceptable behaviours of each employee in the organisation (Bacal 2011). This technique is an objective measure though the supervisors may emphasize on the negative incidents. Benchmarking technique can be used in performance management whereby the company compares its internal and external performance indicators with the industry benchmarks. The objective of benchmarking is to encourage continuous performance improvement in the processes, product quality and human capital skills. A checklist technique that contains specific job expectations that are useful in evaluating job performance of employees through reviewing the attainment of job expectations outlined in the checklist. Management by Objectives technique provides the performance indicators that can be used to assess individual performance against the set targets (Bacal 2011). However, this technique may lead to low morale, increased bureaucratic practices and unrealistic targets when the performance expectations are poorly designed. Some performance management biases include first impression bias and hallo effect bias whereby the employee is rated according to his or her perceived quality or traits. The spillover effect leads to evaluating the past performance while the recency effect bias leads to only concentrating on the recent behaviors of the employee (Bacal 2011). Recommendations The management should evaluate both the financial and non-financial performance of the organisation. Performance evaluation systems and criteria should be results oriented while the goals should be realistic and attainable. Proper job description, reliable performance evaluation technique and proper leadership will facilitate performance management in the organisation. Conclusion Performance management entails all activities that ensure that individual objectives contribute towards attaining pre-determined organisational goals and objectives. Performance management systems should provide the job description of individual employees and ensure set goals are realistic and attainable with the available resources in the organisation. Historically, performance management was geared at financial indicators such as sales revenues and profitability, but modern performance management has shifted to a balance between the financial and non-financial measures that entail customer services, internal processes and quality of human capital. Reference list: Aguinis, H. 2012. Performance management. London: Prentice-Hall. Bacal, R. 2011. Performance management. London: McGraw-Hill. Grote, R.C. 1996. The complete guide to performance appraisal. New York: AMACOM. Read More