Implementation of Integrated Performance Management - Term Paper Example

Introduction The level of productivity that exists today is determined by the current level of knowledge embedded in workers’ skills, management techniques, tools, equipment, and software used in the manufacturing process. Productivity is a function of knowledge and skill. However growth in productivity depends on person performance as well as system performance. For achieving competitive advantage (Porter 1980) organizations adopt Performance Management techniques to realize efficiency and effectiveness. A number of organizations also implement Total Quality Management (TQM) practices to guide them through to becoming competent and successful. TQM has a preventive approach and not a detective approach to work (Walton, 1986). It is a proactive system and not a passive one and stresses on removing the defect rather than just locating it. Deming (1986) and Walton (1986) both state that the detective systems have serious disadvantages. Firstly these are results and as such cannot help in correction of past errors. Secondly, the greater loss is that due to errors the customer will be dissatisfied. Thirdly the direct cost of defect detection and later correction or replacement is doubled. Fourthly the human cost by way of fear of performance and loss of pride in workmanship is the greatest of all (Walton 1986). All this can be avoided by following TQM process by not allowing a defective product or service to be sent from production lines. Obviously prevention is better than cure. Performance management should be understood as a tool for measuring corporate objectives and is calculable in tangible form in terms of outputs and finally deliverables to customers. The ultimate goal is to deliver total quality and 100 percent value to the end customer. (Zairi 1994) and this is the standard or benchmark of acceptable performance management that describes the optimum use of all resources. Zairi (1996) goes on to state that product life cycles are getting shorter making it imperative for organisations to turn to innovations with greater speed to remain effective in their markets. Decision making thus becomes dependant on quality assurance systems that provide the required information for these judgments. Performance management is therefore essential to evaluate the quality and to ensure acceptability by customers. Performance Management According to Zairi and Youssef (1998) in the global context today competition cannot be met with cost efficiency alone. Quality plays an equally important role in assessing competitiveness. Quality is a function of (TQM) and Performance Management should be a process under TQM and as part of TQM initiative. If Human Resource Management (HRM) process is chosen for performance management and evaluation then the total emphasis will be on the worker, his performance, his output and assessment will be worker centric only. This is due to the fact that HRM focus is on selection, performance appraisal, and training. The emphasis begins with selection of right persons, with correct skill, and the training to be offered. The assumption by HRM is that differences in worker skills and attitudes have a bearing on performance. HRM assumes that performance is largely due to the worker (Dobbins, Cardy, & Carson, 1991). Under HRM aappraisals are vital in deciding capability and judging performance. But Performance management under TQM has brought into consideration system factors that effect performance apart from person factors. It was Deming (1986) who pointed out that 85% of performance variance is due to the system factors and only 15% is due to person factors. These system factors include the quality of raw materials, types of equipment, nature of supplies and co-worker support. Even proper training and guidance by managers is part of the system factors and they are generally beyond the control of the worker therefore the worker is usually at a disadvantage in appraisal where everything is assessed to be his personal performance. Deming (1986) argues vehemently against performance appraisals calling them a deadly disease. He compares it to a cruel lottery since, from a TQM standpoint, most of the variance in performance by workers is actually due to system factors. System Factors TQM has brought into limelight the importance of system factors. Whereas previously all blame was squarely put on the worker’s shoulders, TQM made managers realize that the person performance is indeed highly dependant on the system support. The quality of co-workers and supervision, the availability and training on technology, the quality and timely availability of inputs, the layout and ambience of the workplace and above all the organizational culture all play vital roles in determining the person performance. Peter O’Connor and Eulberg (1985) have developed an eleven factor categorization of constraints that can put restrict performance; whereas Bernadin (1989) has enumerated twenty two limiting factors. Even constraints like clerical support and managers own performance have been found to be affecting performance results. Other variables in the shape of opportunity, motivation and ability have also been identified as important factors by Blumberg and Pringle (1982). There have been other empirical studies evidencing these and similar factors by different names and categories by a number of researchers and writers. (Bernardin, 1989; OConnor, et al 1984; Peters, et al 1980; Steel & Mento, 1986; Steel et al, 1987). All of them concluded that system factors indeed have an important bearing on person performance. Performance Evaluation Waldman (1994) has designed a performance evaluation model that covers both person and system factors on job performance. Basically, this model combines the traditional HRM focus on the individual with the TQM leaning on system factors. Both person and system factors directly influence job performance. In fact system factors dominate the situation and are capable of both restricting and enhancing personal performance factors. He does accept that vice versa can also happen but the influence of person factors is comparatively weak. Waldman’s structure goes on to suggest that more than workers it is the managers who should be held accountable for performances as they decide the work process. He uses bureaucracy as a moderator between persons and system. Binning & Barrett, (1989), Smith, (1976) and Guion (1961) also confirm that individual performance measures are a function of the two domains of performance, either job-related behaviours (Campbell 1990) or work outcomes in the shape of products or services. The performance results therefore are inter-dependant on both aspects and each influences the other at least in some parts In addition, the measures may be differentiated as to the extent to which they are objective or judgmental in nature. Performance Measures and their Critique A variety of methods are used to measure performance. Among them Outcome Oriented measures are most common. These are sales figures, production units and profitability. They are direct measures and all of them are heavily dependent on the system rather than the person. They reflect less on the character or the job relevant behaviour of the person and more on the systems adopted by the company. This had resulted in conclusion that these outcome oriented measures are not really useful or correct in measuring person performance (Brogden & Taylor, 1950). Latest thinking on strategic management has changed this perception as will be seen later in this essay. However there is a larger canvas where performance management becomes the focal point of all kinds of organizational activities. It is shortsighted to presume that the performance measures are through HRM practices only, or even through system oriented TQM practices. HRM focuses on worker performance oblivious of the pressures exerted by the system. TQM looks on eliminating discards or under prepared goods or services that will be rejected at a later point and concentrates on evolving the perfect product or service. These narrow focuses forget the role played by other factors that can and do affect performance. Performance measurement is not just an outcome like the annual sales volume. Amaratunga and Baldry (2003) state that it is a process of ascertaining and assessing progress and achievement of pre-determined goals and includes information on the efficiency that has been shown in conversion of resources into goods and services. The quality of these outputs and outcomes has a great bearing on the organization’s effectiveness and its objectives. Management by Objectives (MBO) finds that the Outcome oriented judgmental criteria is a useful tool because of its objectivity (Gatewood and Field 1990; Bretz & Milkovich, 1989). MBO is said to be a management practice which combines tools like goal setting, participative decision making, and feedback of goal attainment in determining performance outcomes. But it must be pointed out that MBO is evaluation of individual performance (Bernardin & Beatty, 1984; Bretz & Milkovich, 1989). However the redeeming feature is that it is basically a subjective judgment through appraisal and a study of work outcomes measured against selected criteria. This characteristic sets it apart from merely being a HRM tool. Performance Evaluation The real measure of performance according to Evans and Lindsay (1999) is found in five key categories; customer satisfaction; financial and market performance measures; human resource measure; supplier and partner performance; company strategy measures. Each of these segments plays a vital role in determining the actual value of performance in the context of performance measurements. Strategic management revolves around objectives that need contributions from all stakeholders; hence underperformance from any quarter will affect the overall result. Excellence is achieved when it covers the total transaction and not just a part of it. Thus if the product or service is of the desired quality, but is either too costly due to supply side failures or excess utilization of assets; or at the other end of the spectrum, there is non-availability of after sales service or maintenance, then the performance on TQM alone will have failed to achieve its target. On evaluation the performance managed will have to be called poor and unacceptable and the organization’s objectives will not be met. Another evaluation mechanism from the performance management perspective is Benchmarking. This is the setting of standards components of which will be quality, price, timelines and assurance of supply. This is applicable throughout the whole organisation and is applicable to all stakeholders. Essentially it is a cost reduction method (McDougall and Hinks 2000). Its exercise results in pre-determined and pre-arranged costs. Deviations are the measures that performance management seeks to locate and redress. Managers depend upon it for performance measurement in the TQM context (Camp 1989) and it is considered as the most powerful technique for gaining and maintaining competitive advantage (Codling 1992). Benchmarking has also been defined as the continuous, systematic process for evaluating the products, services and work processes of organisations for the purposes of organisations improvement (Sarkis 2001). Its dynamism offers managers the opportunity to continually assess performances against set targets in order to maintain the effectiveness of the organisation. Conclusions Performance management has been used to determine the efficiency of the employees and in turn it offers means to check the effectiveness of the company. The question arises that in view of the diversity in approach and ambiguity in performance measures, is the reporting on corporate efficiency and effectiveness reliable. The answer obviously lies partly in performance evaluation and partly elsewhere. While it is true that performance measurements based on persons and systems provide an insight into efficiency levels and quality consciousness and are both relevant and important in the context of competitive advantage, the real measure of the effective organization is in its ability to be innovative in its performance evaluations. Motivation is a great factor in productivity and when performance measures accurately value a person’s role in the organisation then this evaluation turns into a motivator instead of plain rewarding or punishing tool. The need is to convert these performance evaluations into motivating tools. Performance Management in the broader context covers not just the employees and the systems they use for TQM but it covers the whole range of activities performed for the company by others including suppliers, partners and even shareholders. Obviously the management strategy for competitive advantage is the outcome of every segment’s effort and therefore performance management must devise performance criteria or benchmark for every section of its stakeholders. It will no longer be possible to peg performance onto TQM alone if the competitive advantage is sought to be maintained or achieved in the marketplace. References 1. Amaratunga, D and Baldry, D (2003), A conceptual framework to measure facilities management performance, Property Management, Vol. 21, No. 2, pp. 171-189. 2. Bernardin, H. J. (1989). Increasing the accuracy of performance measurement: A proposed solution to erroneous attributions. Human Resource Planning, 12, 239-250. 3. Bernardin, H. J., & Beatty, R. W. (1994). Performance appraisal: Assessing human behavior at work. Boston, MA: PWS-Kent. 4. Binning, J. E, & Barrett, G. V. (1989). Validity of personnel decisions: A conceptual analysis of the inferential and evidential bases. 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