Effectiveness of the Performance Management - Coursework Example

Managing People Performance Management Terms of Reference The purpose of this report is to look at Performance Management as a better alternative to the current system of the company, which is limited only on Performance Appraisal. This report aims to provide information regarding Performance Management, its benefits, and how it can be implemented to optimize our organisation’s efficiency. Introduction This report presents Performance Management as an improvement over the company’s current system of Performance Appraisal. First, we define Performance Appraisal and Performance Management and distinguish between the two. Then we look into the advantages of Performance Management over Performance Appraisal. Finally, we look into how we can implement Performance Management to improve the company to better achieving its long term goals. Appraisal and Performance Management The purpose of this section is to define Performance Appraisal and Performance Management, as well as to distinguish between the two. Both Performance Appraisal and Performance Management lead to increase in organisational productivity (Thomson 2003). Performance Appraisal is one of the tools used for implementing Performance Management. Performance Appraisal This section defines Performance Appraisal and identifies its weaknesses when implemented alone. Performance Appraisal is the process of setting job standards, measuring and evaluating employee performance, and giving relevant feedback to the employees (Thomson 2003). Performance appraisals are an important part of performance management, particularly in the Feedback Stage of Performance Management (Farrington 2007). Currently, our company is relying on Performance Appraisal in order to improve employee performance. However, Performance Appraisal is not enough to maximize and maintain good employee performance for the following reasons. Performance Appraisal, when used alone, is demotivating, it takes a lot of time to implement and get results back, it creates a legal liability, and it flies in the face of team rewards and accountability (Brull 1997). Furthermore, Cook discusses that the focus of Performance Appraisal is too much on the individual, instead of developing the employee. Appraisal is inconsistent and only useful in the extremes of performance (1993). In itself, it is therefore not enough to maximize organisational productivity. Performance Management This section defines Performance Management, its two foci which are development and reward driven, and details the process of performance management. This section then explains how and why Performance Management improves organisational productivity. Performance Management is the process used by managers to enable the employees to perform effectively and efficiently (Thomson 2003). Performance Management uses Performance Appraisal as its pillar, from which all other processes of Performance Management can be based on. Performance Management has two foci, development and reward driven. Focus on development means that the capability and potential of the employees are given priority in implementing the Performance Management process. Focus on rewards, on the other hand, implements the Performance Management process to ensure that employees are well compensated for their achievements, thus ensuring motivation to excel in whatever they are doing. For rewards driven performance management, it is a key to ensure that the criteria for the rewards are appropriate. Performance Management, if implemented correctly, is consistent with the strategic mission of the organisation, beneficial as a development tool, useful as an administrative tool, is legal and job-related, viewed as generally fair by employees, and is effective in documenting employee performance (Cook 2003). Furthermore, according to MacNamara, the 4 key benefits of Performance Management are that: it focuses on results, instead of behaviors or activities; it aligns activities and processes to the goals of the organisation; it cultivates a system-wide and long-term view of the organisation; and it produces meaningful measurements (2008). Aside from these key benefits, other smaller benefits include: it helps you think what you really want; it depersonalizes issues; it validates expectations; it helps ensure equitable treatment of employees because it’s result oriented; it optimizes operations in the organisation; it cultivates a change of perspective from activities to results; performance reviews are focused on contributions to the organisational goals; it supports ongoing communication, feedback, and dialogue about organisational goals; performance is seen as a continuing process rather than a one-time event; provokes focus on the needs of the customers; and cultivates relationships and exchanges between departments, processes, teams, and employees (MacNamara 2008). The process of Performance Management is a cycle consisting of four stages, as detailed on the figure below: The first stage is the planning stage, where the goals are set and areas for improvement are identified. It is on the first stage that you understand the current performance, prioritize what needs to be done, identify actions that need to be taken, and plan for improvement (Improvement and Development Agency 2008). On the first stage, it is of primary importance that when setting objectives, the individual objectives should be in alignment with the organisational objectives. According to the goal-setting theory of motivation, specific goals increase performance, and difficult goals, when accepted, result in higher performance than easy goals (Adams 1965). Therefore, if we align individual goals with organizational goals, we increase the performance of the employees in such a way that the organizational objectives are achieved. In addition, the expectancy theory of motivation states that an individual will act in a certain way based on the expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual (Vroom 1964). Again, aligning the individual objectives to the organizational objectives works according to the expectancy theory of motivation, since the employee is motivated to perform his tasks knowing that the outcome will contribute to the long-term goals of the organization, and knowing that this will reward him with better opportunities for advancement or development in the future. The second stage is the doing or managing stage, where methods are implemented in order to carry out the plans from the first stage. It is in this stage that we ensure that the proper systems and processes are in place to support improvement, take action, and manage risk to help people achieve better performance (Improvement and Development Agency 2008). The third stage is the review or feedback stage, where the results are measured and analyzed. It is on this stage that you understand the impact of your actions, review performance, speak to users and stakeholders about their experience of performance, and getting a better picture of changing circumstances (Improvement and Development Agency 2008). The third stage is the one where Performance Appraisal occurs. The fourth stage is the revision stage, where the Performance Management process is reevaluated and suitable adjustments are made to further the improvement of the organization. This stage is where you use the lessons learned from the review stage to change your plans or actions so future actions are more efficient, effective, and appropriate (Improvement and Development Agency 2008). Recommendations It is recommended that the company use Performance Management as an improvement over Performance Appraisal. Performance Appraisal is very limited and is just one stage in the Performance Management Cycle. Performance Appraisal presents several flaws and is not as effective as Performance Management because it only provides feedback and does not do anything to actually address the problems of the organization. Performance Management, on the other hand, is broader in scope, and uses Performance Appraisal in one of its stages. Through Performance Management, the problems are addressed in a continuous cycle of improvement. Many companies are already relying on Performance Management due to the benefits that it provides, and our company would really gain a lot from using Performance Management over our current system of Performance Appraisal. In implementing Performance Management in our company, I would recommend that we use both foci detailed in this report—development and rewards driven—in implementing the Performance Management in our company. Depending on the situation, we can use one or even both development and rewards driven Performance Management, which will be determined by the managers or supervisors in charge on a per-situation or per-case basis. This is important since not all situations are equal and not all employees are the same. Depending on the type of employee personality or the situation, using one focus may be more effective than the other. The one to decide which to use and whether or not to use both should be the managers who are in regularly in contact with the employees, and who know the needs and the personalities of the employees. In implementing Performance Management, it is of primary importance to set objectives that are in alignment with the organisational objectives. This is in accordance with the goal-setting theory of motivation and the expectancy theory of motivation. According to the Improvement and Development Agency, major strategic reviews and revisions may happen only once in a few years. They may even be held monthly, but on a more detailed level. On an informal level, managers may set tasks, observe tasks, and give helpful feedback from day to day. Additionally, Performance Management should be implemented across our different organisational levels as well as with company partners (2008). Using Performance Management requires dedication and commitment from our managers, since it requires looking into deeper details. Otherwise, it will not work. The benefits of Performance Management will far outweigh the added responsibility for the managers. We are already benefiting from Performance Appraisals, however, it is only one of the stages of Performance Management. The organization can further benefit by Performance Management, which addresses a broader scope of issues and problems. Being limited to Performance Appraisals, which is only one stage of Performance Management, means that we are missing the benefits provided by the other stages of Performance Management. With this, I suggest that we switch our system to Performance Management as soon as possible. REFERENCES Adams, J. (1965) Goal setting theory [Internet]. Faculty of Information Studies, University of Toronto. Available from: < http://choo.fis.utoronto.ca/FIS/Courses/LIS1230/LIS1230sharma/motive5.htm#goal> [Accessed 15 March 2009]. Brull, H. (1970) Performance appraisal: the other side of assessment [Internet]. IPMAAC National Conference. Available from: ipacWeb [Accessed 13 March 2009]. Cook, C. (2003) Performance management and appraisal [Internet]. South Western College Publishing: Available from: [Accessed 13 February 2009]. Farington, J. (2007) What a performance appraisal is and what it is not [Internet], Best Management Articles. Available from: [Accessed 13 February, 2009]. Heathfield, S. (2007) Checklist for the performance management process [Internet], Human Resources at About.com. Available from: [Accessed 14 February, 2009]. Improvement and Development Agency (2008) The performance management cycle [Internet]. PMMI, UK. Available from: iDea [Accessed February 14, 2009]. Macnamara, C. (2008) Performance Management: Benefits and concerns [Internet]. Field guide to consulting and organisational development. Available from: < http://managementhelp.org/perf_mng/benefits.htm> [Accessed 13 February 2009] Thomson (2003) Performance appraisal vs. performance management. BNET Business Network [Internet]. January, 15 (6), pp.1-15. Available from: [Accessed 13 February 2009]. Vroom, V. (1964) Work and motivation [Internet]. Faculty of Information Studies, University of Toronto. Available from: http://choo.fis.utoronto.ca/FIS/Courses/LIS1230/LIS1230sharma/motive6.htm [Accessed 14 February 2009]. Read More