Performance Management: Concepts & Definitions - Literature review Example

Performance Management PERFORMANCE MANAGEMENT Discuss the purpose of performance appraisals and how effective or ineffective they are in todays business environment Performance appraisal, a significant part of large private and public sector organizations, is considered an essential human resource management tool (Thomas and Bretz, 1994). Definitions vary by authors. The definition by Business Dictionary appears to have all the components that are considered in performance appraisal: “Performance appraisal is the process by which a manager or consultant (1) examines and evaluates an employees work behavior by comparing it with preset standards, (2) documents the results of the comparison, and (3) uses the results to provide feedback to the employee to show where improvements are needed and why” (Performance Appraisal, BusinessDictionary.com). Performance appraisals are used to determine the quality of performance of each employee in his job. An idea as to those who have talent or need training and those who may be promoted, demoted, retained, or fired will be obtained. The transitional differences in organizations over the recent years have influenced the performance appraisal systems too to accommodate larger business opportunities and priority in the aims (Sonnentag, 2002, p. 115). Sonnentag has described performance appraisal as a “generic term covering a variety of processes whereby an individual’s work performance is assessed, usually by that person’s line manager and discussed with a view to solving problems, improving performance and developing the individual appraised” (2002, p.116). He has detailed three perspectives contributing to employee performance: the individual, situational and performance regulation. Individual employee perspective The behavior, motivational personality and the interpersonal relationships of the employees play a role in the success of the appraisal systems. The appraisal would materialize based on the organizational politics and conflict avoidance of the appraiser, the appraisee’s behavior and the relationship between the two parties. The appraisee’s differences in behavior change his views on the “need for achievement, goal orientation, self awareness and self efficacy, self esteem, locus of control and feedback attitudes” (Sonnentag, 2002, p. 115). His performance level would depend much on his personality and mental make-up, the situational aspect where events may facilitate or obstruct his functional performance and the organizational performance regulations of goal setting (Sonnentag, 2002, p. 8). Campbell has spoken about three factors of individual performance or task proficiency “declarative knowledge, procedural knowledge and skills and lastly motivation” (1990). Campbell’s model was considered proficient. The declarative knowledge included the personality, education, training, experience and aptitudes. These same characteristics along with his cognitive and psychomotor skills decided his procedural knowledge. Motivation included the choice to perform and the extent of effort along with the desire to continue in this manner. Campbell however neglected situational predictors. Instead he included job knowledge and job skills as predictors with no direct influence on performance (Campbell, 1990). The influence of cognitive abilities influencing performance has been investigated by many researchers (Bobko, Ruth and Potosky, 1999; Hunter and Hunter, 1984; Schmidt and Hunter, 1998 all cited in Sonnentag, 2002, p. 10). They all claim that superior cognitive abilities led to a better performance. A meta-analysis by Barrick and Mount (1991 cited in Sonnentag, 2002, p. 10) showed little relationship between personality factors and performance. However emotional stability and conscientiousness did have some influence just as some specific factors for certain jobs. Personality traits which contribute to motivational skills are focused on achievement and anxiety in research by Kanfer and Hegestead (1997 cited in Sonnentag, 2002, p. 10). These researchers also indicated emotional control and motivational control as significant motivational skills. Bandura (1997 cited in Sonnentag, 2002, p. 10) has spoken of self efficacy as a motivational skill which is essential for performance. The success of small business has been attributed to self-efficacy by Baum, Locke and Smith ( in press cited in Sonnentag, 2002, p. 10). Participating in providing ideas and suggestions to the organization contributes to performance (Frese, Teng and Vijnen, 1999 cited in Sonnentag, 2002, p. 11). Professional experience works to a small level in performance (Quinones et al, 1995 cited in Sonnentag, 2002, p. 11). Situational perspective The factors which stimulate or hinder individual performance contribute to the situational perspective. Vroom (1964 cited in Sonnentag, 2002, p. 11) has suggested rewards as a special motivational approach. Greenberg (1990) has suggested the establishment of equity and fairness. The situational factors which enhance performance are the more significant and includes the job characteristics model of Hackman and Oldham, a motivational model (1976 cited in Sonnentag, 2002, p. 11). These researchers suggest that the individual experiences meaningfulness, has responsibility for good outcomes and knows fully well about the results of his activities due to his job characteristics like “skill variety, task identity, autonomy, feedback and task significance” (Sonnentag, 2002, p. 11). Factors which obstruct performance are role ambiguity and role conflict. However some researchers are of the view that these stressors are significant only for the professional or technical or managerial jobs (Tubbs and Collins, 2000 cited in Sonnentag, 2002, p. 11 ). Other stressors that have a direct negative impact on performance could be the deficiency of information, machinery problems and lack of supplies (Sonnentag, 2002, p.12). Additional regulation capacity is an essential factor. Normal capacity is required for completing a task but additional capacity is needed for tackling the problems which arise alongwith. Some researchers consider that it is a deficiency of positive factors at work that leads to a poor performance much more than the presence of stressors. Performance regulation perspective This perspective has been researched by Ericsson and Lehmann (1996 cited in Sonnentag, 2002, p. 13) through the expert research approach in cognitive psychology and by a host of others who used the action theory approach to performance (Frese and Sonnentag, 2000; Frese and Zapf, 1994, Hacker, 1998, Hacker, 1973 all cited in Sonnentag, 2002, p. 13). The variation in the approach to tasks and arrival at solutions differentiate the high performers from the poor ones. The expert research approach has indicated that high performers are known to focus on the abstract and general information. They then move onto specific information. Using a relational strategy, they put together the various components of the task and evolve the solution (Sonnentag, 2002, p. 13). Concentrating on long range goals, they plan well only in ill-structured tasks. The action theory approach concentrates more on the actual process. The sequence of the actions taken within the hierarchial organization is more focused upon: setting and development of goals, searching for relevant information, planning and implementation, monitoring and feedback evaluation. The better workers will possess high goals, the right mental make-up, do crucial planning and have exemplary feedback. Roe (1999 cited in Sonnentag, 2002, p. 14) considered the action theory approach as only one of 5 perspectives: the others were “energetic regulation, emotional regulation, vitality regulation and self-image regulation” (Sonnentag, 2002, p. 14). The behavior modification approach with the positive reinforcement is another method of performance regulation. The reinforcements could be financial or non –financial (feedback) or social rewards (attention or recognition) or a combination of them. Relationship of the three perspectives Researchers have evaluated the outcome of two of the three perspectives. The individual perspective may be combined with the situational one. (Waldman, 1994; Hackman and Oldham, 1976 and Barrick and Mount, 1993 all cited in Sonnentag, 2002, p. 15). The factors of the individual perspective (person factors) are moderated by the system factors of the situational perspective. (Waldman, 1994 cited in Sonnentag, 2002, p. 15). Purpose of performance appraisal The main advantage is the provision of a feedback which can be useful to the employee, the managers and the organization as a whole (Grote, 2002, p.5). Feedback serves the purpose of conveying the organization’s expectations of the employee. The employee becomes aware of his strong points and his deficits in performance. This could serve as a motivational factor for enhanced performance later. Employees generally do not like to be labeled “poor”. The ratings of the supervisors also could be assessed from the perceptions of the employees appraised. The capability of the talented employees would be a basis for promotions to important positions. In the face of economic reality, lay-offs or downsizing is inevitable (Grote, 2002, p.5). The appraisal would have allowed the organization to classify their employees in the category of talent and performance and the decision to let go certain employees, who did not reach the expected level, would depend on this database. The talented group can be retained. Setting goals and measuring the achievement through appraisal makes the system more credible as employees understand what is expected of them and can work towards a better performance (Grote, 2002, p.5). Specific goals produce better performances than when no goals are set or the employee is advised to do his best (Locke and Latham, 1990 cited in Sonnentag, 2002, p. 14). The improvement of the action itself leads to better performance levels. The effort of the employee, his persistence in doing the best, well-directed motivation and efficient strategies contribute to his excellent performance. Intervention programs are especially benefited by the setting of goals (Sonnentag, 2002, p. 14). Critical evaluation of a performance through feedback produces a positive effect (Sonnetag, 2002, p. 14). Managers, who provide the feedback to the poor-performing employees, take the opportunity to speak more frankly about the reasons for the poor appraisal and encourage them to work towards specific goals. The combination of goal setting and feedback produces better results than a goal setting alone (Neubert, 1998 cited in Sonnentag, 2002, p. 14). The Productivity Measurement and Enhancement System is an approach which combines the two. Good performances are rewarded through decisions increasing the pay. The performance appraisal is accompanied by coaching and mentoring by the managers. Performance appraisal supports manpower planning or succession planning. Noting departments which have no dearth of talents will help the company weed out the poorer performing employees. Identification of the intellectual horsepower for the future is significant (Grote, 2002, p.5). Individual drawbacks are corrected through training. Recruitment could be on the basis of performance appraisal. The achievement of the organization also depends on the performance appraisal. The performance appraisal results can be used as a point in defensibility of a legal issue in court. Failure of performance appraisal The purpose of performance appraisal may not work for many reasons (Grote, 2002, p. 9). Lack of knowledge of ownership on the part of the manager or employee is one reason which leads to failure. Their ignorance about administration, the drawback of having had no training, having no idea about the company or having no feedback all make the manager inadequate and incompetent to manage his team. This reflects on the employees too. Managers are sometimes not competent to pass on negative information or feedback without hurting or embarrassing the employees. The employee becomes hostile and cannot accept his feedback. This makes his performance worse and he does not feel committed to the organization as a whole. Had the manager been efficient, his message would have been received in an amicable manner and the employee would have responded positively. Bad managers are therefore one reason for failure of appraisal (Grote, 2002, p. 9). If the appraisal is a repeated process, the staff are bound to believe in the feedback and its importance for their performance. Not submitting negative feedbacks in writing could also be a drawback (Grote, 2002, p. 9).. There is a possibility that an adverse impact may follow a negative message but it is always best to be formal about it. When managers fail to do this, the situation of failure of appraisal may result. Being stingy about rewards is another possible cause for failure of appraisal (Grote, 2002, p. 9). Rewards must definitely be given when performance is especially good. It could be in the form of commendatory certificates or pay rises or bonuses. There is also a belief that not giving negative feedbacks also has a beneficial effect. Managers may feel that the work of their subordinates reflects their performance levels too. Their efficiency may come into question if the employees do not do well (Grote, 2002, p. 9). Refraining from candid appraisal may help prevent any “bad mark” against them. This attitude opposes the principle of appraisal. Managers are also scared of discrimination amongst the employees should they provide a negative feedback about them to the higher-ups. Gabris and Ihrke performed a study to investigate whether performance appraisal had any relationship to employee burnout and job satisfaction (2001). They found that behavior observation scales helped to uncover highly effective and ineffective behaviors while on the job. Management may believe that they can control the employees through appraisal schemes. Employee compensation also can be controlled and individual merit can be determined by appraisal. Gabris and Ihrke found that high burnout enhanced many work-related characteristics (2001). Poor job satisfaction, worsening health problems and poor response to governmental rehabilitation were discovered. They found that formal appraisal processes worsen the burnout. The idea of revamping formal appraisal processes must be further investigated. Benefits of performance appraisal. The individual level The performance appraisal provides benefits at the individual level, the manager level and the organization level. If the appraisal is performed systematically, the employee benefits most. He is able to understand the subtle nuances of his job better (Murphy and Cleveland, 1998, p. 326). The feeling of being a useful part of a large organization helps build his commitment and satisfaction. The idea about how he is monitored and assessed becomes clearer to him. Career decisions may actually be influenced by the performance appraisal. His own strengths and weaknesses become obvious to him and he may take steps to make a good decision about his career. The knowledge about own strengths, weaknesses will add positive factors to his personality; he will take steps to improve his performance (Murphy and Cleveland, 1998, p. 326). Developmental needs may be recognized. The appraisal may help to decide about allocation of rewards or pay hikes. Discussion with the managers would open up ways to improve performance. This may also open up training needs. The discussions could also direct his career decisions (Murphy and Cleveland, 1998, p. 326). Benefits to the team leader or manager The team leader gets a chance to exchange views with the employees with an open mind. He hears the employees away from the stresses of work. Potential difficulties or deficiencies may be noted and necessary information exchanged to let the employee know how to solve his problem for the sake of the organization. The employees may be informed about the resources available for their benefit. Goals may be set for the next period of work. The employee gets an opportunity to clarify his role and its significance in the hierarchy. Plans may be discussed for further coaching. Motivation can also be done at the meetings. The performance of the managers too could be obtained from the perceptions of the employees. Benefits to the organization If the appraisal of performance is done well, employee commitment and satisfaction would soar and improve the success of the organization (Murphy and Cleveland, 1998, p. 326). The potential or talent of the employees could be assessed. Their expectations and dreams may become evident. Baseline information for deciding on expansion or downsizing would be obtained; the organizational decisions for lay offs, rewards, promotions or transfers would all depend on the performance appraisal (Murphy and Cleveland, 1998, p. 326). Succession planning may be done. The performance appraisal provides information on vital areas of the organization for future information so that training needs may be assessed. Employee records would be updated and their newfound competencies would be on record for future purposes. Performance management system Business today requires performance management. Efficiency is increased, costs are reduced and quality is enhanced through performance management (Performance management guide for businesses, 2006). The meaning of performance appraisal is not the same as performance management. The appraisal is just one step in the management. Performance management takes the organization to a highly competitive level and exhibits an exemplary standard for the rest of the industry. This soon becomes the standard. Then another innovative performance system evolves and another higher standard is established. Each time a new performance management is created (Performance management guide for businesses, 2006). Performance appraisal is not a static procedure with a one-time instrument. It needs innovative ideas and methods and must incorporate transitional procedures which constantly change. Newer techniques must be used. The appraisal is therefore not a mere management procedure. To keep the competitive edge over other organizations the appraisal of performance must elicit many features and factors which influence employees and production as a whole. Methods to hold employees’ interests, provide a satisfactory job and stop them from moving to other organizations, apart from improving their work performance, must be at the centre of all appraisals. The appraisal is thereby a management challenge. It can motivate employees to better production and profits in the future and take the organization to heights. Performance appraisals can be considered as extremely valuable organization tools. The Ford Motor Company Performance Appraisal The Ford company spokesman, Nick Sharkey, revealed that the company was revamping the appraisal process and eliminating its quotas in August 2001. These quotas had been instituted in January 2000 by Jacques Nasser (Ford’s Performance Operative System, 2001). This earlier evaluation system had sparked off age discrimination suits causing a disadvantage and problems for the company. The earlier need was to change the company culture and concentrate on bottom line results. The previous grading of middle level managers into A, B and C for the annual performance rating was changed to “top achiever, achiever and improvement required”. The lowest grade would not have any fixed quota. The managers would get bonus but still be dismissed if remaining two years in that position but only in a worst case scenario (Ford’s Performance Operative System, 2001). The accusation that they used the lowest grade to push off older workers was thereby changed. This change of appraisal process hoped to boost the morale of its employees. References: Campbell, J.P. (1990) “Modeling the performance prediction problem in industrial and organizational psychology” IN M.D.Dunnette and L.M.Hough (Eds) Handbook of Industrial and Organizational Psychology, Vol. 1, p. 687-732, Palo Alto: Consulting Psychologists Press. Ford’s Performance Operative System. (2001). Dated 8/9/2001, Retrieved on 18/8/09. http://www.learning-org.com/01.08/0043.html Gabris, G.T. and Ihrke, D.M. (2001). “Does Performance Appraisal Contribute to Heightened Levels of Employee Burnout? the Results of One Study “, Public Personnel management, Vol. 30 Grote, R.C. (2002). “The performance appraisal question and answer book: a survival guide for managers”. Published by AMACOM Div American Mgmt Assn, 2002 Murphy, K.R. and Cleveland, J. (1995). “Understanding performance appraisal: social, organizational, and goal-based perspectives” Published by Sage Performance Appraisal, Retrieved on 17/8/09, http://www.businessdictionary.com/definition/performance-appraisal.html, BusinessDictionary.com Performance management guide for businesses, (2006). http://www.performancemanagementguide.com/ Performance Management Guide .com Sonnentag, S. (2002). “Psychological Management of Individual Performance”. Published by John Wiley ans Sons: New York Thomas, S.L. and Bretz, R.D. (1994). “Research and practice in performance appraisal: evaluating employee performance in Americas largest companies” SAM Advanced Management Journal, Vol. 59, 1994 Read More