Performance Measurement Current Perspectives and Future Challenges - Literature review Example

Critical Literature Review: Performance Management Introduction Performance Management is a process of continuous and uninterrupted flow of communication among employees and their supervisor so that strategic purpose of the organization is properly communicated to the employees. This helps the employees to become motivated to achieve the purpose and accordingly enhance their performances (Bennett, Lance and Woehr, 2014). Many researchers are of the opinion that sustainable management of employee performances and introducing best practices in this regard, is the key to success for any organization. Best practice in performance management is regarded as using the most professional, standard and accepted method for performance evaluation and management. In contrast, some of the scholars have shown that performance management involves the scope for stereotyping and many other errors very frequently (Griffin and Moorhead, 2009). Therefore, it cannot be considered as a key constituent of organizational growth and development. In this paper, various aspects of performance appraisal will be critically analysed from the researchers’ point of view. Discussion Eminent researchers Melnyk, Bititci, Platts, Tobias and Andersen (2014) have identified the concept of performance management as a research paradox. According to them, though the system provides a critical and constructive assessment of employee functions in the organization, comparative assessment of employees in turn results in demotivation and deterioration of performance of some of the employees within the same organization. Therefore, performance management creates a paradoxical situation in the organization. Conversely, Armstrong and Taylor (2014) have shown that effective performance management enables the managers of an organization to review the performances of all individual employees and accordingly plan requirement for training and skill development, determine the performance gap and infuse visibility and accountability among the employees. Therefore, according to them, performance management tends to enhance organizational efficiency. Theoretical Perspective Performance management can be explained through two contrasting theoretical perspectives such as Universalistic perspective and Contingency perspective. As defined by Hamid (2013) the universalistic approach establishes a direct relationship between management of human resource of an organization and performance of the employees. Figure 1: Universalistic Approach of Performance Management (Cohen and Olsen, 2015) Hamid (2013) also stated that the universalistic approach of Human Resource Management (HRM) is based on the core idea of best practices of HRM. The approach is constructed on the basis of three principles. First, the principle of universality and superiority which explains that there exist some strategic HRM practices which are better than all other alternatives available. Exercising such standard methods for managing performance of the employees will yield the best results both from employees’ perspective and from the perspective of the organization. Second principle which deals with selectivity reveals that best practices of human resource management are reflected through highest financial performances. To be more specific, if employee performance can be managed efficiently, this will enhance the productivity of the organization. According to Clegg, Kornberger and Pitsis (2011), improvement in productivity in turn will boost the bottom line for the organization and this will be reflected in the financial report of the organization. The final principle is known as the principle of additively which indicates that the aggregate effect of performance management is a manifestation of simultaneous effort for managing individual performances of all the human resources in an organization. According to Zohar and Polachek (2014), the theory of universalistic approach that integrates human resource practices, employee performance and best practices is applicable for all business entities operating in the contemporary business scenario. According to eminent behavioural scientists Taylor and Fayol, the approach is probably one of the best ways of performance management. In contrast, contingency approach believes that the method of managing performance is contingent in nature and it varies according to the internal and external structure and environment of the organization in which it is operating. According to Cohen and Olsen (2015), in large organizations where the workforce constitutes of a huge number of employees with dissimilar needs and requirements, difficulties are experienced in the strategies of working. Therefore, performance of such diversified employee base cannot be managed by adopting a single strategy. Jianga, Lepaka, Hana, Hongb, Kima and Winklera, (2012) stated in their article that nature of performance management should also vary with the nature of business the organization is associated with. For instance, in a manufacturing company productivity or performance of labours is measured by the number of pieces they have manufactured per day. Conversely, in an organization associated with research and development work, the quality of work of the employees will indicate their performance. Naturally, managing performance of these employees with discrete characteristics will also differ. Citing this example, Boyd, Haynes, Hitt, Bergh and Ketchen (2012) altogether came up with the notion that the management should continue to transform their style of managing performance depending on the prevailing circumstances; one size definitely does not fit for all. In fact Cohen and Olsen (2015) also inferred in disparity to the universalistic approach that there is no direct relationship between human resource management and organizational performance. Best Practices and Performance Management In recent years best practices in organizational management context have gained considerable interest. Though the notion of best practices appeared to establish the most standard and applicable strategies into the organizational context, in reality, several questions has been raised by researchers regarding the consistency and universal applicability of such best practices (Volberda, Weerdt and Stienstra, 2013). The concept of best practices was developed by well-known researcher Pfeffer in which he discussed about seven distinct attributes, which can be incorporated by an organization to strengthen its path towards success. These attributes are applicable to the performance management of an organization as well. Based on the theory of Pfeffer, research scholar Marchington and Grugulis (2011) analysed that the first aspect of best practices deals with security of employment. According to Marchington and Grugulis (2011), in this age of rightsizing through downsizing, especially after the economic recession of 2008, an organization should concentrate on securing the interest of the workers. This should be done by incorporating a sense of job security among the workers so that they can shift their concentration totally towards their work and utilize their full potential in acquiring organizational effectiveness. The next hypothesis deals with creating a sophisticated selection process in which candidates with relevant skills and knowledge level the will be hired. Selection process of employees is a critical aspect for the success of an organization. Marchington and Grugulis (2011) are of the opinion that selection of appropriate candidates increases the profitability of the organization though their application of knowledge, dedication and hard work. In contrast, recruitment of wrong candidates may decrease productivity and profitability because such candidates are characterised with high absenteeism, low motivation and little intention of contributing towards organizational objective. Therefore, best practices in this regard are to hire the best candidates available in the market and manage their performance properly. Meier, Favero and Zhu (2015) also mentioned about the requirement for imparting pertinent training and development programs as well as creating learning opportunities as an integral part of managing the employee performance. As a result of rapid technological progression, it does not take much time for employees’ skill set to become obsolete and irrelevant for the existing production and distribution process. Therefore, according to Grumana and Saks (2011), it is very important to create a learning environment and provision for training and development in order to keep the employees updated. Dressler (2004) has also identified that in order to establish best practices and manage organizational performance successfully; the management should strive to maximize employee participation and involve them into decision making process as much as possible. In this way, they will gain some sense of accountability and ownership towards the organization and eventually perform better for attaining the goal of the organization. Carton (2006) was of the opinion that teamwork should be given importance over individual assignments and any kind of discrimination such as hierarchical differences or judgement regarding colour, race and religion should be highly eliminated in order to bring harmony and peace within the organization. Moreover, employees should always be motivated to perform better and such motivation should be linked with some monetary and non-monetary benefits for the employees so that employees themselves drive for enhancing their performances in order to maximize their compensation. All the researchers’ expectation unveils that exercising all these aspects of best practices will help an organization to experience a well-managed performance of the employees and the organization at large. Limitations of Best Practices Though the concept of best practices in performance management has gained substantial importance over a long period of time, Grabner and Moers (2013) raised certain drawbacks of the theory to invalidate the significance of the model. According to them, the theory emphasises on all indirect ways of enhancing performance. None of the seven attributes of best practices can be directly linked for assessing the method of improving the performances of employees. Grabner and Moers (2013) have also stated that the system talks about associating attractive reward system along with the performance of the employees. However, adoption of best practice is easier when labour costs do not form a major proportion of the controllable costs. In fact, Voorde, Paauwe and Veldhoven, (2011) suspected about long term sustainability of best practices, as no system prevails with so much perfection. They have also shown that best practice is most appropriate for managing performances to the employees of unitary firm which are engaged in general business line such as wholesaling, manufacturing and retailing. Best Fit As the hypothesis of best practices is paradoxical and the system inherits a large number of constraints, Kalev, Dobbin and Kelly (2006) have attempted to resolve the issue by introducing the concept of best fit. Dynamism and turbulence being inevitable in today’s business scenario, periodical review of business approaches and evaluating the relevance of the strategies in the contemporary business line are the most important considerations. According to Worthington and Whittaker (2006), in this way an organization will be able to identify the strategies for performance management which are most suitable for its business at a particular point of time, rather than adopting some standardized set of strategies as mentioned in best practices. This approach of managing organizational performance is known as best fit. Campion et al (2011) also expressed their outlook in this regard by highlighting the need for synchronizing reward system which is most applicable to the best fit approach obtained by the company. The effectiveness of performance management can be best realised when reward system is integrated in best fit, otherwise the approach will yield a lack of fit that in turn tends to downgrade the performance of the employees and subsequently the organization as well. Critical analysis of Porter’s Three-Fold Typology of Business Strategy Eminent organizational behavioural scientist Michael Porter introduced Three-Fold Typology of business Strategy that has identified three distinct business characteristics such as innovation, quality enhancement and low cost that an organization may follow in order enhance its business performance. Based on this threefold business strategy model, in 1989 Shuler recognized three comparatively contemporary and more importantly, contrasting approaches which the organizations may align with best fit. According to Shuler, the first concept is accumulation that gives emphasis on quality enhancement. It is a long term approach that enables a firm for careful selection of the most suitable candidate who will be able to contribute adequately towards organizational excellence. The system also gives importance to create a learning environment so that the employees’ skill set is upgraded at a continuous basis and an atmosphere of trust and commitment can be constructed between employee and management of the organization. The next approach is facilitation that emphasizes on the underlying importance of development of all the employees irrespective of their position in the organization. Shuler was of the opinion that innovation in business conduction can be achieved only if proper employee development, both technical and behavioural, can be instituted. Employees are required to be infused a sense of responsibility so that they can provide their best effort for achieving organization’s objectives. The cost reduction perspective of Porter has been replicated by Shuler through the concept of maximum utilization of existing resources and elimination of wastage of time and resources as well. Shuler believed that cost reduction will be possible only if wastages of critical elements can be minimised. He also opined in this regard that it is better to construct a small but steady workforce that is always motivated and skilled to contribute towards organizational effectiveness rather than having a large human resource team, a large proportion of which tends to hamper organization productiveness and enhance cost consideration due to lack of skill possession, absenteeism and exit rate. Conclusion Performance management is one of the critical aspects for any organization to sustain in long run. From the theoretical perspective, Universalistic approach tends to institute a set of guidelines for managing organizational performance which are applicable universally. 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