Purposes of Performance Management and Its Relationship to Business Objectives - Assignment Example

Activity A:- Explain at Least 2 Purposes of Performance Management and Its Relationship to Business Objectives According to Armstrong and Baron (2004), performance management systems (PMS) can be defined as a practice for establishing common objectives, and a tactic to manage and monitor the development of people in a way that enhances the chances of achieving goals in minimum time (CIPD 2013, p. 3). Considering this definition, one could outline several reasons why performance management is required: first of all, to run an organisation, one must be aware of the people who work within it, and of the skills that the staff members possess, so that before setting any target one could outline the plan of action and, moreover, consider the risk factors involved. Performance management allows managers to keep regular check of performance on an individual and group basis. Workforce acts as bearings in a machine that need to be kept clean and oiled on a regular basis; the same applies to PMS (CIPD 2013, pp. 3–4). Another purpose of using performance management is to control the budget of an organisation; it may include setting salary grades and hiring or firing people. Therefore, to maintain a business or to run an organisation, performance management has become a necessity in the present day scenario. Identify 3 Components of Performance Management Systems There are several components of performance management systems; however, three of them have been discussed briefly. 1. Performance Planning: It deals with establishing objectives at individual and organisational levels, and setting plans of action (CIPD 2013, pp. 2–25). 2. Data Gathering, Observation and Communication: To establish a frictionless momentum for a company, it is compulsory to maintain regular checks and balances. This is only possible in the presence of a keen observer, who is knowledgeable of the past and present, and does know how to communicate his/her findings to the workforce (CIPD 2013, pp. 2–25). 3. Performance Appraisal Meetings: The purpose of performance appraisal is to establish ground for both the lateral and vertical movement of employees. With the implementation of various tools and techniques, performance appraisal provides crucial inputs for succession planning and job rotation (CIPD 2013, pp. 2–25). Explain the Relationship between Motivation and Performance Management, Referring to at Least 2 Motivational Theories “Motivation is a decision-making process, through which the individual chooses the desired outcomes and sets in motion the behaviour appropriate to them”. – Buchanan (CIPD 2013, p. 4). Motivation refers to the force that urges an individual to work. Whether the job is simple or complex in nature or whether working hours are long or short, better output can be achieved provided motivation is there. Motivating factors are given importance in the industry. Pleasant and positive physical factors stir up motivation. Factors of motivation are also taken into account in the study of morale and productivity. Rewards, bonuses, repute and additional benefits generate motivation (CIPD 2013, pp. 6–7). Maslow’s hierarchy of needs is often quoted in circles when motivation is the topic of discussion regarding performance management. According to Abraham Maslow, human beings have two sets of needs: basic and intellectual ones. At first, man tends to fulfill his basic requirements such as hunger, security, relationships and respect. Once these needs are gratified, he aims at higher goals of self-actualisation. The intensity of motivation may vary at different stages (CIPD 2013, pp. 6–7). Maslow’s Theory of Self Actualization (CIPD 2013, p. 7) Another motivation related to performance management comes from Herzberg. It is commonly known as the Two Factor Theory, or Motivation-Hygiene theory. According to this theory, there are certain factors that motivate employees and some that lead to job dissatisfaction. For example, variety of work, responsibility and recognition are motivators, while absence of job security, stress and proper company policies affect the hygiene of the workplace and demotivate the employees (CIPD 2013, pp. 6–7). Fig. 2: Herzberg’s Two Factor Theory (CIPD 2013, p.7) By analysing the course of performance management and comparing it with the motivational theories mentioned, one would find a clear link between the two. For example, performance appraisals are aimed at recognising the potential of employees and awarding them according to their performance and capabilities. Apart from attaining greater rewards, there is an element of fulfilment of personal goals that are of subjective nature, but very important. Therefore, motivation does not drive one to earn more, it directs an individual to strive for self actualization. Identify 2 Purposes of Reward within a Performance Management System ‘A great deal of research shows that pay for performance, when well executed, can indeed motivate individuals to perform well. Rewarding performance with extrinsic rewards is the only way to motivate individuals, but it can be very effective. (Lawler, George & McDermott 2012, p. 1). The goal of performance management system is to develop a meritocratic setup, which is free from other social biases and politics. Therefore, when employees get rewarded for their work, they get motivated. Motivation drives them to earn more, and in order to earn more they improve their performance, which enventually leads to improvement in the efficiency of organization. Otherwise, if appraisals are bound to serve just as a formality, employees stop taking interest in them. Therefore to maintain a healthy and competitive environment within an organisation, rewards become mandatory. Moreover, rewards induce individuals to set higher targets, and by achieving them they not only earn bonuses and rewards but also improve the overall performance of an organisation. Furthermore, when rewards are awarded to people for their conduct they get satisfied. Satisfaction of employees is important to maintain the morale within an organisation. Therefore, rewards based on merit does not let employees’s loose hope and drive them to work hard. The competition that is established due to the presence of reward also help the organisation, because it induce a sense of improvement within the individuals, so that they able to compete with their colleagues and grasp every career opportunity that comes their way (CIPD 2013, pp. 8–10). The purpose of using rewards can be addressed by analyzing the motivation theories presented by different psychologist. For instance the Theory of Self Actualization postulated by Maslow, explains the different motives that drives an individual, where at first man intends to gratify his basic needs like food, health and shelter. This can be earned by gaining bonuses, and then the person movies towards gratifying subjective needs like developing professionally, improving qualifications and this can be understood through the concept of extracting maximum out of one’s self or one may call it actualizing one’s potential. Describe at Least 3 Components of a Total Reward System, 1 of Which Should Be Non-Financial The major components of a total reward system are compensation, benefits, work–life, performance and recognition, and career development opportunities. Three of them are discussed in detail. Work–Life: Health is wealth. As an employer, you do not want to see absent marks on the attendance sheet. However, this does not mean that one should develop a no-leave policy or wage reduction on leaves, provided there is a solemn justification. An organisation that cares for its employees’ health eventually gains positive results and dedication from its workers. The idea is to keep the workforce stress free and to facilitate them in such a manner that they develop belongingness towards the company. This is possible if the company develops a flexible schedule and allows annual paid leaves (CIPD 2013, pp. 10–11). Career Development Opportunities: Upgrading staff members, teaching them newer skills and supporting them to improve their qualification can eventually prove beneficial for the employees as well as for the organisation. Moreover, by providing international exposure to workers, an organisation can learn to compete globally. When an organisation allows its employees to upgrade their skills or improve their qualification, it provides two benefits: first, it improves the capacity and capabilities of the workforce; second, it motivates workers because better skills mean bean better career opportunities within or outside the organisation (CIPD 2013, pp. 10–14). Compensation: In addition to the base salary, the company should offer other types of compensation that motivate employees to perform well. A variable pay system rewards employees based on performance. Once the employee achieves this level of pay, it must be earned again for each subsequent pay period. Short-term incentive pay offers extra compensation for short-term (less than a year) performance improvements. Long-term incentive pay offers rewards such as stock options and cash bonuses for sustained productivity and performance for longer than one year. Top employees find these options attractive because they know they can consistently outperform expectations (CIPD 2013, pp. 10–14). Explain the Factors That Should Be Considered When Managing Good and Poor Performance The management team needs to take several factors into account while analysing performance. Performance can be good; it can be average or it can go bad. Good performance is one where all objectives are attained within the set time period, while bad performance may have several loopholes, and average performance lies somewhere in the middle of the two extremes (CIPD 2013, pp. 22–24). While managing poor performance, one must be able to identify the problem and circumstances that are causing it. Then, this detail must be communicated to the HR department and the workforce so that together they could evaluate the situation and understand the need to solve it. The last but not the least, one is to opt for a solution. While choosing or outlining the solution, one must evaluate the pros and cons of taking a particular step. Problems must be dealt with patience, and any step that may lead to further depreciation must be avoided (CIPD 2013, pp. 22–24). One must also look out for errors that might have occurred in the collection of data. Mistakes made in the past must not be repeated. The first thing that is to be considered while managing performance is a plan of action and its associated goals. If the plan is comprehensive and mentions details of activities involved, it allows employees to grasp a better understanding of the project. Before setting targets, the manager needs to be aware of the capacity and ability of his or her team. If a project is designed without evaluating the potential, it may end up in a disaster. To establish a fool proof system, it is mandatory to establish tools that could regularly indicate the gains and losses and intend to maintain balance. Budget must also be managed properly, otherwise bad debts may cause poor performance (CIPD 2013, pp. 22–24). A good manager is one who is a keen observer; it is his or her duty to facilitate his or her team. He or she must be on the lookout for motivators and hurdles that affect the performance of the team. Arranging meetings on a regular basis can help improve the standard of performance. Moreover, work must be divided equally in such a way that its aims are achieved within the set time frame. Describe at Least 2 Items of Data, Including 1 External to the Organisation Data refer to the information that is usually collected by the human resource department while analysing performance at an individual, group or organisational level. They are job description, objectives and performance standards, personal development plan, reward and feedback. Job Description: It involves the nature of the job; whether it is a field job or a desk job; the minimum qualification for the job; a specific type of skills regarding computers, machines or mechanics etc; the age limit for the job and any health specifications; and pay scale and whether the job is permanent or contract based. All these things are included in a job description (CIPD 2013, p. 25). Objective and Performance Standards: While gathering data for the analysis of performance, there are certain standards established in order to avoid errors. Moreover, it is important to consider objectives that have been set and should be achieved for successful fulfillment of the job. Personal Development Plan: While hiring people for job posts, one must know about an individual’s plan. This helps in determining the potential of personnel and gives an idea to set the bar for expectation. Age and career level are important determinants of personal development. Some people are eager to join organisations in the middle of their academics. This may sometimes prove beneficial, and sometimes its results are not good (CIPD 2013, p. 25). Explain the Frequency, Purpose and Process of Performance Review For efficient performance management, regular checks and balances are required. This process of evaluation is carried out by means of performance review. The frequency, purpose and process of carrying out a performance review have been explained briefly. Frequency: Performance reviews must be carried out at regular intervals. These intervals can last for three months, four months, six months or a year, which means a performance review, can be quarterly, tri-annual, biannual or annual. In case of quarterly or tri-annual reviews, detailed reviews could be replaced with three or four mini reviews. The frequency of performance reviews also varies with the length of projects and the duration of contracts (CIPD 2013, pp. 26–27). Purpose: The purpose of performance review is to critically analyse the performance of individuals. It is carried out to understand the strengths and weaknesses of employees. It allows the human resource department to identify areas that require training. Moreover, in reward systems it acts as a tool to motivate employees because their rewards are decided after performance reviews (CIPD 2013, pp. 26–27). Process: To carry out a performance review, one must collect data about an employee. Consider his or her development by comparing it with previous records. The interviewer/manager must be confident in pointing out the areas that need improvement. Comparing results with standards is important to determine the efficiency. Rewards can be awarded either through financial bonuses or recognising one’s contribution to the goals achieved. Both sides must come to some common agreement for the future line of action (CIPD 2013, pp. 26–27). References CIPD 2013, Performance management: certificate in HR management, viewed 31 January 2014, . Lawler, EE, George, SB & McDermott, M 2012, ‘Performance management and reward systems’, CEO Publication, June, pp. 1–17, viewed 30 January 2014,< http://ceo.usc.edu/working_paper/l>. Activity B Performance Review Form Date of Review …23-Jan-2014... Period Covered …6 months.… Name of Manager …Abdelhadi… Name of employee …Gwen…. Job Role of Employee ……………Call Centre Agent…………………….. 1. Summary of discussion on performance over the last six months Agent was unable to achieve the set targets Reasons behind the decline of performance Active listening from manager’s side Insufficient training in last six months Employees suggestions on areas of improvement 2. The quality of the work provided, recording areas that have gone well and those where improvement is required. Positive points Quality of work was up to the standard for sales that were made Good negotiation skills Team work was valued Negative points Irregular Need to be more focused on job Must try to achieve 100% target Lack of Knowledge about the product 3. Record performances against targets set and in those cases where they have not been met, record the reasons given and your views on these Absenteeism Lack of knowledge about the product Reasons Gwen was not regular at job for last six months, which gave her less time to make sales, moreover her understanding about the product was scarce, so her sales also suffered because of it. 4. Outline agreed actions to overcome any shortfall against targets including such factors as training and development needs, equipment needs or medical support Actions by line manager: More detailed and accurate coaching related to new product and market New Sales targets were issued Actions by employee: Attend training sessions for new projects Referring issues to line manager Employees accepted the new sales tagets issued by the company 5. Indicate whether a performance related bonus should be made at current rates. (In circumstances where the full target has not been met a case must be made before any partial bonus payment can be paid, with reasons provided for that recommendation). Absenteeism on the part of employee and improper training by the organisation were the key hindrances in attaining 100% targets. Therefore, the mistakes were made by both the sides, Miss Gwen was granted 80% of bonuses as compensation for her five years services for the company. However, the company expects her to get more focused on job and attend training sessions regularly. Summary While dealing a performance appraisal interview, one has to be confident and direct. Jumping from one issue to another must be avoided, and the employees must be given full chance to explain their code of conduct. It is important for an interviewer to collect data, and analyse it before taking that interview, confusion within a matter may lead to discontentment. Loosing employees or firing them on minor mistakes is not wanted. It is better if the whole situation is analysed, and performance evaluation must not be limited to either subjective or objective evaluation, rather both measures must be used. Moreover, when an employee comes up with a problem, it is the duty of the manager to discuss the matter, and try to provide logical solutions, so that the problem does not create any difficulty in future. As a manager one needs to reach to an agreement with the employees in such a way that it conform to the objectives of the organisation. Another important factor that is involved in the whole process is appreciating the positive work that has been done by the employee, because sometimes it pays better than financial bonuses. Overall, one cannot stick to the theory absolutely; therefore, one must be flexible enough to deal with range of circumstance. So, performance appraisal of an old member of an organisation is tough to carry out, because one does not want to lose a senior campaigner just because of one terms poor performance. A person who has been in the organisation for past five years needs to be dealt with delicacy, because experienced employees are like backbone of the organization. Read More