Performance Measurement - Essay Example

Introduction: Performance measurement is the process of assessing progress toward achieving predetermined goals. Performance management is building on that process, adding the relevant communication and action on the progress achieved against these predetermined goals. Completive advantage is the value that a company retains with itself to give an outstanding performance in the industry. One such factor contributing to the competitive advantage to an organization is the Human resource. And the companies tries to retain this source by adopting performance appraisal systems, however may be the rate of success that leads to many assumptions and chances of doubt on the Performance Management system. Literature review: Although a given firm may possess more or less of any particular resource, only those resources that are rare, valuable, and difficult to imitate provide a sustainable competitive advantage (Amit & Schoemaker, 1993; Barney, 1991; Schoenecker & Cooper, 1998). Human capital is more mobile than other intangible resources (Teece, Pisano, & Shuen, 1997). Therefore, it may seem an unlikely source of sustained competitive advantage. Hence the organization must search for the means and ways to retain them to achieve completive advantage. Competitive advantage is gained only when the organization selects or develops these resources and structures work tasks and the reward system in ways that motivate the team to perform well and thereby contribute to organizational effectiveness (Guzzo & Shea, 1992). Some organizations reward employees financially when they demonstrate an ability to acquire and master new knowledge (Jenkins & Gupta, 1985; Gerhart, 2000; Lawler, ch-10).Also some studies like, Jackson & Schuler, 2002 considers that organizational structures for rewards improve organizational performance and proves competitive advantage rather than team effectiveness and selection and training. But according to Dobbins, Cardy, Facteau, & Miller, 1993 opinion, system factors are the only constraining influences that restrict individual ability and motivation, and result in lowered performance. So the current study tries to observe the assumptions and truth between the impacts of Performance management on the competitive advantage of an organization it the following sections. Performance management involves enabling people to perform their work to the best of their ability, meeting and perhaps exceeding targets and standards, and hence the PM system involves the following components. 1. The focus is on an individual's work. 2. There are expectations or standards of performance. 3. There are usually two sessions between the employee and the evaluator: one to establish the standards and another to review performance. 4. The evaluator is usually the person who has line management authority over the one evaluated. 5. The evaluation session usually results in some written conclusion--some paper trail regarding the performance of the person reviewed. Corporate Performance Management (CPM) has become a widely adopted strategy execution in the current day corporate scenario with systematic and integrated improvements in the management processes to ensure efficiency and effectiveness. At the core of CPM is A metrics-based strategic planning and execution framework that helps align strategic plans with resource allocation and strategic initiatives Strategic goal alignment through enhanced communication and focusing processes / resources towards organization objectives A structured information based review mechanism that provides the feedback loop and connects strategic planning to operational performance measures Eg: Infosys is a best example to observe the competitive advantage of the company that has achieved through the adoption of CPM approach. Performance management and improvement is observed as Cycle to adopt in the process with certain steps. The practice of Infosys CPM is observed through the following steps of PM cycle. 1. Performance planning: Here Visioning, Goal setting, Negotiating and Listening is formulated at the beginning of system practice and establishment. 2. Managing Performance: This phase is practiced by Observing, Problem solving and regular feedbacks from the stockholder's of the system 3. Appraising Performance: The above phase is supported by Rating, Review and documentation of process and achievements. 4. Developing Performance: This is a continuous process involving employee Coaching/training and Counseling 5. Rewarding Performance: The final phase of a PM is evident through recognition and rising of system effectiveness. The other side of the coin: Some observations found that most enterprises even after implementing the Performance appraisal programs failed to achieve competitive advantage, where the strategy fails In such instances Performance appraisals are treated as wasteful practices and need a rethinking before adoption. Another reason that performance reviews are being criticized is the reviewing managers are not appropriately trained to assess individuals and provide proper constructive criticism. Many of the traditional performance reviews put managers into the position of uncomfortable judges, while confronting before the employees why they can't reward the employee's performance against the undefined performance levels that result in losses to the company. Scholtes, Peter R. in their paper on Total quality or performance appraisal: choose one, gives a special attention to reward system, observes the case against performance appraisal and raises the following contradictory statements about Performance appraisal system: 1. Disregards and, in fact, undermines, teamwork: By rewarding the individual performance in the team, the team work will not considered as a factor to be practiced by the members of the team. This hampers the work culture where team work is highly and necessary as in case of software project management. Eg: Gallery Furniture in Houston, Texas, eliminated performance appraisal, quotas, and pay for performance in 1991, by observing a drastic decrease in the teamwork of the salespeople against eh increased business performance. 2. Disregards the existence of a system: Practice of system procedures is looked down by the individuals concentrating much on the personal gain rather than collective gain. 3. Disregards variability in the system and, indeed, increases variability in the system: performance management itself disregards the variability of the time and effort differences for the allotted work, but still rates the different individuals on a single rating system. Flight instructors in the Israeli Air Force experienced an increase in performance among the student pilots when they were reprimanded but experienced poor performance when they were complimented. 4. Uses a measurement system that is unreliable and inconsistent: The changing environment of Human resources and customer needs changes the project environment from time to time making the system inconsistent from the planned situation. Still PM assumes the performance of individuals constant and adhering with the planned system, where PM is not changing constantly with the project changes. A common source of measurement error is the subjective bias of the reviewers. A good example is the glass ceiling effect in the corporate management. 5. Encourages an approach to problem-solving that is superficial and culprit oriented: Rather than working on the real root causes of problem solving the individual rewards encourages superficial answers and task completion activities. 6. Tends to establish an aggregate of safe goals-a ceiling of mediocrity--in an organization: Performance management encourages employees to choose safe goals to make themselves eligible for the reward system rather than working for the benefit of the company. 7. Creates losers, cynics, and wasted human resources: Pm creates ill feelings in the employees who didn't get eh appraisals and who ultimately tend to loose the current job to look out for another raising attrition rate in the system 8. Seeks to provide a means to administer multiple managerial functions: Many times PM serves as a means to facilitate the different levels of managers to exercise their supervising task only and nothing else. Alternatives: Now many organizations are looking for the alternative tool to achieve competitive advantage then performance management. There is a need for new types of reviews that base the evaluations done not for raises, bonuses, or promotions, but for development, growth, and communication. The new ways of tools stresses on the communication between the employee and other people, instead of one-way communication, as a factor to build performance and hence competitive advantage. Following are the few recently evolving and adopting review methods: Peer review: A peer review program may be designed by a task force of three to six workers, to set the goals, benefits, and objectives of the program; design a criteria-based performance evaluation system; and conduct a pilot program (Training and Development, June 1992). Peer reviews give employees a high level of involvement in building the competitive advantage of the system; the groups are task-relevant and the performance will be stable and accurate. Members of the group help each other to understand each others' work in a non-threatening manner, while peer reviews helping the members people to get along better as team. For the organization, team performance results as competitive success, and for the people, this means a better place to work and less frustration; while concentrating less on politics or working around people, and to spend more time on their work. Self Reviews: Self-reviews are worked out where employees are familiar with their work, and they perceive their involvement is essential. A number of established criteria helps the employees to rate themselves against and also allows them to suggest improvements. Self reviews help the employees to clarify their own goals, and expose areas of weakness so that employees will workout on them to build the competitive advantage. Though manager helps in exchanging the views of the employee, the activity of the manager is limited in supervision and paper work. Employees feel they have a voice in the process, and it provides the ability to report progress toward goals. However, this review suffers from personal bias of the employees as people tend see their positive attitudes more than their weaknesses or deficiencies than others. Hence this method should be adopted alongside other methods. Eg: KPIT Cummins Info systems, the Intra-based appraisal system actually allows the employee to define various types of KRAs, like people-related, quality-related, project-related, learning-related at the beginning of appraisal period and to achieve during the year with a balanced set of goals that get assessed for the employee Upward Assessments: Though Upward assessments are rejected by managers at the beginning, the proper design will definitely get their approval as strong improvement methods for competitive advantage. Amoco's Bill Clover described this as the "SARAH reaction: Shock, Anger, Rejection, Acceptance, Help" (Training, March 1993). Many organizations like Honda and Chrysler to Motorola and NASA adopted this system. Upward assessments can help managers to line up their words and actions on a single parameter. This system exposes the areas where managers can improve their performance and increases their credibility. This acknowledgment is given by the outside consultants to help managers deal with their own assessment. Outside consultants having experience, needed skills, and with an "objective outsider" image, facilitates the people to open up to them without fear of reprisal. Eg: Environmental Protection Agency's Region 9 in San Francisco initiated the upward assessment process bit shifted to 360 degree evaluation as the earlier process resulted as Paper intensive. 360 degree feedback: 360 degree feedback is the most expensive and comprehensive appraisal. This system includes all the above types like peer reviews, self ratings, and upward assessments; where feedback is collected and used as input to the appraisal system. This kind of system facilitates the people to know themselves better and to wait for other's approval as well the need to be ranked by outsider and gives a complete acknowledgement of the performance. Cooperation with people outside their department, helpfulness towards customers and vendors, etc. will all become the means of appraisal and improves the total quality of service rendered by the employee in the organization. This system also resolves the conflicts like employee -manager differences in opinions. 360 degree feedback shows strongest impact on behavior and performance of the employee by greatly increasing the communication and shared goals. It offers high employee involvement and credibility and supports people with a good all-around perspective and offers. Eg: Change Capital Partners is an independently-managed private equity firm created by Luc Vandevelde, which is by adopting the 360 degree appraisal system and is staying ahead in the industry. Also a study on 360-degree feedback to leaders conducted by Arizona State University founds that improvement in a leader's consideration and employee development behaviors will lead to positive changes in employees' job satisfaction and engagement, and reduce their intent to leave (Brett 582-583). References: 1. Amit, R., & Schoemaker, P.J.H. (1993). Strategic resources and organizational rent: Strategic Management Journal, 14, 33-46. 2. Alternative performance appraisals, accessed on august 11, 2007, available from < http://www.toolpack.com/performance.html> 3. Brett, Joan. "360 Degree Feedback to Leaders." Group and Organization Management 31(2006): 578-600. 4. Barney, J. B. (1991). Firm resources and sustained competitive advantage.Journal of Management, 17, 99-129. 5. case study for 360 degree appraisal system, accessed on August 12, 2007 and available from http://www.bowlandsolutions.com/360-degree-feedback.html 6. Gerhart, B. (2000). Compensation strategy and organizational performance. In S. Rynes & B. Gerhart (Eds.), Compensation in organizations: Current research and practice (pp. 151-194). San Francisco: Jossey-Bass. 7. Jackson, S. E., & Schuler, R. S. (2002). Managing individual performance: 8. A strategic perspective. In S. Sonnentag (Ed.), Psychological management of individual performance. New York: Wiley, 372-390. 9. Jenkins, C. D., & Gupta, N. (1985). The payoffs of paying for knowledge. National Productivity Review, 4, 121-130. 10. Schoenecker, T. S., & Cooper, A. C. (1998). The role of firm resources and organizational attributes in determining entry timing: A crossindustry study. Strategic Management Journal, 19, 1127-1143. 11. Scholtes, Peter R. , Total quality or performance appraisal: choose one,a ccessed on August 12, 2007, available from http://deming.eng.clemson.edu/pub/den/files/tqmorpa.txt 12. Training and Development, June 1992, quoted in Alternative performance reviews, accessed on August 13, 2007, available from < www.toolpack.com/performance.html - 18k> 13. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18, 509-533. Read More