Performance

Management
Chapter I

Introduction to Performance
Management LH 5

• Concept and Characteristics of

Performance Management;
• Contributions and Principles of
Performance Management;
• Performance appraisal, performance
evaluation and performance management;
Cont…

• Performance Management Process

• Conceptual Model and its Application; Role
of Appraisal in Performance Management,
• Challenges to Performance Management.
Case discussion
Concept
• Performance management is a continuous
process of identifying, measuring, and
developing the performance of individuals
and teams and aligning performance with
the strategic goals of the organization.
• Performance management is ongoing. It
involves a never ending process of setting
goals and objectives, observing
performance, and giving and receiving
ongoing coaching and feedback.
Concept
• Performance management requires that
managers ensure that employees’ activities
and outputs are congruent with the
organization’s goals and, consequently, help
the organization gain a competitive
advantage.
• Performance management therefore
creates a direct link between employee
performance and organizational goals and
makes the employees’ contribution to the
organization explicit.
Concept
• Performance management can be described
as a process by which organisations set
goals, determine standards, assign and
evaluate work, and distribute rewards
(Varma et al., 2008).
• It is used to improve organisational, team
and individual performance, including
activities designed to ensure that goals are
consistently being met in an effective and
efficient manner
Concept
• Performance management can be described
as a process by which organisations set
goals, determine standards, assign and
evaluate work, and distribute rewards
(Varma et al., 2008).
• It is used to improve organisational, team
and individual performance, including
activities designed to ensure that goals are
consistently being met in an effective and
efficient manner
Concept
• Performance management can be defined
as a systematic process to improve
organizational performance by developing
the performance of individuals and teams
working with an organization.
• It is a means of getting better results
from the organization, teams and
individuals by understanding and managing
their performance within a framework of
planned goals, standards and competence
requirements.
Characteristics of PM

• Measures outputs of delivered

performance
• Concerned with inputs and values
• Continuous and flexible process
• Based on the principle of management by
contract and agreement
• Focuses on future performance planning
and improvement
Contributions of PM

Motivation to perform is increased.

• Receiving feedback about one’s

performance increases the motivation for
future performance. Knowledge about how
one is doing and recognition of one’s past
successes provide the fuel for future
accomplishments.
Contributions of PM

Self-esteem is increased.

• Receiving feedback about one’s

performance fulfils a basic need to be
appreciated and valued at work. This, in
turn, is likely to increase employees’ self-
esteem.
Contributions of PM
Managers gain insight about subordinates.
• Direct supervisors and other managers in
charge of the appraisal gain new insights
into the person being appraised.

• Gaining new insights into a person’s

performance and personality will help the
manager build a relationship with that
person. Also, supervisors gain a better
understanding of each individual’s
contribution to the organization
Contributions of PM
The job definition and criteria are
clarified
• The job of the person being appraised may
be clarified and defined more clearly.
• Employees gain a better understanding of
the behaviors and results required of their
specific position.
• Employees also gain a better understanding
of what it takes to be a successful
performer
Contributions of PM
Self-insight and development are
enhanced.
• The participants in the system are likely to
develop a better understanding of
themselves and of the kind of development
activities of value to them as they
progress through the organisation.
• Participants in the system also gain a
better understanding of their strengths
and weaknesses, which can help them
better define future career paths.
Contributions of PM
• Personnel actions are more fair and
appropriate.
• Performance management systems provide
valid information about performance, which
can be used for personnel actions such as
merit increases, promotions and transfers,
as well as terminations.
Contributions of PM
• Personnel actions are more fair and
appropriate.
• Performance management system helps
ensure that rewards are distributed on a
fair and credible basis.
• In turn, such decisions based on a sound
performance management system lead to
improved interpersonal relationships and
enhanced supervisor–subordinate trust
Contributions of PM
Organizational goals are made clear.
• The goals of the unit and the organisation
are made clear, and the employee
understands the link between what he or
she does and organisational success.
• Performance management systems can help
improve employee acceptance of these
wider goals (i.e., organisational and unit
level).
Contributions of PM
Employees become more competent.

• An obvious contribution is that the

performance of employees is improved.

• In addition, there is a solid foundation for

developing and improving employees by
establishing developmental plans.
Contributions of PM
There is better protection from lawsuits.
• Data collected through performance
management systems can help document
compliance with regulations (e.g., equal
treatment of all employees regardless of
sex or ethnic background).

• When performance management systems

are not in place, arbitrary performance
evaluations are more likely, resulting in an
increased exposure to litigation.
Contributions of PM
There is better and more appropriate
differentiation between good and poor
performers.

• Performance management systems allow

for a quicker identification of good and
poor performers.
• Also, they force supervisors to face up to
and address performance problems on a
timely basis
Contributions of PM
Supervisors’ views of performance are
communicated more clearly.
• Performance management systems allow
managers to communicate to their
subordinates their judgements regarding
performance.
• Thus there is greater accountability in how
managers discuss performance
expectations and provide feedback.
Contributions of PM
Supervisors’ views of performance are
communicated more clearly.
• Both assessing and monitoring the
performance of others are listed as key
competencies for managers by the
Management Standards Centre
(www.management-standards.com,
Standard D6: Allocate and monitor the
progress and quality of work in your area
of responsibility).
Contributions of PM
Supervisors’ views of performance are
communicated more clearly.
• When managers possess these
competencies, subordinates receive useful
information about how their performance
is seen by their supervisor.
Contributions of PM
Organizational change is facilitated.
• Performance management systems can be a
useful tool to drive organisational change.
• For example, assume an organisation
decides to change its culture to give top
priority to product quality and customer
service.
• Once this new organisational direction is
established, performance management is
used to align the organisational culture
with the goals and objectives of the
organisation to make change possible.
Contributions of PM
Organizational change is facilitated.
• Employees are provided with training in the
necessary skills, and are also rewarded for
improved performance so that they have
both the knowledge and the motivation to
improve product quality and customer
service.
Principles of PM
Transparency
• decisions relating to performance
improvement and measurement such as
planning, work allocation, guidance and
counseling and monitoring, performance
review etc., should be effectively
communicated to the employees and other
members in the organization.
Principles of PM
Employee development and empowerment –
• effective participation of employees
(individuals and teams) in the decision –
making process and treating them as
partners in the enterprise.
• Recognizing employees of their merit,
talent and capabilities, rewarding and
giving more authority and responsibility
etc., come under the umbrella this
principle.
Principles of PM
Values –
• a fair treatment and ensuring due
satisfaction to the stakeholders of the
organisation, empathy and trust and
treating people as human beings rather
than as mere employees form the basic
foundation, apart from others.
Principles of PM
• Congenial work environment –
• the management need to create a
conducive and congenial work culture and
climate that would help people to share
their experience knowledge and
information to fulfill the employees
aspirations and achieve organizational
goals.
Principles of PM
Congenial work environment –

• The employees should be well informed

about the organizational mission,
objectives, values and the framework for
managing and developing individuals and
teams for better performance.
Principles of PM
External environment

• Effective management of external

environment to overcome the obstacles and
impediments in the way of effective
managerial performance.
Performance Management
process
Stage 1: Pre- Requisites

• At this step the purpose is defined Cleary

for existing and new employees/ staff,
departments in order to make integrate all
teams to meet company’s target.

• There are three primary stages where the

company defines their long term and short
term goals.
Performance Management
process
Stage 1: Pre- Requisites

• The first stage is at the organization level,

where the management describes the
holistic view and defines overall objective
of formulation of the company, what are
their long term vision, what are the values
on which they stands for, and what is the
mission the company is chasing.
Performance Management
process

Stage 1: Pre- Requisites

• The second stage perquisites at

department level, where the management
assign targets to each department to
achieve overall organization objective. At
this stage, the management strategize the
processes and allocate targets to each
department.
Performance Management
process
Stage 1: Pre- Requisites
• The last stage is individual level, where the
department further give targets to
employees.

• The above three stages are the foundation

of performance management system of any
organization. Basis on these three levels,
the management design, strategize and
develop the performance management
system.
Performance Management
process
• Stage 2: Performance Planning
• There are three important
attributes of performance
planning:
Results
Behaviors, &
Development Plan
Performance Management
process
• Stage 2: Performance Planning
• Results:
• the yardstick of performance management
is used to measure employees and
department performance.
• It provides the information about the
performance gaps and achievements.
Hence, it evaluates how well the individual
employee has performance against his
assign targets
Performance Management
process
• Stage 2: Performance Planning
• Behaviour:
• measuring the employees behaviours are
one of the most challenging and difficult
task basis on performance standards.

• The human behaviour can only be measured

through observation and close monitoring
by his supervisors or human resources
department.
Performance Management
process
• Stage 2: Performance Planning
• Development plan:
• development plan is the third stage of
performance planning. At this stage, we
develop the plans to improve employees
knowledge, skill and attitude (K, S, A).

• It allows employee to take his professional

standards to next level which the support
of development tools and plans
Performance Management
process
• Stage 3: Performance
Execution
• Performance execution is considered
as most important stage because the
whole exercise of creating
performance management systems
and building up standards would rely
on it.
Performance Management
process
• Stage 3: Performance
Execution
• The primary responsibility and
ownership of performance execution
is with employee, which is followed by
department and then organization.
• Hence, it is considered as a chain or
process, in which the performance of
individual employees would result
department performance.
Performance Management
process
• Stage 3: Performance
Execution
• Therefore, the role and responsibility of
supervisor or manager also increases which
comprises with following focus areas:
Provide resources, tools and equipment’s to
employees to make out better results,
Provide regular feedback to subordinate
about their performances and improvement
areas,
Performance Management
process
• Stage 3: Performance
Execution
Motivate team members through
different channels and tools Integrate
individual development plans with
department’s goal

Remain focus on development activities to

enhance individual knowledge and skills.
Performance Management
process
• Stage 4: Performance
Assessment
• In this phase, the employee and manager
both are responsible to measure and assess
the performance of employee against his
targets.

• The process should comprise to the extent

of individual targets, behaviors or attitude
and special achievements during the
performance appraisal cycle.
Performance Management
process
• Stage 5: Performance Review
• The performance review stage is a
platform where the subordinate and
superior exchange performance feedbacks
and review performances against
given targets or goals to individual.

• To make the performance review

successful, the involvement and exchange
of dialogue are equally essential between
employee and his manager.
Performance Management
process
• Stage 5: Performance Review
• Apart from performance review, they also
discuss about the development plans,
trainings to improve skills and knowledge,
next year goals and targets and
expectations of employee and manager
both.
• Hence, this stage is considered the base
of next year performance appraisal cycle
as well.
Performance Management
process
• Stage 6: Performance Renewal
and Reconstructing
• The performance management
process is an ongoing continuous
process. Once the performance has
been reviewed and end, then the cycle
starts for the next performance
appraisal.
Performance Management
process
• Stage 6: Performance Renewal
and Reconstructing
• It should be again align with next
year organization mission, goals and
objective and integrated with
departments goals. This is necessary
because the external environment of
company like market, customers ,
competitors , suppliers etc. also
revolved.
Challenges of Performance
Management
Poor Integration and Alignment
• Performance management has to be
approached from an integrated
perspective.
• Synergy has to be created between the
performance management system and
strategic planning, human resource
management processes, organizational
culture, structure and all other major
organizational systems and processes.
•
Challenges of Performance
Management
Poor Integration and Alignment
• Individual, team and organizational
strategic objectives must be
harmonized.

• Without integration, no performance

management system can succeed on
its own, no matter how good the
performance management system may
be
Challenges of Performance
Management
Complexity Issues of the System
and the Tool
• Performance management system should
operate flexibly to meet different
circumstances of the organization, and
have to be accepted by all staff as a
natural component of good management and
work practice, transparent and operate
fairly and equitably (Armstrong and Baron,
2002).
•
Challenges of Performance
Management
Complexity Issues of the System and
the Tool
• The system has to be also flexible enough to include
core competencies which are the common attributes,
type, level and quality of skills and behaviors that
employees are expected to demonstrate so that the
organization can meet its objectives (Common Wealth
Secretariat, 1996).
• Moreover, for a system to be easily implemented and to
produce the intended result it has to be clear, simple
(as much as possible), and requires the necessary skills
for effective and efficient implementation of the
system.
Challenges of Performance
Management
Leadership Support
• Senior management must do more than simply
articulate the need for effective performance
appraisal, they must be role models of effective
performance management behaviour which is
the critical element in their providing
leadership with respect to the performance
management system (Carter et al, 2001).
• According to (Armstrong, 2001), the
implementation of the performance management
system has to be supported and driven by top
leadership and management.
Challenges of Performance
Management
Leadership Support
• Leadership has to be committed to
implementing the performance management
system.

• Leaders should be encouraged to develop the

capacity to create a shared vision, inspire staff
and build a performance management system
that drives the entire organization towards a
common purpose.
Challenges of Performance
Management
Leadership Support
• Leadership has to be committed to
implementing the performance management
system.

• Leaders should be encouraged to develop the

capacity to create a shared vision, inspire staff
and build a performance management system
that drives the entire organization towards a
common purpose.
Challenges of Performance
Management
Resistance to Change
• According to( Reynolds ,2004) the only constant
business in life is change that could be large or
small, rapid or slow, planned or unplanned,
controlled or not controlled from implementation of
a new system.
• Change in an organization can be introduced by
internal forces like new strategy, new technology,
employee attitude and behaviors and external
forces like technological environment, the economic
environment, the political and legal environment,
social conditions, and competitive environment.
Challenges of Performance
Management
Resistance to Change
• The change management aspect of performance
management should be managed strategically.

• The organization’s top leadership must drive the

change process. Resistance to change should be
managed proactively.
Challenges of Performance
Management
Skills Gaps
• Reynolds (2004) makes the point the ‘’improvement
and learning are casually related.
• All those involved in the performance management
system must possess appropriate knowledge,
attitudes and skills to utilize the system.
• Proactive training and development interventions
should be implemented to ensure that the users of
the performance management system are
continuously developed.
• Special emphasis should be given to soft skills and
the behavioral aspects of performance
Challenges of Performance
Management
Managing Rewards
• Applying benefit packages serves to avoid turnover,
to build loyalty and commitment, to build
sustainable competitive advantages.
• Since work groups are part of the larger
organizational system, employee's behavior will be
influenced by how the organization evaluates
performance and what behaviors are rewarded.
• However, establishing rewarding system, which is
Credible and sustainable, it must avoid any risk of
serious challenge to the performance management
methodology, which may be subject to resistance
Challenges of Performance
Management
Managing Rewards
• A reward system that rewards high performance
and discourages low and mediocre performance
must be put in place.
• According to (Armstrong, 2001) a comprehensive
and holistic reward system, which includes various
rewards such as financial rewards, public
acknowledgments, merit awards, promotions,
greater work responsibilities, learning and study
opportunities, should be developed and
communicated to staff.
Challenges of Performance
Management
Managing Rewards
• Much greater emphasis must be given to non-
monetary rewards. Mechanisms must be put in place
to take corrective action against low performers.
Challenges of Performance
Management
Communication Challenges
• To alleviate misconceptions and to ensure that the
benefits and implementation of PMS are well
understood, organizations should communicate
contentiously until all employees are aware of and
become part of the implementation process

• a proactive communication strategy and process

must be followed throughout the implementation of
the performance management system.
Challenges of Performance
Management
Communication Challenges
• Communication is one of the most critical success
factors of the entire performance management
system. Effective communication ensures the
provision of relevant information, reduces fears and
anxieties, reduces resistance to change, and
generates commitment to the system.
Challenges of Performance
Management
Organizational Culture
• Fundamentally, performance management systems
are manifestations of and powerful mechanisms for
supporting the organization’s work culture.

• Therefore, any discussion of performance

management system would be incomplete before
exploring the meaning/context of culture and its
impacts on performance management system
enabling one to suggest the type of culture that
supports identification and development of an
appropriate culture to an organization.
Challenges of Performance
Management
Organizational Culture
• Culture management will involve influencing
behaviour, attitudes and beliefs through process
(Blunt and Jones, 1992).
• And changing attitude is up to individuals as long as
they accept that their attitude needs to be
changed. The challenge for managers is that people
will not change their attitudes simply because they
are told to do so.
• They can only be helped through counselling
approach to understand that certain changes to
their behaviour could be beneficial not only to the
organization but also to themselves.