PERFORMANCE MANAGEMENT

Prof Neeraj Rajneesh Paul

 What is Performance Management?

Performance Management is a continuous and systematic approach that ensures the

achievement of organizational business goals by streamlining employee performance and
efforts to match the set goals efficiently.

Performance Management builds a communication system between a Manager and an

employee that occurs throughout the year, in support of accomplishing the strategic
objectives of the organization.

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 Performance Management Definition and its Meaning in HRM

• Managing the Performance of the employee is the most important function of Human Resource.

• Performance management is defined as an ongoing process of identifying, measuring, and

developing the performance of the employees in the organization.

• Its main objective is to focus on employee performance and direct their efforts towards
achieving the business goal of the organization.

• Performance management is a tool that is widely used by managers to monitor and evaluate the
work performance of employees.

• The tools start working from Job design followed by coaching, training and development and
connect performance with reward and recognition and ultimately result to achieve the
organization's goals and objectives

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 Performance Management Definitions

Armstrong and Baron

“A strategic and integrated approach to increasing the effectiveness of organizations by improving
the performance of the people who work in them and by developing the capabilities of teams and
individual contributors”

Lockett
Performance Management is – ‘The development of individuals with competence and commitment,
working towards the achievement of shared meaningful objectives within an organization which
supports and encourages their achievement’

Dr. T. V. Rao
‘Performance management involves thinking through various facets of performance, identifying
critical dimensions of performance, planning, reviewing and developing and enhancing
performance and related competencies.’

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 Performance Management Vs Performance Appraisal

Often people misconstrue performance management with performance appraisal. However,

performance management is quite different than performance appraisal. It is an extension of
performance appraisal after the feedback or review of the performance.

The three additional steps in performance management are:

a) Performance interview

b) Archiving performance data

c) Use of appraisal data.

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 Objectives of Performance Management

•It enables the employee to achieve the work performance of set standards

•It helps to identify the skills and knowledge required to perform a job efficiently.

•It is a very important factor to motivate employees and boost employee empowerment

•It provides a communication channel between the team and supervisor. It makes the goal-setting
process more transparent.

•It identifies the issues which leads the low performance and also resolve the issues by providing
suggestion about development interventions.

•It provides data for several important decisions such as promotions, strategic planning, succession
planning, and performance-based compensation.

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 Purpose of Performance Management

1. Feedback Mechanism:
The purpose of the performance management system is to develop a systematic feedback
mechanism. It creates a pathway through which the employees become aware of their contribution
to the organization in terms of performance. It also conveys to the employee the improvement
required in the performance to meet the set standards.

2. Development Concern:
It addresses the development issues in the organization. It recognizes the skill and knowledge
development required in the organization and facilitates the training programs which are
appropriate.

3.Documentation Concern:
It creates a database for the organization in which all the information about the employees is
collected. The information about the performance level, skills, knowledge, expertise, and regular
rewards received by the employee is maintained in this database.
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 Purpose of Performance Management

4. Diagnoses of Organizational Problems:

The up and down in the performance of the employee is recorded using a performance
management system. This record helps to diagnose the organizational problems. It provides an idea
about where the work is going wrong and what improvements are required to improve the
performance status of the organization.

5. Employment Decisions:
Based on the performance management records various important decisions are taken by the
management. The decision includes an arrangement of training and development programs,
promotion, increase or decrease in compensation, hiring decisions, and many more.

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 Importance/Advantages of Performance Management

1. Documentation:
With the help of a performance management system you can generate a performance document
for every employee for the particular financial year. This paper can be maintained in the employee
file to cover the performance graph of the employee throughout the working years.

2. Structure:
It creates a formal structure for communication between supervisor and employee. It makes it
necessary for supervisors and employees to take out time and discuss the performance as well as
bring out a solution to improve performance.

3. Clarify Expectations:
Using performance management system managers can clarify the performance and behavior
expectations that employees should understand.

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 Importance/Advantages of Performance Management

4. Feedback:
Employees are often interested to know the feedback about their performance in the organization.
Here performance management system makes it mandatory for the supervisor to provide timely
performance feedback to the employees.

5. Annual Planning:
It plays a vital role in the annual planning of hiring, training and development practices, and goal
settings.

6. Motivation:
As a part of a comprehensive compensation strategy the performance management system is very
helpful to motivate the employees to improve their performance.

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 Disadvantages of Performance Management

1. Creates Negative Experience:

The system can create a negative experience for the employees, if the performance appraisal is not
done in a fair way and feedback is conveyed in a wrong way.

2. Time-Consuming:
It is very overwhelming for managers to evaluate and manage the performance of hundreds of
employees working in the organization. The process becomes time-consuming and not worth it.

3. Natural Biases:
As managers are responsible for several steps in the performance management system a natural
bias from the manager's end is expected. The natural biases can result in rater errors.

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 Performance Management Feedback
Performance feedback is the most important part of the performance management system. It is
used by the organization in the following ways:

1. Areas to Improve:
On a timely basis the management and the supervisor provide information to the employee about
the areas in which they can improve their performance. It includes tips, ways, and coaching for
performance improvement.

2. Game Plan for Improving:

Motivation and direction is provided through feedback in order to create a game plan to improve
performance.

3. Attitudes and Behaviors:

The attitudes and behaviors of the employee are also addressed during performance management.
Through performance feedback, the managers put forward the favorable behavior expected from
the employee to make a teamwork success.
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 Performance Management Feedback

4. Achievements and Accomplishments:

In a performance management system, the feedback includes both positive and negative
information about employee performance. Managers can declare the achievements and
accomplishments of the team member in public meetings or on the common communication
platform to motivate the performing employee. A one-to-one meeting is suggested to convey the
negative feedback to the employee.

5. Goals for Next Year:

In the yearly feedback meetings the managers discuss with the employee about the upcoming
challenges and work responsibilities. New goals and objectives are set for the employees for the
next financial year. The standard performance expected of the employee is also conveyed in the
performance feedback meeting.

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 Components of Performance Management

• Performance management is a communication-based process between a supervisor and an

employee occurring throughout the year, to plan, monitor and review the employee's
performance, objectives, goals, and overall contribution to the organization.

• Essentially, performance management is what organizations undertake to increase their success

and maintain a competitive edge.

• The main aim of performance management is to foster an environment in which people and
teams take ownership of their development and that of their companies. Specifically,
performance management is concerned with accomplishing individual goals under corporate
settings and ensuring that each employee works toward these.

• A lot of components are necessary for successful performance management in any organization.

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 Components of Performance Management

Components of a successful performance management system are as follows −

Performance Planning

This is the first critical component of any performance management process. During this period,
employees determine the objectives and major performance areas that can be accomplished within
the confines of the performance budget over a year. The performance budget is established after a
mutual agreement between the reporting officer and the employee.

Continued……

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 Components of Performance Management
Performance Appraisal and Reviewing

In most organizations, appraisals are conducted twice a year in mid-year reviews and annual reviews held
after the fiscal year. The appraisee begins by providing self-completed evaluations on the self-assessment
form and defines their accomplishments over time in quantitative terms.

The assessor provides final grades for the employee's quantifiable and measurable accomplishments
following the self-assessment. The whole review process requires active engagement from both the
employee and the appraiser to determine the root reasons for performance gaps and how they might be
closed. This was mentioned in the section on performance comments.

Rewarding superior performance is critical since it determines an employee's work motivation. An

employee's outstanding performance is publicly acknowledged and rewarded during this stage.

It is a very sensitive time for an employee since it directly impacts self-esteem and success-oriented. Any
contribution acknowledged by a company assists an employee in effectively overcoming setbacks and fulfils
the demand for love.
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 Components of Performance Management

Constant Performance Feedback

Performance Feedback, followed by personal counselling and performance facilitation − The

performance management method places a high premium on feedback and counselling.

This is when the appraiser informs the employee of areas for development and provides
information on whether the employee is performing at the desired level of performance.

The employee gets open and honest feedback and identifies the person's training and development
requirements.

The appraiser takes all necessary means to ensure that the employee achieves the organization's
desired goals via effective personal counselling and coaching, mentorship, and individual
representation in training programs that build competencies and increase overall productivity.

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 Components of Performance Management
Performance Improvement Plans

At this level, a new set of goals and a new deadline for achieving those goals are defined for an
employee.

The employee is informed explicitly of the areas in which they are expected to improve, and a
specified date is also provided by which they must demonstrate their progress.

This strategy is prepared and authorized jointly by the appraise and appraiser.

Potential Assessment

Potential appraisal lays the groundwork for lateral and vertical staff mobility. Evaluating potential
employees gives critical information for succession planning and job rotation.

Potential evaluation is accomplished via competence mapping and other assessment procedures.
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 Components of Performance Management
Timings

Generally, performance reviews are mostly conducted annually due to which it become so dreadful
and longer in duration.

Hence, because of the nature of the performance management systems, such reviews are
undertaken maybe on quarterly or even monthly.

These techniques on timings lead to situations where employees take the initiative to come to
supervisors to discuss both issues and ideas more openly, and come up with resolutions sooner
before it becomes a crisis.

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 Methods of Performance Management

The types/methods of performance are determined based on the vertices included in the
performance appraisal or review system. It can range from the self-assessment of the employee to
the review from different members of the organization such as managers, peers as well sometimes
extend to check the review of customers and investors.

1.General Appraisal-

In this type of performance management there is continuous communication between the manager
and employee regarding the performance throughout the year. They communicate about the pre-
set goals, the objectives, the performance feedback, and set the new goals.

2. 360-Degree Appraisal-

In 360-degree appraisal the feedback about the performance and behavior of the employee is
provided by peers and the manager of the employees.
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 Methods of Performance Management

3. Technological Performance Appraisal-

This appraisal is totally based on the technical knowledge of the employee. The technical expertise
and capabilities of the employee are throughput and identified by the manager.

4. Employee Self-Assessment-

The employee compares their own performance with the standard performance expected from
them. The manager has discussions with employees about their performance achievements or
failure.

5. Manager Performance Appraisal-

This system is designed for the appraisal of the manager. Here the feedback from the team
members and client is collected to evaluate the performance of the manager.

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 Methods of Performance Management

6. Project Evaluation Review-

This is considered the best way to identify the performance of an employee at work. After
completion of each project, the performance of the employee is evaluated, and based on the
review another project is assigned to the employee.

7. Sales Performance Appraisal-

A specific monthly or yearly sale target is assigned to the employee at the beginning of the year. At
the end of the financial year, the salesperson is judged on the set target and the sales result of the
employee. In this system, it is important to set a realistic sales target for the employee.

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Conclusion

 Effective performance management may assist you in ensuring that all of your staff work
together toward a common objective.

 Unfortunately, majority of the employees have a problem with the review and constant feedback
system.

 However, with a clearly stated overarching purpose, employees will understand how their efforts
contribute to the company's overall success.

 This contributes to improving individual, team, and organizational performance and productivity.

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