Performance Management

Performance Management is a continuous and systematic process that ensures the achievement of organizational business goals by aligning employee performance and efforts to match the set goals efficiently.

Performance Management in HRM?

In the existing business scenario, the role of Performance Management in HRM is very important. Performance Management includes all the functions such as Goal Setting, conducting regular performance reviews in accordance with the set business goals, establish instant communication amongst the team member for coaching, providing performance feedback and its report for creating better employee training and development programs, and finally connects performance with reward and recognition for better results.

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. Performance management is an important aspect in HRM. It is used to create a work environment where people are motivated to provide their best performance and do quality work.

Performance Management Definition and Its Meaning

Managing the Performance of the employee is the most important function of Human Resource. Performance management is defined as a continuous process of identifying, measuring, and enhancing employees' performance within the organization. The main objective of performance management is to enhance employee performance and align their efforts with the organization's business objectives.

Performance management is a tool that is commonly used by managers to monitor and evaluate employee’s work performance.

The tools begin with Job design and progress through coaching, training and development and connect performance with reward and recognition and ultimately result to achieve the organization's goals and objectives.

Performance Management Definition by Eminent Authors

Please find below that how these eminent authors have defined “Performance Management”

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’

Mohrman and Mohrman

‘Performance Management is managing the business’

Walters

Performance Management is – 'The process of ‘Directing and supporting employees to work as effectively and efficiently as possible in line with the needs of the organization’

Ronnie Malcom

‘Performance management may be defined as a planned and systematic approach to managing the performance of individuals ensuring their personal development and contributing towards organisational goals.’

John Storey

‘Performance management includes the whole cycle of agreeing goals and objectives (which may vary in their degree of specificity), providing feedback, offering coaching and advice and motivating staff to perform at a high level.’

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.’

Manuel Mendonca and R. N. Kanungo

‘Performance management refers to the process of setting and communicating performance targets, defining evaluative criteria to be employed at different levels of performance, monitoring performance, reviewing performance, providing feedback and taking corrective measures to remove performance snags.’

Brumbrach

'Performance management is a process for establishing a shared understanding about what is to be achieved, and how it is to be achieved; an approach to managing people which increases the probability of achieving job-related success.'

Bates and Holton

'Performance management can be defined as a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who works in them and by developing the capabilities of terms and contributors.'

Purpose of Performance Management

Feedback Mechanism: To develop systematic feedback mechanism is the main purpose of performance management. It creates a clear pathway for employees so that they can learn about their performance and related contribution to the company. It also conveys to the employee the improvement required in the performance to meet the set standards.
Development Concern: Performance management handles the development issues in the organization. It identifies the skill and knowledge needed to improve the performance of the employees within the organization and facilitates them with the training programs which are appropriate.
Documentation Concern: Performance management facilities organization to create the database with all employee details which includes employee’s performance level, abilities, knowledge, expertise and regular awards.
Diagnoses of Organizational Problems: The fluctuation in the performance of the employee is recorded using a performance management tools. This 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.
Employment Decisions: The performance management helps an organization to take many important decisions. The decision includes an arrangement of training and development programs, promotion, increase or decrease in compensation, hiring decisions, and many more.

Objectives of Performance Management

It aims to help employee to meet the desired work performance standards.
The prime objective of performance management is to identifying the gap of skills and knowledge required to execute the job efficiently and provide a solution to perform the job efficiently.
The purpose of performance management is to increase employee empowerment and motivation of the employees.
It provides a communication channel between the team and supervisor, making the goal-setting process transparent.
The job of performance management is to identify the problems that leads to poor performance and offers immediate solutions by making recommendations for development interventions.
It provides data for making some important and key decisions that includes, promotions, strategic planning, succession planning, and performance-based compensation.

Types of Performance Management in HRM

The types of performance management 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.

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

360-Degree Appraisal: In 360-degree appraisal feedback on an employee's performance and behavior is gathered from peers, subordinates, and the employee’s manager.

Technological Performance Appraisal: The employee’s technical knowledge is the only factor considered in this type of appraisal. The technical expertise of the employee is identified by the manager in this type of appraisal.

Employee Self-Assessment: The employee evaluates their own performance against the set standards, while the manager discusses the employees achievements or failure with them.

Manager Performance Appraisal: This system is designed for the appraisal of the manager wherein the feedback from the team members and client is gathered to evaluate manager’s performance.

Project Evaluation Review: This is the effective way to assess an employee’s performance 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.

Sales Performance Appraisal: At the beginning of the year, a specific sales target is assigned to the employee, either on a monthly or yearly basis. At the end of the financial year, the salesperson’s performance is evaluated based on their achievements of the set targets and the sales result. In this system, setting a realistic sales target for the employee is important.

Performance Management Vs Performance Appraisal

Performance Appraisal is an organized way of evaluating the performance of individual employee for his future growth and development	The performance management is a systematic process of managing the human resources, it includes the process of setting up goals and expectation, regular performance feedback and further development.
Performance Appraisal is a system can be conducted either annually, half yearly or periodically.	Performance management is a continuous and ongoing process.
Performance appraisal is non-flexible function therefore it is doesn’t allow to accommodate any changes may require in between.	Performance management is easily bendable process. It is flexible to amend and accommodate any changes it may require.
Performance Appraisal is an operational practice and works for improving the performance of the employees.	Performance management is a strategic approach aimed to achieve the organizational goals
Generally, HR Department is responsible to Performance Appraisal of the employees within an organization	The Performance Management process is managed by the Manager within the organization, who creates reports for management.
Performance appraisal uses a formal ranking or rating system to evaluate and rank the performance of an employee accordingly.	On other hand Performance management give more weightage on improving and developing the performance.
Performance Appraisal follows an individualistic approach therefore it Focuses on evaluating individual employee performance	Performance Management is concerned with meeting overall business goal therefore its objective is to line-up individual performance with organizational goals.
Performance appraisal mainly emphasis on individual accountability system.	Performance management accentuates on teamwork and building trust collaboration for achieving organizational goals & objectives.
The Impact of performance appraisal effects management decisions on rewards & recognitions, promotions, and increments.	Whereas, performance management ambitions are to boost employee engagement and largely focuses on organizational performance.

Often people misunderstand performance management with performance appraisal. But performance management is little bit different from performance appraisal. It extends beyond performance appraisal after the feedback or performance review. The three steps in performance management are:

a) Performance interview

b) Archiving performance data

c) Use of appraisal data.

Advantages of Performance Management

Documentation: Using performance management, performance document for each employee for the particular fiscal year can be generated. This document can be maintained in the employee file to track the employee’s performance graph throughout their working years.
Structure: Performance management creates a formal framework 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.
Feedback: Employees are eager to know the feedback on their performance in the organization. performance management ensures that the supervisors provide feedback to the employees on a regular basis.
Clarify Expectations: A performance management enables managers to clarify the employee’s performance and behaviour expectations that employees should understand.
Annual Planning: Performance management plays an important role in the annual planning of hiring, training and development practices, and goal settings.
Motivation: Performance management is helpful to motivate the employees in improving their performance at work.

Disadvantages of Performance Management

Creates Negative Experience: The performance management can lead to a negative experience for the employees, if the performance appraisal is not done fairly and feedback is conveyed in a wrong way.
Time-Consuming: Performance Management is very overwhelming for managers to evaluate and manage the performance of hundreds of employees working in the organization, hence it becomes time-consuming and not worth it.
Natural Biases: As managers are responsible for several steps in the performance management a natural bias from the manager's end is expected, which can lead to errors in the evaluation process.

Performance Management Feedback

Performance feedback is the most vital part of the performance management. It is used by the organization in the below mentioned ways:

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.

Game Plan for Improving: Motivation and direction is provided through feedback in order to create a plan to improve performance.

Achievements and Accomplishments: In a performance management, 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.

Attitudes and Behaviors: Performance management also addresses the attitudes and behaviors of employees. Through performance feedback, the managers put forward the favourable behavior expected from the employee to make a teamwork success.

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.

Examples of Performance Management

The regular performance management sometimes does not yield the expected results. Consequently, there is a need to innovate the approach to performance management. Cargill Inc is an example of a company that has adopted a creative method to effectively utilize organizational resources. performance management for the betterment of the company. Cargill Inc is a food producer company in Minneapolis. The company found it very difficult to motivate and engage its 155,000 employees spread worldwide. In 2012, the company introduced the everyday performance management, which acted as a turning point for the organization. The system facilitates on the job conversation which is a part of the feedback and daily work encouragement for the employees. The principles of the ‘everyday performance management are:

Effective performance management is not an annual thing it is a continuous process
the quality of the performance can be predicted using day to day activities rather than using feedback forms
the most important factor of an effective performance management system is the relationship between employee and their manager
It is essential to design a flexible performance management to meet the diverse business needs of the organization.

The leadership team at Cargill acknowledges that in order to see the visible difference in the performance dedicated efforts of several performance management cycles are required. The performance management process was implemented with the involvement of senior leaders and the participation of the employee. The HR team of Cargill kept focus on:

Encouraging the managers carrying out day-to-day performance management by regular rewards
Documentation of tips and experiences of implementing a new performance management system in the organization
The teams were responsible for the implementation of day-to-day performance management in the organization.
Special efforts were taken to build up the skills required to implement the new performance management system such as skills to deliver feedback and develop effective two-way communication and coaching.

FREQUENTLY ASKED QUESTIONS

What do you mean by performance management?

Performance management is a process involving planning, monitoring, and assessing employees’ work to optimize individual and organizational performance to achieve goals and objectives of an organization. This includes setting clear goals, providing feedback, and performance appraisals to enhance efficiency and productivity. By aligning individual contributions with organizational objectives, performance management facilitates continuous improvement and employee development.

What are the main functions of performance management?

Some important functions of performance management are:

Goal Setting: Goal setting involves defining clear and measurable objectives that align with the organization’s goals.
Performance Monitoring: Performance monitoring involves ongoing assessment of progress.
Feedback and Coaching: Feedback and coaching provides constructive guidance for improvement.
Performance Appraisal: Performance appraisal is an evaluation process where achievements and areas for improvements are analyzed.
Employee Development: Employee development focuses on enhancing skills of staff through training and development.