What Is Performance Management - Coursework Example

Introduction The modern business environment is characterized by a high level of competitive rivalry, and for this reason performance management is such an important issue. It enables the management of an organization to increase and improve organizational capability and outcomes. Implementing a performance management system is essential because without such a system the management cannot determine organizational goals. There are different aspects to performance management such as performance planning, monitoring, reviewing performance, and appraising individual performance. Clearly, performance management is important to organizational goals because it assesses the overall performance of the organization. Planning performance is an important organizational activity because it ties together different organizational factors, such as HR processes, strategy, and capability. In task 2, it has been explained why a well designed performance management system should monitor and review performance. After it, the difficulties in appraising individual performance have been addressed. What is Performance Management? Performance management can be defined as the process by which line managers influence organizational roles and functions in order to ensure that actual outcomes match strategic aims and expectations. Traditionally, organizations implemented the framework of performance appraisals which had a number of problems. The system of performance management aims to eliminate these problems by being a dynamic system. The performance appraisal system is a static one and therefore cannot be used in the rapidly changing present-day business environment. Performance management is a dynamic process which integrates individual performance objectives or standards of staff with operational plans. Performance management is a framework for aligning human resource management to organizational goals. Thus performance management provides the holistic approach through which a link is made between the overall performance of the organization and the performance of the people within the organization. Why Performance Management is Important to Organizational Goals Performance management is important to organizational goals because it provides the link between organizational goals and criteria against which the performance of the people is measured. As a result, the management is able to take into account the contextual factors of business strategy, workplace technology, and employee involvement. Because these factors are taken into account, organizational goals are more strategically aligned. This indicates the importance of performance management to organizational goals. The process of goal-setting is a key component of performance management. It guides the interactions between managers and employees in clarifying mutual duties and responsibilities. Therefore, it ensures that they are aligned to the overall performance of the organization. Organizational goals are related to the overall performance of the organization. If they are not aligned to the strategic focus of the organization, the result will be poor organizational performance (Mintzberg, 1987). Performance management ensures this strategic alignment. The three contextual factors have been mentioned. They are all essential components of organizational goals and they are taken into account by performance management. For example, business strategy defines the goals and objectives which give the organization its competitive advantage. Therefore, business strategy should be included in goal-setting. This can be achieved through performance management. Performance management also facilitates employment involvement. Unless employees are involved in determining organizational goals, they will not be motivated to perform at the highest possible level. In that case, organizational goals may not be effective. Therefore, by facilitating employee involvement, performance management aligns employee goals with organizational goals. As a result, the competitiveness and overall success of the organization are ensured. Performance management ensures strategic congruence between job performance and organizational goals. The performance management system enables the employees to see how their duties and responsibilities fit into the overall organizational picture. In other words, the employees can see how their work contributes to organizational goals through performance management. When they are able to make the link, then the employees can also identify those skills and talents which are most needed to achieve organizational goals. The result is human resource development that occurs in strategic alignment with the three contextual factors of business strategy, workplace technology and employee involvement. Through this strategic alignment, the management can develop action plans which link to organizational goals. Therefore performance management is important to organizational goals not only because it links performance to organizational goals but also because it facilitates human resource development in strategic alignment with organizational goals. Why planning performance Performance planning is important because it aligns HR processes with improving organizational capability and outcomes. This has a positive impact on both organizational and individual performance. Because the current business environment is characterized by a high level of competitiveness, organizations need to develop sustainable competitive advantages. This objective is met through aligning human resource management with organizational outcomes (Gottfredson and Aspinall, 2005). Organizations need to perform at a high level in order to compete effectively and this performance is attained through planning performance. Through planning performance, the management is able to take into account the larger organizational context in which the HR processes operate. Therefore human resource management becomes an integral component of measuring organizational performance. This is the strategic alignment which ensures that an organization is able to compete effectively. If an organization is to have a sustainable competitive advantage, it should have organizational capabilities and outcomes defined by HR processes. This is ensured by performance planning. Performance management has been defined as the process by which line managers ensure that actual outcomes match strategic aims and expectations. This can only happen if the performance management system incorporates performance development strategies. This objective is met through planning performance. By increasing and improving organizational capability and outcomes, performance planning facilitates the development of a performance management system that is in strategic alignment with performance development strategies. The result is high performance at both the organizational and the individual level. Because the modern organization operates in a highly competitive climate, it has to develop capability and outcomes in a continuous process. For this reason planning performance is such an important organizational activity. It leads to developing organizational capability in a continuous process through human resource development. Planning performance provides the links between strategy and organizational capability. The result is organizational development. In the rapidly changing business environment, organizational development has to occur in a continuous process (Kotter and Schlesinger, 2008). This happens through planning performance. Different methodologies for planning performance emphasize upon individual performance objectives. These objectives ensure that the process of increasing and improving capability and outcomes is aligned to the organizational culture and environment (Gosling and Mintzberg, 2003). As a result employees have the skills and confidence to use performance management as part of their normal management activities. Planning performance enables the employees to contribute to the organizational goals and objectives because it enables them to make the link between their work and the overall organizational success. For this reason, planning performance is an organizational activity that is of high strategic importance. Why a well designed PMS should monitor and review performance Competing in a rapidly changing external environment, a business organization needs to develop a competitive advantage which will enable the organization to compete effectively. This competitive advantage results from employee performance. For this reason, how well employees perform is a critical aspect of organizational strategy. This question can be answered by implementing a well designed performance management system. The performance management system can identify those areas where employee performance is satisfactory and where it is not, so that the management can take the necessary corrective actions. Given the rapid change occurring in the external environment, an organization needs to develop its capabilities and resources in a continuous improvement process. This process is maintained by a well designed performance management system. By monitoring and reviewing performance, the performance management system can identify those areas where the organization should invest in order to develop performance further. In this manner, a sustainable organizational strategy is maintained. Employee performance should be connected to organizational strategy. A well designed performance management system meets this objective by monitoring and reviewing performance. The process of monitoring and reviewing performance creates information that is crucial for decision making in performance development. If there are some areas where employees are not performing according to performance standards, then the management needs to undertake training and development programs in those areas. A well designed performance management system can help identify those areas. It is the framework for understanding what needs to be monitored, how it will be monitored and by whom (Tovey, Uren and Sheldon, 2010). In the process, supervisors and staff develop performance standards that contribute to the CSFs and KPIs. If there are any gaps in this regard, then the management needs to make training and developmental decisions. Therefore, a well designed performance management system also has a developmental aspect to it. A well designed performance management system facilitates collaboration between subordinate and supervisor to set predetermined objectives against which actual performance in key result areas can be measured (Tovey, Uren and Sheldon, 2010). As a result, the management is able to ensure that individual and team performance is aligned to key performance indicators by way of contributing to the critical success factors. By monitoring and reviewing performance, a well designed performance management system enables line managers to ensure that performance standards and objectives are aligned to the key result areas. It is also a continuous process so that the performance standards and objectives can be changed as warranted by circumstances. It ensures participation by both staff and managers. The result is a framework for managing performance improvement. Employee goals are aligned to organizational goals to develop a sustainable competitive advantage. Given the rapidly changing environment that the business operates in, it has to develop a sustainable competitive advantage. The objective can be met by a well designed performance management system as it monitors and reviews performance in order to create strategic information. This also relates to employee motivation. As mentioned before, a well designed performance management system facilitates collaboration between subordinate and supervisor. Therefore it facilitates participation by employees in setting performance standards and objectives. In the process, a communications framework is created. As the management frequently communicates with the employees, acceptance of the process for monitoring and reviewing performance is increased so that they start to use performance review and monitoring as part of their normal management activities. If the performance appraisal takes place on only one day of the year, then it has little relevance to organizational strategy. It is only when employees and managers monitor and review performance as a natural and normal event that the process has any strategic value. For a performance management system to be well designed, it has to review and monitor performance in an ongoing process. Only then can performance improvement take place. In other words, the performance management system should have a developmental aspect to it. This means that the managers and their staff have the skills to manage and develop performance. When this happens, performance management becomes connected to organizational strategy. In the process, performance reviewing and monitoring becomes part of the managers’ daily responsibilities. The information that is collected is used to improve performance through individual development. The setting of performance standards becomes a collaborative between the staff and their managers. There is strategic alignment between employee goals and organizational goals. The result is managing and development of performance. For all these reasons, a well designed performance management system should review and monitor performance. Difficulties in appraising individual performance Performance appraisal systems frequently fail because they tend to focus upon personal characteristics rather than job-related characteristics. As a result the criteria are generalized and non-job specific. The system may also fail if it does not have a developmental aspect to it. The reason for implementing performance management systems is to facilitate a continuous process of managing and improving performance. If the developmental aspect is missing, then the time and efforts required for appraising individual performance will not have any strategic relevance. There is no individual development at the end of the process. Difficulties also arise because managers and their staff do not understand the appraisal system. Appraising individual performance might happen one day of the year. The rest of the time, the performance is not managed. Because of this, managers and their staff are also not motivated to use the appraisal system. Because they do not see the strategic relevance, they are not motivated to develop skills in the implementation of performance appraisal. Frequently there is confusion about what aspects of individual performance to appraise and how the appraisal system will operate. Individual performance should be defined by key performance indicators and the appraisal process should take place accordingly. However this may not be the case. If there is no job relevance, then it has no developmental effect. Rater bias and lack of top management support are also responsible for a failing appraisal system. Conclusion Performance management is an important organizational activity because it takes into account the three contextual factors of business strategy, workplace technology, and employee involvement. By implementing performance management, an organization is able to compete effectively because the overall performance of the organization is monitored and reviewed. Organizational goals are set accordingly. Through planning performance, an organization is able to tie together different aspects of the organizational culture and environment, such as HR processes, capability, and outcomes. However, there may be some difficulties in conducting the appraisal system, such as the lack of top management support or rater bias. But a well designed performance management system is essential for ensuring the overall performance of the organization. This is an important organizational activity that leads to organizational development. Because it emphasizes upon individual development, both managers and staff are involved in the process so that ensuring high performance becomes a joint responsibility. Employee goals are aligned to organizational goals resulting in greater organizational capability and outcomes. Performance standards and objectives are set in a collaborative process so that performance is managed and developed. For this reason, performance management leads to managing performance improvement. References Gosling, J. and Mintzberg, H., 2003. The five minds of a manager. Harvard Business Review, vol. 81, pp. 54-63. Gottfredson, M. and Aspinall, K., 2005. Innovation vs. complexity. Harvard Business Review, vol. 83, pp. 62-71. Kotter, J.P. and Schlesinger, L.A., 2008. Choosing strategies for change. Harvard Business Review, vol. 86, pp. 130-139. Mintzberg, H., 1987. Crafting strategy. Harvard Business Review, vol. 80, pp. 120-125. Tovey, M.D., Uren, M.A.L. and Sheldon, N.E., 2010. Managing performance improvement. 3rd ed. Australia: Prentice-Hall. Read More