Importance of Performance Management in Public Sector - Coursework Example

Table of Contents Introduction 02 Meaning of Performance Management 02 Importance of Performance Management in Public Sector 03 Performance Management Process 05 Performance Management within the National Statistics Office (NSO), Malta 06 Performance Management across European Public Authorities and Malaysia 07 Performance Management Models 08 The Pitfalls of Performance Management in the Public Sector 09 Drawbacks of Performance Management in the Public Sector 09 Conclusion 11 References 12 Introduction Management is a very big subject and so are its implications. The managers are needed to have the right requisite knowledge regarding every aspect of their job to attain the organisational goals. One among the many aspects of management is performance management which has become very popular across organisations all round the globe. Over the years different organisations, both in public and private sector have applied different theories, from traditional to modern to reduce the gap in this field. Performance management is a system implicated by the managers to motivate their employees to work more effectively and efficiently. Performance management has also become very popular in the public sector and its cyclical nature of working has added some benefits to the working system of the sector. The system has helped both the management and the employees to improve their relationship with one other and also made the understanding of the business requirements more clear. In this assignment we study how performance management has assisted the public sector in its performance and helped improve the public services in NSO, Malta and European Public Authorities. We also study the process of performance management and the models to study them. The pitfalls and the drawbacks of the system have also been presented. Meaning of Performance Management Managing the performance of the employees on a continuous process basis with the view to ensuring towards contribution of achieving the organisational goal is considered as performance management. It is considered as a holistic process of man management with the primary objective of establishing a culture where individuals and groups take the responsibility of achieving the goals with the full utilisation of their skills, behaviour and contributions and also ensures that the need for attainment at all the levels of performance. It is a continuous process of identifying, measuring and developing performance in an organisation. It is never-ending and is cyclical in nature involving developing, coaching, assessing, rating and rewarding (Moullin, 2003). Performance management ensures the following few factors from both the employees and management: Knowhow and understanding is expected on the part of the staff. Have the skill and ability to complete the expectations. Enjoy the support that the organisation provides in the direction to meet the expectations. Proper feedback on performance. The staff should be provided opportunities to discuss and contribute to their own and organisational goals. Performance management was never considered as significant in the public sector as it is today as many governments around the world have introduced policies which mandate performance in organisations which are under their control. With the need to achieve various goals and the public expectations the public service organisations have starting implementing performance management to increase productivity and efficiency. Performance management is basically creating improvements in all aspects of an organisational strategy to attain a leadership strategy which is successful. Importance of Performance Management in Public Sector Effective performance management is crucial in assisting the achievement of sustainable and stable public finances. Performance management cycle in the public sector is a system of measurement and reporting including factors like evaluation, planning, budgeting and management (Popper and Wilson, 2003). Some of the benefits of performance management are: Motivation: it helps in increasing performance through motivation, through feedback for the future performances. The knowledge of one’s past successes serve as fuel for future accomplishments (Zoe and Mary, 2004). Boosts Self-esteem: Receiving feedback is like an appreciation for the work achieved and this helps in increasing self-esteem. Managers gain insight about their subordinates: Direct supervision helps the managers top know their subordinates better which helps in building the manager and subordinate relationship (Burgess and Ratto, 2003). Clarification of Job Definition and Criteria: Performance management helps the managers in defining a job more accurately to the employees and also helps in employees to understand the facts behind a successful performance. Enhancement of Self Insight and Development: With proper feedback and correct appraisal system the employees gain a better understanding of their activities and they keep upgrading their progress to ensure better career path. Personal Actions are More Fair and Appropriate: Personal management provides a very clear picture regarding personal performances which helps in merit increase, promotions and transfers as well as termination. Organisational Goals are made clear: The organisational goals become clearer as the employees start understanding the link between individual performances and organisational success and also improves employee acceptance of wider goals. Increase in Competence: A very obvious contribution of performance management is the increase in performance which increases the level of competence. Better Protection from Lawsuits: The system of data collection involved in performance management helps in document compliance with regulations which in future helps against any form or lawsuit. Supports Decision Making: Correct evaluated data and information helps the management to take the decisions more in favour of the organisation with correct knowledge of current achievements (Boland and Fowler, 2000). Performance Management Process Performance management simply means a shared commitment to high performance which focuses more on increasing the effectiveness of the employees involved. Performance appraisal is the most commonly used tool of the system to evaluate and improve the performances (Dixit, 2002). It is an ongoing, interactive process involving the following few stages: Pre-appraisal: This stage is the planning and agreeing on performance of the employees where the appraiser enters into a discussion and records the priorities and objectives with each individual and how the same shall be achieved. A work plan is developed and agreed between both the parties. Mid-appraisal: It is the midway of the plan process where the employee is called to conduct a self evaluation of the achievements and the performance gaps as per the set plan. This stage is basically considered with managing the performance and understands the areas of improvement. Final Appraisal: This is the final appraisal of the performance at the end of the cycle where the management evaluates the entire performance during the appraisal period. This stage is the final reviewing of the entire performance. Performance Management within the National Statistics Office (NSO), Malta Like the private sector, the public sector organisations all feel the pressure to improve their services, lower the costs, improved accountability, and customer focussed and responsive to stakeholders’ needs. There are many conflicting and diverging views on the effectiveness of performance management in the private sector than in the public sector. Their sustainability and functioning depends more on the operational viability. There is little evidence which shows that the operations in the public sector are influenced by the actual performance of the employees where there is an involvement of statistics. Literature finding have revealed that the application of proper performance management system has resulted positively to the organisation which has motivated the workforce and increased productivity. Research conducted at the NSO suggests that training is needed in regards of performance management for both the employees and management. NSO is an official national statistical agency in Malta which provided a wide range of statistics on social and economic matters covering the population, the government and the business sector. Employees are considered as a valuable resource in an organisation and it achieves the operational objective through the effective use of talents and ability of the employees (Cardy, 2003). The general public refer to operational efficiency in the public sector when considering the services delivered. Efficiency is measured as to bow the resources have been utilised but conversely effectiveness is considered more useful than efficiency as it focuses on the production of right products and services rather than on the process of its production. The implication of performance management has increased the operational efficiency of the government agencies in the European countries. Performance appraisal system, a method used in performance management, has been off late applied to the Maltese Pubic Services Sector. This system is a performance rating report where the statistics and data are systematically recorded for future considerations for promotions in accordance to a common standard. The performance appraisal system, implemented at the NSO provides abundant information which is more detailed and complete. Performance Management across European Public Authorities and Malaysia Issues of service delivery, responsiveness and quality and performance management have become very common topics for the local governments. With the addition of new task to the local authorities and the existing work has raised the expectation and performance bar (Tangen, 2004). Increasing expectations of stakeholders has brought about the qualitative changes in the demand and supply for public services. Majority of Europe has some scheme in operation and performance appraisal is the most extensively used amongst all. Countries like Germany, Britain, France, Denmark, etc. have all applied performance management system in the public sector. The application of better management system aims at reduced error and waster, increased productivity and improved quality and serviceability (Steven and Geert, 2007). Also the Malaysian Government has taken long strides to replace the traditional administrative structures. The New Public Management, a part of performance management has been introduced to solve the issues administration in the public sector (Siddique, 2006). Performance Measurement Models Performance management was criticised in the early years of its implementation but with the passage of time it has turned out to be a unique process of evaluation. In response to the criticism and dissatisfaction some measured models were developed which are as follows: Balanced Scorecard: This model includes both the financial measures and the operational measures involved for customer satisfaction and improvement of activities for future performance. It is based on four key perspectives of performance measurement known as the financial perspective, customer perspective, internal business process and learning and growth. The model focuses more on strategy, vision and communication rather than on control. The balanced scorecard has been very successful across many industries in the public sector in US (Bourne, Neely, Mills and Platts, 2003). The Performance Pyramid: The hierarchal levels within an organisation have a link to the performance measures at different levels which strive together for the same organisational objective when placed in the summit of the ‘pyramid’. The model highlights the middle level as the human resources who bridge the gap between the top level and the day-to-day operations of the organisation to attain customer satisfaction, productivity and flexibility. The Performance Prism: This model is the latest development in performance measurement and it derives measures from strategy. There are five facets of the performance prism of which first is the satisfaction of the stakeholders. Next four are the strategies, processes, capabilities and stakeholders’ contribution (Neely, Adams and Kennerley, 2002). The Pitfalls of Performance Management in the Public Sector The problem with performance management in the public sector which includes a real risk of misuse of performance information includes the following: Inadequate indicators which do not measure what is actually intended and the evaluators consider it as poor construct validity. This kind of situation arises when the performance assessment process is applied hurriedly or under pressure and the indicators are chosen without much consideration. The performance monitoring information is used in a manner that assumes causality in relation to outcomes. The pitfall is the lack of adequate knowledge and knowhow and the link between activities and outcomes are taken for granted by the carriers of the program and is treated as something very obvious. Use of performance information to ends for which they are not intended. The information is hijacked by the senior management to interpret it in their own ways to suit other purposes. Another serious risk in performance management is goal displacement. This generally occurs when performance management creates incentives which direct effort towards meeting the requirements of measuring and reporting. The risk increases under the following few conditions: when insufficient attention is given to the implementation process, when the focus of the assessment effort is on cosmetics rather than fundamentals and failure in involvement of stakeholders (Powell, 2004). Drawbacks of Performance Management in the Public Sector The problems with performance management in the public sector can be studied under the two approaches namely economic approach and psychological approach. Economic Approach: Principal-agent model: The moral hazard model of incentive design is the tool which the economists have always used for understanding the performance management. Due to the nature of the public sector it becomes difficult to identify the right performance indicator resulting for dysfunctional and unintended behaviour. Dysfunctional Behaviour: Incentives have always been put as the principal to measure the performance management in the public sector which causes negligence of lesser measureable tasks and higher efficiency and efforts on more powered rewards. Individuals respond to performance indicator to maximise their benefits is known as gaming response which includes neglecting unrewarded tasks, manipulations and distorting results (De Waal, 2003). Subjectivity and Perception of Fairness: The rising issue of performance management has given rise to issue like equity and fairness. According to the equity theory individuals compare the ratios of their own perceived work outcome to that of the others work input and corresponding ratios. It the employees’ investments are not proportionate to the rewards given that a situation of inequality arises and the employees shall attempt to restore the balance which results in a range of undesired outcomes. For subjective performance management plans based on pay have little chance of success. With higher subjective measures the degree of trust is required to be more on the higher side because without trust levels the subordinates shall not believe that their pay is really fair based on performance (Christopher, 2005). Psychological Approach Problems with Motivation: Motivation has always referred to as the main tool for the increase in the level of efforts of the individuals. The rationale and objective of performance management has been based to better motivate staff by basing salary on performance that on seniority. Motivation in the public sector has been tested using two main theories, expectancy and goal-setting theory (Roberts, 2001). As per the expectancy theory motivation is affected by three factors. First is the expectancy, which is concerned with the individual’s perception of effort being positively correlated with performance. Second is instrumentality, which presents the individual’s expectation of reward being closely tied to his performance. Last is called valence which is a measure of the degree to which an individual values the reward. This theory has been criticised as it is based only upon the extrinsic rewards and not including the role played by intrinsic incentives in motivation (Herpen, Praag and Cools, 2003). Goal-setting theory pays less attention towards rewards and stresses more on motivating employees through defining appropriate work goals and engaging employee commitment. The system was strongly supported and only failed if the managers has doubt or were not sure about their objectives. The difficulty rose as the true goals are hard to clarify and are still harder to judge or justify. The biggest difficulty in this theory is determining and identifying the performance dimension to measure the set goals (Sloof and Praag, 2005). Conclusion The assignment has helped in studying performance management very clearly and also the importance of it in the public sector. It has been widely used across different organisations globally to help attain success in the private sector. The use in the public sector has brought some serious conclusions showing the major drawbacks and pitfalls in the process to apply this specific management which basically revolves around motivation through monetary incentives rather than paying attention to all tasks whether it be rewarded task or the unrewarded task. References Bourne, M., Neely, A., Mills, J. and Platts, K. 2003. “Implementing Performance Measurement Systems: a literature review”, International Journal of Business Performance Management, Vol. 5, No. 1, pp.1-24 Boland, T. and Fowler, A. 2000. “A systems perspective of performance management in public sector organisations” The International Journal of Public Sector Management, Vol. 13, No. 5, pp. 417-446. Burgess, S. and Ratto, M. 2003. “The Role of Incentives in the Public Sector: Issues and Evidence”, Working Paper, CMPO, No. 03/071 Christopher, P. 2005. “Performance Management in Practice: A Comparative Study of Executive Agencies,” Journal of Public Administration Research and Theory 16: 25-44. Cardy, R. L. 2003. Performance management: Concepts, skills, and exercises.Armonk, NY: M. E. Sharpe, Inc. De Waal, A. A. 2003, “Behavioural factors important for the successful implementation and use of performance management systems” Management Decisions 41(8), pp. 688-697 Dixit, A. 2002. “Incentives and organisations in the public sector: An Interpretive Review”, Journal of Human Resources, Vol. 37, No. 4, pp. 696-727 Herpen, M. V., Praag, M. V. and Cools, K. 2003. “The Effects of Performance Measurement and Compensation on Motivation”, Tinbergen Institute, Discussion Paper, No. 048/3 Moullin, M. 2003. “Perspective on Performance”, Performance Measurement Association, Vol. 2, No. 2, pp.1-25. Neely, A., Adams, C. and Kennerley, M. 2002. “The Performance Prism: The Scorecard for Measuring and Managing Business Success”, Financial Times-Prentice Hall: London Powell, S. 2004. “The challenges of performance measurement”, Management decision, Vol. 42, No. 8, pp. 1017-1023 Popper, C. and Wilson, D. 2003. “The use and usefulness of performance measures in the public sector”, Oxford Review of Economic Policy, Vol. 19, No. 2, pp.250-267 Roberts, I. 2001. Reward and performance management. In I. Beardwell & L. Holden (Eds.), Human resource management: A contemporary approach (3rd edn., pp. 506–558). Edinburgh: Pearson. Sloof, R. and Praag, M. V. 2005. “Performance Measurement, Expectancy and Agency Theory”, Tinbergen Institute, Discussion Paper, No. 026/1. Steven, V. W. and Geert, B. 2007. “Perceptions of Productivity and Performance in Europe and the United States,” International Journal of Public Administration 30: 1123-1140 Siddique, A 2006, Public management reform in Malaysia Recent initiatives and experiences. International Journal of Public Sector Management Tangen, S. 2004. “Performance measurement: from philosophy to practice”, International Journal of Productivity and Performance Management, Vol. 53, No. 8, pp. 726-737. Zoe, R. and Mary, M. 2004. “Performance Management in the Public Sector: Fact or Fiction?” International Journal of Productivity and Performance Management 53 (3): 245-260 Read More