Concept And Definition Of Performance Management

Published Date: 02 Nov 2017

INTRODUCTION

CONCEPT OF PERFORMANCE MANAGEMENT

Principles of Performance Management

Importance of Performance Management

Benefits of Performance Management

Performance Appraisal vs Performance Management

POTENTIAL APPRAISALS

Purposes of Potential Appraisal

Techniques of Potential Appraisal

Characterstics of Potential Appraisal

PERFORMANCE COUNSELLING

Conditions for effective counselling

Performance Counselling Phases

Processes in Performance Counselling

PERFORMANCE METRICS

EFFECTIVE PERFORMANCE MODELLING

SUMMARY

REVIEW QUESTIONS

INTRODUCTION

In a developing economy like INDIA, organisations in commercial, industrial and social services and all other sectors also need to be dynamic and competitive. It also poses a greater challenge for Indian organisations to be dynamic and proactive. Dynamic and forward looking organisations can only grow fast and contribute to the nation’s economic development. While growing, every organisations need to plan for their growth in order to avert the danger of breakup. Planning for the human resources of an organisation is a significant aspect of corporate planning. Growing organisations continue to add new structures that create new roles and it essentially necessitates the right people to be deployed in those roles. Unless the right people are available to perform these roles at the time of need, organisations’ growth will be at stake. In this context, human resources planning become important in order to make sure that, the right types of people are available to perform various tasks at a time when the organizations require it.

Human resource planning analyses the existing human resources of an organisation, their promot ability and the possibility of their development. This process necessitates crucial promotion decisions. To make these decisions prudent and ensure a healthy climate in an organisation, performance appraisal, performance management and potential appraisal has become important.

PERFORMANCE APPRAISAL

CONCEPT AND DEFINITION OF PERFORMANCE MANAGEMENT

Performance management is a source of income justification. It is a tool used to determine an employee’s wage based on his performance. Organisations use Performance management to drive the employees’ behaviour to get specific outcomes. In today’s business world, the human resource management has been introduced as an integrated approach to the management and development of employees. It is posited as a strategic driver and has changed the process of managing people to a very formalised and specialised one. Many of the conventional performance appraisal methods have been absorbed into the concept of performance management, that aims at a more extensive and comprehensive process of management. Some of the recent developments in the field of Human Resource Management, that have shaped performance management are the talent management, differentiation of employees or management by objectives and constant monitoring and review. Though the process is not easy, rather is much complicated, now-days performance management has been given a lot of importance, as more and more companies incorporate these as effective management strategies.

Performance Management (PM) is a term coined by Dr. Aubrey Daniels to describe a science imbedded technology in applications methods for managing behaviour and results. It includes all the activities that ensure consistent achievement of goals in a very effective and efficient manner. Performance management includes performance of an organization as a whole, a department or an individual employee. Even, it can also focus on the processes that involve making a product or service, as well as many other areas. Generally, a performance management system includes the following actions.

Developing a clear job description

Selecting right people with proper selection process

Negotiating requirements and accomplishment-based performance standards, outcomes, and measures

Making provisions for effective orientation, education, and training

Providing on-going coaching and feedback

Conducting quarterly performance development discussions

Designing reinforced compensation and recognition systems that reward people for their contributions

Providing promotional avenue and career development opportunities for staff

Assisting with exit interviews to understand the reason for which valued employees leave the organization.

Principles of performance management

It helps to clarify corporate goals and translates it into, team, department and division and individual goals.

It is evolutionary in nature and the process is continuous. It aims at improving performance over time.

It relies and proceeds with consensus and co-operation and does not believe in control and coercion.

It creates a shared understanding and view to improve performance.

It promotes and facilitates self-management of individual for better performance.

It rests on an open and authentic management approach that encourages free flow of communication between superiors and subordinates.

It seeks continuous feedback on employee performance enabling them to gain more on the job experiences and knowledge and thereby modify corporate objectives.

It measures and assesses performance against jointly agreed upon goals.

It applies to all employees of an organisation and the major concern is not to link performance to financial reward.

Importance of Performance Management

Help working towards common goals

People at workplaces are usually caught up with daily routine work. As a result of which the purpose of an organization is forgotten many times. Performance management make the people understand and remember that, Individual performance drives organizational performance. It ensures that, everyone understands organisations’ vision and goals. It helps them to understand how their work fits into and contribute to organisations’ mission accomplishment. This practices increases employee engagement and improves delivery.

A clear understanding of job expectations

Performance management set clearly defined specific job duties for all the employees. When the employees and supervisors have a clear understanding of it, many of the ambiguities in the workplaces are reduced or may be eliminated. Each and every individual remain accountable for their own duties and responsibilities. Performance management empowers an individual to think about and clarify his own role in the organization by setting clear goals and expectations. A balanced credible employee performance plans must be designed to get the desired result. While measuring expected results, the performance plans measures quality, quantity, timeliness, and cost effectiveness. Performance expectations are set based on proper job analysis. It must be very clear, specific, and easily understandable as well as fairly reasonable and achievable. Credible expectations are also observable, measurable, verifiable, and results oriented. More importantly, it must be communicated to the concerned employees in a timely manner and foster continual improvement in productivity.

Regular performance feedback

Regular feedback facilitates better and clear communication in the workplace. Performance management helps people to identify their strengths and weaknesses. It provides opportunities to be heard and exchange views and opinions. Most importantly, performance management gives a better understanding of how an individuals’ performance is assessed and monitored. This boosts employees’ confidence and adds to their contribution in the workplace. Performance management is a motivational tool by fostering an individual’s job satisfaction to perform at his peak level. Performance feedback process facilitates the exchange of dialogues between supervisors, managers and employees. Performance management is a continuous and ever changing process. It reflects and measures the work performed by the employees.

Helps in improving performance

Performance Management help in identifying ways and means to improve performance. It provides the opportunity to discuss the career direction and prospects of employees and to plan for and set objectives to develop further in one’s career. Performance Management helps in gaining additional training or mentoring facilities that may be a basis to chalk out future succession plans.

Rewards for good performance

Performance management offers a variety of awards such as time off and bonuses etc to show gratitude for outstanding performance. Successful performance appraisal provides incentives to the employees to perform well and open the door to future career advancements. Moreover, performance management is about increasing performance.

Benefits of Performance Management

Linked to Organisational Performance

If Performance management is implemented with some objectives and linked to the strategic and operational plan of the organisation, performance outcome is supposed to increase. For example, increase in profit objective of an organisation percolates down to every department, team and individual. People who are successful in achieving this objective will get a favourable review and bonuses and those could not achieve get an unfavourable review. Thereby the process of performance management drives organisational performance and outcomes.

Lower Stress

The employees and managers of an organisation communicate more frequently and thereby they agree on and adapt to changed objectives in accordance with continuing changes in conditions and priorities. This ensures an inclusive and collaborative process and entails that the employee has his own input and work to specific and relevant objectives lowering the level of stress.

Increases levels of confidence

Where there is a structured performance management system that is communicated well in advance, employees and managers enter into the process with high degree of confidence. Employees are assessed on the basis of achievement of previously defined objectives to which they are agreed with. Managers also have a better framework to assess employees’ performance with specified and defined criteria. As a result of which both the individuals have an informed discussion that raises confidence and reduces stress. Both the parties can have a content rich and factual discussion on issue of performance and focus on achievement of both personal and business objectives, with due avoidance of irrelevant issues.

Focus on performance

Performance management reviews performance more frequently and the discussion basically focus on performance of objectives. Business focused discussions on achievement of objective takeover personal discussion.

Aligned to the corporate plan

With the introduction of performance management system, most organisations have defined performance periods such as quarterly or half yearly etc. The strategic and operational objectives of the business are set at the beginning of the performance period. The performance reviews conducted periodically enable management to direct and fine tune their efforts in accordance with the set objectives.

High Visibility

Frequent Performance reviews increases its visibility. As a result of which, non performance areas receive more attention and problems are attended quickly. Reporting on the performance of the departments as well as individuals becomes easier by implementing performance management systems.

Planning

By reviewing performance frequently, managers and staff plan and try to execute well thought out objectives that results in better resource management. That enables managers to focus more on the business.

Human Capital Development

Performance management systems necessitate managers and employees to commit to a development Plan. That requires employee engagement with the organisation. As a result of which, they feel the interdependency that exist between the organisation and themselves. The organisation is fostering employee development and the employees are working towards development and growth of the organisation by achieving its goals.

Compliance

The objectives are set and the development plans for employees are chalked out in well thought-out manner. Employees see meaningful objectives are set with real planning. They give their best input for personal development by which both the organisation and the employees derive benefit. This result in engaged workforces committed towards achieving real outcomes for the organisation.

Performance appraisal VS Performance management

The terms 'performance management' and 'performance appraisal' are sometimes used synonymously, but they are different. Performance management is a comprehensive, continuous and flexible approach to the management of organisations, teams and individuals which involves the maximum amount of dialogue between the concerned parties. Performance appraisal is a more limited approach. It involves managers making top-down assessments in rating the performance of their subordinates at an annual performance appraisal meeting.

Potential Appraisals

Potential appraisal is a powerful tool for employee development. Potential Appraisal is the process that involves tracking of unrevealed talent, skills and abilities in a person, which even he/she is unaware of. It is a future oriented appraisal and considered as a potent device for employee advancement. The objective is to identify and evaluate the potential of the employees to rise up in the organisational structure. Managers use it as predictors to determine the required potential of employees to execute added responsibilities in the future. Potential appraisal helps to foresee future, in order to guide and direct individual performance towards the achievement of individual goal and organizational growth. Many organisations consider and use potential appraisal as part of the performance appraisal processes. Potential appraisal data is extremely useful for career panning, as it captures the latent abilities of an individual and links with the future role and responsibilities. Thus, Potential appraisal is defined as a process of determining an employee’s strengths and weaknesses with the objective to use this as a predictor of his future performance. This would help in determining the promotability of an individual to a higher position and to chalk out his career plan. Most organisations incorporate potential appraisal in their appraisal processes for identifying and developing suitable talents for succession planning.

The fundamental difference between reviewing performance and assessing potential is in the criteria used. In reviewing performance, the criteria used are the goals the employee has already achieved and the skills he or she currently possesses. These are used as indicators of his or her ability, while assessing his potentiality, in order to assume different or more advanced responsibilities.

Purposes of Potential appraisal:

To advise employees about their overall career development and future prospects

To help the organisation to chalk out succession plans

To motivate the employees to further develop their skills and competencies.

To identify the training needs

Techniques of potential appraisal:

Self – appraisals

Peer appraisals

Superior appraisals

MBO

Psychological and psychometric tests

Management games like role playing

Leadership exercises etc

Characterstics of potential appraisal

Reviewing performance forms the basis of potential appraisal: Performance review of employees is assessed on the basis of the targets accomplished and the skills possessed and already utilized. The review results act as indicators and can be used to make assessment on candidates’ aptitude to manage extra functions. However, this is not a fool proof method. It cannot conclude that, added responsibilities will be handled successfully in future. This makes crucial point of potential appraisal.

Potential Appraisal cannot be applied to all in the same level: people are there in the organization, possessing the necessary potential but could not perform due to attitudinal problem. Promoting these types of people to higher designations could create problems for the employees as well as for the company. Again to deal with workhorses too is not very easy because they are good performer on routine tasks but have limited potential. If promoted, they lack the required ability to perform at higher level. Moreover, ‘stars’ are ideal people to have in organisations. But retaining stars performers is very difficult. They have high potential backed by high levels of performance. Their lookout is always for greener pastures. Thus, Potential appraisal is more intricate and complex, so also the performance appraisal.

The time for a potential appraisal is not fixed: potential assessment is conducted under the discretion of the managers and supervisors. Unlike performance review, it does not happen periodically in every organization. Generally the managers exercise it, when an employee achieves a certain milestone, or completes a year successfully or is planning to change jobs due to some reason or so. Usually, the recommended time for potential appraisal is within six months.

Potential appraisals commence and end with a meeting between the two parties: To start with, at the first meeting, the manager can list the required abilities to deliver additional tasks. He also can recommend various ways to attain them. He may suggest in-house training programmes, external workshops, etc for achieving such additional tasks. The latter meeting usually happens after six months. It can be a sort of review to test, whether the skills have been rightly acquired and various abilities adopted are used in the improvement area or not. Then a plan is chalked out to chase the potential and taste the growth in the organization.

Potential appraisal does not ensure promotion: Normally, potential appraisals are meant to facilitate people’s growth in an organisation. The results of such assessment can be used for recommendation of growth plan that shows a bigger picture to the employees. It infuses enthusiasm within the employees to sharpen their abilities. Training requirements of the employees can also be inferred and succession plan for future can also be drawn from potential assessment of people.

PERFORMANCE COUNSELLING

The performance counselling is the process of helping an employee to analyse his job related performance and its outcomes over a predetermined period. It identifies the ways and extent to which he and factors other than him are responsible for the performance outcomes. Such an analysis results in identifying ways and means of improving the effectiveness of the counsellee for the next performance period. Performance counselling is a dynamic process. It focuses and aims at strengthening the "counsellor- counsellee" relationships and helping the counsellee to improve his effectiveness. Primarily, the counselling techniques are primarily used to help employees deal with personal problems they encounter in the process of achievement of these goals. It includes issues such as substance abuse, stress management, smoking cessation, or fitness, nutrition and weight control. A survey conducted by the centre for HRD at XLRI, Jamshedpur, reveals that out of 53 organisations 41 require their executives to counsel their subordinates. 27 of these 41 require their executives to counsel their subordinates as often as they need. 32 percent of 41 required their executives to counsel their subordinates once a year. This survey entails that there is a demand of performance counselling as part of corporate life. However, counselling is becoming a part of the executive life more on paper than in practice except few organisations like Larsen and Toubro Ltd, and State Bank of India, where executives are continuously trained to have a performance review and counselling skills and required to have discussions with their subordinates.

Performance counselling is the help extended by a manager to his subordinates to analyse their performance and other job behaviours. The purpose of such counselling is to increase their job effectiveness. Essentially, it focuses on the analysis of performance on the job and helps in identifying training needs for further improvement. Performance Counselling is a crucial activity that helps employees to know themselves, their own strength and weaknesses as well as their bosses better. Performance counselling helps the counsellor and the counsellee to understand themselves, each other and their environment better. Thereby it contributes to individual and joint effectiveness. Since providing performance related feed back is an important component of performance counselling, it accelerate improvement in performance, helps in acquisition of new skills, stimulates behaviour changes by overcoming all sorts of personal shortcomings.

Conditions for effective counselling

Climate of openness and trust: An organisational climate of reasonable degree of trust, confidence and openness is inevitably essential for effective counselling. Counselling will be ineffective without a trusting culture and trustworthy relationship.

Empathetic attitude of Management: Effective counselling encompasses with a general helpful and empathetic attitude of counsellor towards counselllee.

Uninhibited Participation by subordinates: The subordinate should feel free to participate in the counselling process without fear or inhibition. It should facilitate two way communications between supervisors and subordinate strengthening dyadic relationship.

Mutual goal setting: performance counselling basically focuses on the counsellee’s achievement of the performance goals that have been set both by the employee and his reporting officer. Without Joint goal setting and performance review, counselling does not achieve its purpose.

Focus on work oriented behaviour: performance counselling is helpful and serve the purpose if the focus is kept only on work related behaviour and deficiency. Care must be taken to prevent the discussion into other personal and personality problems.

Focus on work related problems and difficulties: performance counselling is not related only to the achievement of goals, but also the contextual problems in achieving or not achieving the goals. Analysis of performance ought to be the basis of counselling.

Avoidance of discussion of salary and other rewards: performance counselling may not serve its purpose if the discussion includes salary raise, rewards, etc.

Performance counselling must be periodic, comprehensive and planned. The basic purpose of counselling is employee development. It is an educative process and aims at the development of counsellee as well as the counseller. Performance counselling needs to be taken seriously and must be followed up during post-performance counselling period.

Performance Counselling Phases: the performance counselling is done with the following stages.

Rapport Building: This step is very necessary as it generates the necessary confidence in the subordinate and assures him of his superior’s genuine interest in helping him. In the rapport building phase, a good counsellor attempts to establish a climate of acceptance, warmth, support, openness and mutuality that facilitate the employees to open up frankly, share his perceptions, problems, concerns, feelings etc. The subordinate must be made to feel wanted and that his superior is genuinely interested in his development.

Exploration: During this stage the counsellor puts to the subordinates various questions, which may elicit elaborate information on the latter’s achievement, strengths, failures and short comings. The object is to make the subordinate himself to introspect and define his strengths and weaknesses. Questions are asked that help the employees focus on his problem since problem identification is a critical step in planning for improvement. To help the employee make a correct diagnosis of the problem, open-ended questions may be asked. For example, if an employee’s problem is that others do not co-operate with him, the counsellor may narrow down the problem to the employees’ interpersonal relationship with other individuals then help the employee understand what he does or says to his colleagues which is making it difficult for him to win their co-operations.

Action Planning: Counselling interviews should end with specific plans of action for development of the employee. The main contribution of the superior in this phase is in helping the employee think of alternative ways of dealing with a problem. For example, in case of an employee whose relationships with colleagues are poor, the superior may suggest "What three things could he do in the coming week in order to improve his relationship with X?" After helping the employee brainstorm, the superior may also add more alternatives to the solutions already generated. Finally the superior may render some assistance in helping the employee implement the agreed upon action plan. Often good counselling sessions fail to produce effective results due to lack of follow up.

Processes in Performance Counselling

Feedback: It is extremely important that the feedback is communicated in a manner that produces a constructive response in the subordinate. Feedback should be descriptive and non- evaluative. It must focus on the behaviour of the person rather than on the person himself. The intent should be clear to the employee so that, some specific behaviour is being rejected or criticized not the employee as an individual. To convey feedback, it is generally desirable to back it up with few examples of actual events. Care must be exercised so that subordinate will not misinterpret it that the superior is systematically building up a well-documented case against him. Feedback should be given at the first opportunity when the employee is in the receptive mood and most importantly feedback should be given continuously so that the subordinate develops an ability to accept and act upon the feedback and moreover feedback should be checked and verified.

Pre-Interview Preparation: In the context of mutually agreed upon job responsibilities, the employee’s background, education, training and experiences is reviewed during pre-interview preparation phase. The strengths and development areas of employees that need to be discussed with the employee as well as the areas that need attention during the next review period are identified. The employees must have sufficient advance notice for the interview so that they can have enough time for their preparation.

Interview

It must be informal and friendly. The purpose of the discussion should be communicated with utmost clarity. The employee too must be encouraged to appraise his own performance and tell his own plans so that suggestions for his development can be provided easily with a follow-up action.

Performance Metrics

A performance metric is a measure of an organization's activities and performance. Performance metrics should support a range of stakeholder needs from customers, shareholders to employees. A metric is nothing more than a standard measure to assess one’s performance in a particular area. Metrics are at the heart of a good, customer-focused process management system and any program directed at continuous improvement. The focus on customers and performance standards show up in the form of metrics that assess one’s ability to meet customers’ needs and business objectives. Traditional performance measures, such as profit performance, return on investment or earnings per share, provide reasonable estimates of whether a company achieves its ultimate goals of making profits, but do not reveal how the business achieves this position. However, performance metrics professionals choose measures that have little value, which is referred as the "measurement inversion". For example, metrics seem to emphasize what organizations find immediately measurable even if those are low value and tend to ignore high value measurements simply because they seem harder to measure whether they are or not. To correct for the measurement inversion, "value of information analysis" needs to be introduced in the process so that metrics can focus on high-value measures.

Effective Performance Modelling

An effective performance model is one which allows senior management to be confident that the end results are not guess work but a summation of all the different activities and process, given an attainable standard of performance. The requirements of such model are as follows:

Relevant relationships: Process and activity metrics must form a chain of co-relations leading to the ultimate end results of enhancing profits, brand equity and market valuation.

Measurability: Data for the Metrics can be accurately collected in a timely manner without undue cost.

Comprehensible: It must be easy to understand and impact on the effectiveness of other process and the end results.

Actionable: It must be actionable with a set of corrective actions.

Motivating: It must be motivating, make people to act positively.

Automation complaint: Data collection and analysis should be automated so that employees do not have to be diverted from their main activity into Data collection and analysis.

Summary

Performance appraisal, potential appraisal and performance management reinforces HRP in an organisation. In this era of technological change, global competitiveness, organisations are constantly required to renew and update skills of their people or else they are likely to encounter the problems of manpower obsolescence, which among others, will call for downsizing or rightsizing. While performance appraisal address the skill gap.

Review Questions