Performance Management - 1 ( Meaning - Objectives - Evolution)

 

 Meaning, Advantage- Disadvantage, Objectives, Evolution, Components,

 

What is a Performance Management System?

A performance management system is a continuous methodical process by which the human resources arm of a company makes personnel participatory in advancing the effectiveness of the company, by achieving the stated vision, mission, and objectives of the organization.

·         Performance management encapsulates key human resource functions like frequent communication, employee training for improved performance, acknowledgment of good work, presentation of benefits for improved performance, goal-setting, continuous progress review, and real-time feedback.

·         A performance management system helps leaders continuously track and coach employee performance. ·         These systems ensure that employees are working effectively toward aligned organizational goals, but they help leaders develop their talent toward optimal performance.    ·         Certain features within an effective performance management system help leaders stay on top of employee performance to continuously motivate and engage them, which reduces turnover and maximizes business outcomes.

 

The term performance management gained its popularity in early 1980’s when total quality management programs received utmost importance for achievement of superior standards and quality performance. Tools such as job design, leadership development, training and reward system received an equal impetus along with the traditional performance appraisal process in the new comprehensive and a much wider framework. Performance management is an ongoing communication process which is carried between the supervisors and the employees through out the year. The process is very much cyclical and continuous in nature. A performance management system includes the following actions.

• Developing clear job descriptions and employee performance plans which includes the key result areas (KRA') and performance indicators.
• Selection of right set of people by implementing an appropriate selection process.
• Negotiating requirements and performance standards for measuring the outcome and overall productivity against the predefined benchmarks.
• Providing continuous coaching and feedback during the period of delivery of performance.
• Identifying the training and development needs by measuring the outcomes achieved against the set standards and implementing effective development programs for improvement.
• Holding quarterly performance development discussions and evaluating employee performance on the basis of performance plans.
• Designing effective compensation and reward systems for recognizing those employees who excel in their jobs by achieving the set standards in accordance with the performance plans or rather exceed the performance benchmarks.
• Providing promotional/career development support and guidance to the employees.
• Performing exit interviews for understanding the cause of employee discontentment and thereafter exit from an organization.

 

Statistics About Modern Performance Management Systems

• 80% of the youthful generation wants instant gratification rather than a formal review: An annual review leaves a 12-month gap during which period outstanding achievements would have been forgotten due to the passage of time.

• 90% of performance reviews are emotionally and mentally distressing: The intense focus put on recent events and often discouraging feedback damages the person’s self-confidence. A threatening situation like this actually impairs the individual’s brain function according to research carried out on the brain.

• Only 5% of HR leadership find performance reviews satisfactory: In actual fact, 95% of managers are displeased with long-established performance management customs.

• 51% of employees are of the opinion that annual reviews are grossly inaccurate: Considering the preponderance of events that occur within a space of 6 months to a year, it may not be out of place to say annual reviews may be irrelevant in this regard. A singular review cannot adequately capture and cover all angles fairly. Consequently, such reviews tend to be incorrect, prejudiced, and demotivating to staff.

 

Advantages of a Performance Management System Improved consistency: A performance management system is designed with a carefully selected set of parameters suited to the company’s stated objectives. This system is equally applicable to and cuts across all departments giving rise to a consistent set of expectations required to be met on the part of the employee. High performers and training: It is a versatile means of objectively recognizing great talent and determining training requirements per time. Effectiveness of training: A training program’s degree of effectiveness can easily be ascertained from the level of growth and development in organizational staff. Motivation boost for employees: It is an avenue to encourage staff by celebrating their wins. Employee retention: A key metric of a performance management system is seeing to the satisfaction and fulfillment of employees which automatically results in retention. Saving time: The process which is procedural and has stages gives rise to feedback which can lead to a mid-course correction. This saves both management and the company precious time which could have been lost due to errors only discovered at an advanced stage. Full performance reviews: This gives an overall impression which is often very accurate, about the true position of things on the ground with respect to employee interpersonal relationships. Performance appraisal fairness: The objective and structured manner in which an appraisal document is prepared to serve to create a level playing field for all staff as numerous factors are taken into consideration. Automated performance reviews: The advent of human resource-related software has greatly helped to automate the process.   What are the Disadvantages of a Performance Management System? Inconsistency: Busy schedules can make us lose focus, recall only negative aspects and not acknowledge the high points of employees under us consistently. Prejudice: Human frailty makes it near impossible to keep out bias from the process; only a structured objective process can mitigate or eliminate this. Time Consuming: It is very tedious drafting out documentation having to do with employee appraisals considering the number of employees and key points to be captured in the document. Discouragement: If the undue emphasis is placed only on areas where employees fell short the tendency is for them to be discouraged and give in to despair. It is best to include and reinforce positives also, notable achievements, and progress.

 

Common Problems with Performance Management & Their Solutions

 

Common Problems with Performance Management Organisational performance management systems are the best way to measure and manage employee performance. However, not all businesses have performance management software that either work well or delivers optimal value to the company. Here are seven common issues with performance management systems to focus on:    Competencies/Skills gaps: Organisations are unaware of the skills gaps in individuals, positions, or groups that they manage. As a result of this lack of awareness, managers are often blind to the skills possessed by their employees, and those needed by the organisation. Irregular performance activities: There is a lack of regular performance review and management activity. As a result, organisations remain unaware of performance issues festering or entrenched within the workforce – until the next scheduled performance appraisal. Lack of Objective Assessment: Too often, employee performance is left to the opinions of a manager. Needless to say, even the most effective manager’s objectivity may be questioned if they deliver less than glowing evaluations. Irrelevant job descriptions: In most organisations, the job description is the primary tool against which performance is measured and managed. With irrelevant or vague job descriptions, employees are left guessing what their performance expectations are, and managers struggle with managing those vague expectations.  Inadequate feedback: It’s insufficient, as a performance management measure, to only let employees know how well or poorly they perform. Feedback must not only review and highlight performance gaps but must also include clear paths to performance improvement. Inadequacy of formal appraisal systems: One issue with performance management systems is that they are often too formal. These systems are inadequate because they are typically scheduled as an annual or bi-annual process and often conducted using a template/cookie cutter-based system. Over-reliance on solely formal appraisal systems is often inadequate when it comes to timely and in-the-flow-of-work performance management. Absence of a “plan” for addressing below standard performance:  Highlighting performance gaps is of no value unless there’s a plan to address those gaps. Lack of a performance improvement plan leads to a wasted performance management opportunity.   Addressing these issues can not only lead to improved manager and employee performance but can also result in enhanced organisational performance. But, how do companies address these challenges?     Competencies/Skills gaps: Competency gaps must be highlighted for improvement and better performance management, and then proactively addressed. Appraisers may suggest more training, better supervision, or even assign coaches and mentors to address such gaps. Irregular performance activities: As part of a robust performance management process, frequent appraisals, check-ins, and other feedback are essential. Don’t restrict performance improvement feedback to just annual/bi-annual cycles. Real-time feedback (in-the-flow-of-work) management (observe, instruct, encourage, coach, and evaluate) can lead to better performance at all levels.  Lack of Objective Assessment: Suggested tools to address objectivity in assessments include implementing systems such as 360-degree appraisal, on-the-job-assessment, management by objectives, peer reviews, and trait/behaviour-based appraisals. Irrelevant job descriptions: Clearly explain an employee’s role within a team and the larger organisation, discuss performance expectations, and ensure clarity around how performance is measured. As part of the job definition, set achievable and measurable (SMART) performance objectives. Link company goals to an individual's job description, and their performance against those descriptions. Inadequate feedback: The root cause of such inadequacy often lies in either cursory feedback (“Needs improvement” or “Work on communicating better”), or providing feedback long after a potentially “teachable moment” has passed. Giving concise, yet clear feedback, and across a broad spectrum of performance metrics, is a great way to address this issue. Inadequacy of formal appraisal systems: Performance management shouldn’t be primarily a “timed” or overly formalised process. When managers and supervisors act as front-line coaches, or “in the flow of work” or “in the moment” performance appraisers, their actions will have a significantly better impact on performance than the bi-annual or annual systems of measurement. Absence of a “plan” for below standard performance: As part of a performance management plan, implement a robust performance support system. Components of the plan include consultations and counseling, recommendations for additional training, suggesting refresher courses, continuous skills improvement, or assigning mentors.

 

Objectives of Performance Management   Performance management frameworks are designed with the objective of improving both individual and organizational performance by identifying performance requirements, providing regular feedback and assisting the employees in their career development. Performance management aims at building a high performance culture for both the individuals and the teams so that they jointly take the responsibility of improving the business processes on a continuous basis and at the same time raise the competence bar by upgrading their own skills within a leadership framework. Its focus is on enabling goal clarity for making people do the right things in the right time. It may be said that the main objective of a performance management system is to achieve the capacity of the employees to the full potential in favor of both the employee and the organization, by defining the expectations in terms of roles, responsibilities and accountabilities, required competencies and the expected behaviors. The main goal of performance management is to ensure that the organization as a system and its subsystems work together in an integrated fashion for accomplishing optimum results or outcomes. The major objectives of performance management are discussed below: To enable the employees towards achievement of superior standards of work performance. To help the employees in identifying the knowledge and skills required for performing the job efficiently as this would drive their focus towards performing the right task in the right way. Boosting the performance of the employees by encouraging employee empowerment, motivation and implementation of an effective reward mechanism. Promoting a two way system of communication between the supervisors and the employees for clarifying expectations about the roles and accountabilities, communicating the functional and organizational goals, providing a regular and a transparent feedback for improving employee performance and continuous coaching. Identifying the barriers to effective performance and resolving those barriers through constant monitoring, coaching and development interventions. Creating a basis for several administrative decisions strategic planning, succession planning, promotions and performance based payment. Promoting personal growth and advancement in the career of the employees by helping them in acquiring the desired knowledge and skills. Some of the key concerns of a performance management system in an organization are: Concerned with the output (the results achieved), outcomes, processes required for reaching the results and also the inputs (knowledge, skills and attitudes). Concerned with measurement of results and review of progress in the achievement of set targets. Concerned with defining business plans in advance for shaping a successful future. Striving for continuous improvement and continuous development by creating a learning culture and an open system. Concerned with establishing a culture of trust and mutual understanding that fosters free flow of communication at all levels in matters such as clarification of expectations and sharing of information on the core values of an organization which binds the team together. Concerned with the provision of procedural fairness and transparency in the process of decision making. The performance management approach has become an indispensable tool in the hands of the corporates as it ensures that the people uphold the corporate values and tread in the path of accomplishment of the ultimate corporate vision and mission. It is a forward looking process as it involves both the supervisor and also the employee in a process of joint planning and goal setting in the beginning of the year.

    

Evolution of Performance Management   The performance management process evolved in several phases. First Phase: The origin of performance management can be traced in the early 1960’s when the performance appraisal systems were in practice. During this period, Annual Confidential Reports (ACR’s) which was also known as Employee service Records were maintained for controlling the behaviors of the employees and these reports provided substantial information on the performance of the employees. Any negative comment or a remark in the ESR or ACR used to adversely affect the prospects of career growth of an employee. The assessments were usually done for ten traits on a five or a ten point rating scale basis. These traits were job knowledge, sincerity, dynamism, punctuality, leadership, loyalty, etc. The remarks of these reports were never communicated to the employees and strict confidentiality was maintained in the entire process. The employees used to remain in absolute darkness due to the absence of a transparent mechanism of feedback and communication. This system had suffered from many drawbacks. Second Phase: This phase continued from late 1960’s till early 1970’s, and the key hallmark of this phase was that whatever adverse remarks were incorporated in the performance reports were communicated to the employees so that they could take corrective actions for overcoming such deficiencies. In this process of appraising the performance, the reviewing officer used to enjoy a discretionary power of overruling the ratings given by the reporting officer. The employees usually used to get a formal written communication on their identified areas of improvements if the rating for any specific trait used to be below 33%. Third Phase: In this phase the term ACR was replaced by performance appraisal. One of the key changes that were introduced in this stage was that the employees were permitted to describe their accomplishments in the confidential performance reports. The employees were allowed to describe their accomplishments in the self appraisal forms in the end of a year. Besides inclusion of the traits in the rating scale, several new components were considered by many organizations which could measure the productivity and performance of an employee in quantifiable terms such as targets achieved, etc. Certain organizations also introduced a new section on training needs in the appraisal form. However, the confidentiality element was still being maintained and the entire process continued to be control oriented instead of being development oriented. Fourth Phase: This phase started in mid 1970’s and its origin was in India as great business tycoons like Larsen & Toubro, followed by State Bank of India and many others introduced appreciable reforms in this field. In this phase, the appraisal process was more development driven, target based (performance based), participative and open instead of being treated as a confidential process. The system focused on performance planning, review and development of an employee by following a methodical approach. In the entire process, the appraisee (employee) and the reporting officer mutually decided upon the key result areas in the beginning of a year and reviewed it after every six months. In the review period various issues such as factors affecting the performance, training needs of an employee, newer targets and also the ratings were discussed with the appraisee in a collaborative environment. This phase was a welcoming change in the area of performance management and many organizations introduced a new HR department for taking care of the developmental issues of the organization. Fifth Phase: This phase was characterized by maturity in approach of handling people’s issues. It was more performance driven and emphasis was on development, planning and improvement. Utmost importance was given to culture building, team appraisals and quality circles were established for assessing the improvement in the overall employee productivity. The performance management system is still evolving and in the near future one may expect a far more objective and a transparent system.

 

Components of Performance Management System (Criterion of developing an Effective Appraisal System,)   Performance Planning: Performance planning is the first crucial component of any performance management process which forms the basis of performance appraisals. Performance planning is jointly done by the appraisee and also the reviewee in the beginning of a performance session. During this period, the employees decide upon the targets and the key performance areas which can be performed over a year within the performance budget., which is finalized after a mutual agreement between the reporting officer and the employee. Performance Appraisal and Reviewing: The appraisals are normally performed twice in a year in an organization in the form of mid reviews and annual reviews which is held in the end of the financial year. In this process, the appraisee first offers the self filled up ratings in the self appraisal form and also describes his/her achievements over a period of time in quantifiable terms. After the self appraisal, the final ratings are provided by the appraiser for the quantifiable and measurable achievements of the employee being appraised. The entire process of review seeks an active participation of both the employee and the appraiser for analyzing the causes of loopholes in the performance and how it can be overcome. This has been discussed in the performance feedback section. Feedback on the Performance followed by personal counseling and performance facilitation: Feedback and counseling is given a lot of importance in the performance management process. This is the stage in which the employee acquires awareness from the appraiser about the areas of improvements and also information on whether the employee is contributing the expected levels of performance or not. The employee receives an open and a very transparent feedback and along with this the training and development needs of the employee is also identified. The appraiser adopts all the possible steps to ensure that the employee meets the expected outcomes for an organization through effective personal counseling and guidance, mentoring and representing the employee in training programmes which develop the competencies and improve the overall productivity. Rewarding good performance: This is a very vital component as it will determine the work motivation of an employee. During this stage, an employee is publicly recognized for good performance and is rewarded. This stage is very sensitive for an employee as this may have a direct influence on the self esteem and achievement orientation. Any contributions duly recognized by an organization helps an employee in coping up with the failures successfully and satisfies the need for affection. Performance Improvement Plans: In this stage, fresh set of goals are established for an employee and new deadline is provided for accomplishing those objectives. The employee is clearly communicated about the areas in which the employee is expected to improve and a stipulated deadline is also assigned within which the employee must show this improvement. This plan is jointly developed by the appraisee and the appraiser and is mutually approved. Potential Appraisal: Potential appraisal forms a basis for both lateral and vertical movement of employees. By implementing competency mapping and various assessment techniques, potential appraisal is performed. Potential appraisal provides crucial inputs for succession planning and job rotation.