Performance Management and Performance Appraisal
Category : Effective Management Styles
PERFORMANCE MANAGEMENT AND PERFORMANCE APPRAISAL
The central tenet of performance management and performance appraisal is the word performance. The Merriam Webster dictionary defines performance in many ways. Two among these definitions are accomplishment of something or working effectiveness. Performance, on the one hand, is the act of carrying out or accomplishing something such as a task or action while, on the other, it is also the way in which somebody does a job as judged by its effectiveness. Within an organisation, there are three levels of performance: organisation, process and individual. The first level deals with the organisation as a whole, encompassing its strategies, goals and measures. The main work of the organisation occurs in the second level which is multifunctional. Where individuals, who find themselves part of more than a single process, perform in relation to others make up the third level (1990). According to(2007), these three levels as well as the interrelationships of these levels serve as the vantage points of an organisation.
As such, performance accrues competitive advantage or the position that any firm occupies against its competitors. According to (1985), the basis of above-average performance within any given industry is sustainable competitive advantage. He also argued that a firm can only achieve sustainable competitive advantage when its value-creating processes and position have not been able to be duplicated or imitated by other firms. On the organisation level, competitive advantage could be achieved if the company has the ability to meet customer needs, compete in the marketplace, carry out strategies and achieve goals. Performance at this level is higher and more strategic. If there are internal systems and processes that are well-established to achieve goals, competitive edge is attainable in the performance level. Performance is further honed by means of continuous improvement strategies, Six Sigma efforts and other similar initiatives. Competitive advantage at individual levels centers the collective performance resulting to organizational process that contributes to the attainment of organizational goals ( 2007).
As companies grow and move into the schema of complicated business environment, the focus is on developing strategies that will address various threats, challenges and problems both internal and external while at the same time exploring new opportunities that the business environment provides. These organisations also realized that they have to invest in the most important element of the business – the performers. One of the leading strategies that companies engage into is the management of performance of the internal customers or simply known as the employees. (2000) states that performance helps organizations sustain or improve performance, promote greater consistency in performance evaluation, and provide high-quality feedback. As well, it helps organizations link evaluations to employee development and to a merit-based compensation plan. Moreover, performance management form a basis for coaching and counseling, permits individual input during the evaluation process, and allows for a blend of qualitative and quantitative expectations of job demands and factors that reveal how well the job is done.
(2002), on the other hand, relates performance management as the integration of performance appraisal systems with broader HRM systems as a means of aligning employees’ work behaviors with the organization’s goals. Thus, a performance management system consists of the processes used to identify, encourage, measure, evaluate, improve, and reward employee performance at work. Performance appraisal, as defined by (2002), is the process by which an employee’s contribution to the organization during a specified period of tine is assessed. The author also contends that performance appraisal is treated as an evaluation and development tool, as well as a formal legal document as it review past performance, emphasizing positive accomplishments as well as deficiencies and drafting detailed plans for future development. Further, the performance evaluation also serves a vital organizational need by providing the documentation necessary for any personnel action that might be taken against an employee (2002).
Common Performance Appraisal Methods
Six of the common performance appraisal methods are: Critical Incidents File, Rating Scale, Behaviorally Anchored Rating Scales (BARS), Ranking and Management by Objectives (MBO). The Critical Incident File refers to the performance appraisal method wherein the manager jots down the positive and negative performance behaviors of employees throughout the performance period. The file is a form of documentation it contains brief commentaries regarding noteworthy events in the working life of an employee. However, it tends to be bias because of its individualistic nature and dependent on the competence of the manager. Second, rating scale is a form on which the manager simply checks off employee’s level of performance including areas of quantity of work, dependability, judgment, attitude, cooperation and initiative. One of the main advantages of the rating scale is the ease of administration and familiarity but might conform to preferences however.
The combination of Critical Incidents File and rating scale make up BARS. The strengths of BARS are it is more accurate and objective than the two methods separately, leading to clearer standards when good BARS are developed. However, BARS has its legitimacy under scrutiny because the effectiveness of performance is being measured by several statements that describe the performance of an employee. It is the manager who will select one that best describes the employee thereby having bias while doing so. Almost similar to the process of BARS is the ranking scale but the employees are evaluated from best to worst using such method. The weakness of this method, however, is the comparison among the employees instead of against standard measurement. Nevertheless, ranking method explicitly considers the opportunity of identifying who needs improvement.
MBO is the process of jointly setting objectives for the employees by the employees themselves and the manager. MBO is also a periodic evaluation of performance and reward according to the results. In an MBO system an employee meets with his or her manager, and they collectively set goals for the employer for a coming period of time. These goals are usually quantifiable, they are objective, and they are usually written. During the specified timeframe, the manager and the employee periodically meet to review the employee’s performance relative to attaining goals. At the end of the specified period, a more formal meeting is scheduled in which the manager and employee assess the actual degree of goal attainment. The degree of goal attainment then becomes the individual’s performance appraisal ( 2002)
MBO has its strengths and weaknesses. The strong points of this performance appraisal methods centers the employees’ involvement in setting performance objectives and increases the motivation required to reach those objectives. Since it is entirely job-centered, such method offers an objective, factual basis for measuring accomplishments. It establishes the appraiser as a facilitator of performance rather than a critic of performance and assures the organization that all employees are working toward a common purpose. Finally, MBO supports psychological concept that people will exercise self-direction and self-control in the accomplishment of organizational aims that they have participated in setting (2004).
On the other hand, there are also weaknesses inherent to MBO. First, MBO is an organizational philosophy and cannot operate at one organizational level without operating at all levels. As such, MBO cannot be implemented at all organizational levels simultaneously, nor can it be implemented from the bottom up – it must begin at the very top of the organization and works its way down. It also requires a total and sizable commitment of management support, interest, and time if it is to succeed. MBO is not applicable to all types of jobs. Individuals performing routine, repetitive, or machine-paced jobs are better appraised by another method. Finally, Employees require extensive training before they normally respond in a positive way to MBO ( 2001 ).
A notable example of a company which makes use of MBO as the performance appraisal is the Hewlett Packard, a multinational company. The activities of HP employees were guided by a comprehensive system of management by objectives (MBO). The performance appraisal system starts with the establishment of long- and short-range objectives derived from company and group objectives. At each company level, overall objectives were communicated and subunit objectives were negotiated. HP lets the employees decide on how they would accomplish the goals that they have set. The goals were made to interconnect horizontally and vertically throughout HP. Although the top management is the one who initiates the process, every employee is given opportunity to influence the setting of objectives. Employees are encouraged to suggest on how they can contribute to the success of the business unit
Features of a Successful PM System
As (1998) put it, performance management is also a strategy that relates organizational endeavors embedded in the context of human resource (HR) policies, culture, style communication systems into the individual performance objectives. A fully-realized performance management is a holistic process, but for this very reason, such process is complex and capable of being misunderstood ( 2005). Based on these definitions, performance management purports on establishing a culture, sharing expectations, creating interrelationships and a joint-holistic-continuous process which also involves planning and measurement (2005). There are specific PM systems that are bound to be successful because of specific features.
Measurability is the first feature, objectivity versus subjectivity, that is. Objective measures include hard criteria as sales, units produced, error rate, personnel data, absence rate, turnover and tardiness. In contrast, subjective measures focus on performance measures and their goal is to accurately assess performance. Success PM system strikes a balance between these two elements and ensures both objectivity and subjectivity, at the credibility of results and stability of the system itself. Opportunity-biases occur and the performance is modified by the current organizational situation . In addition, the organisations must take into account the downstream consequences of selected performance measure, the upstream consistency and the compatibility of measures to skills, capabilities and organizational culture ( 2006).
Organizational support includes basic work conditions, resources, facilities and inputs from internal customers among others. As part of PMS, such factors must enable individual employees to do better and deliver expected results. The need for these employees to do such, one must have competencies, motivation and organizational support. If these support mechanisms does not exist in the organisation, the organisation cannot expect to implement an effective PMS and to arrive at desirable results (2004).
Considering that it is closely tied up with the HR, a PM system to be effective also requires the competencies of leaders and HR employees. McKenna and Beech said that “within an organisation of reasonable size, one can expect a personnel function”. And, organisations would not pay leaders “that pay good behaviour in fishes. Leaders must teach their respective teams how to fish and create a corporate culture grounded in reality.” As such, leaders are also accountable for the success of the PMS so, they must be also competent in order to teach competency towards the team. Further, (2004) relates that “the biggest bottleneck in PMS implementation lies on the competencies and incompetence of the HR department”. The business sense and the involvement within the main business must be understood and lived-by by the HR employees (2004). As overseers, they are the ones who must understood the competitiveness and the organization's purpose more before they can make everybody else follows and do the same. This initiative will reflect in PMS.
Alignment of organizational goals vis-à-vis individual goals is also critical. All efforts must align according to the purpose and objectives of the organisation. Mission, vision, goals and organizational strategies must be defined and clearly understood at all levels. In particular, the individual tasks must contribute to overall plans of the organisation and, in return, plans should create performance standards such as quantity, quality, time and cost. These standards should then be translated into performance for each Moreover, misalignment puts excessive pressures on the top management, though, it also identify the maturity level of the organisation ( 2004) once reflected in the PMS.
There are considerations in choice of a schema as: cost, usefulness in employee development, usefulness in administrative decisions and validity . Evidently, the pre-implementation plan is critical; however, most companies fail to design a customized scheme. Most employers and HR employees seem to overlook and undermine the importance of this stage. They fail to answer the who, the why and the how. In addition, improper PMS is also evident in standard-setting, appraisal method and the ‘kindergarten report card’. Performance standards must be set according to the level of expertise. A lot of times, though, HR managers summaries performance in a quick, easy way for fast completion which likely creates employee hostility rather than improvement. The managers also rates employees base on numeric scales then get the average performance rating that supposed to mean something
Organisations seek informations to improve systems and on which to base rewards. On the other hand, employees seek valid performance feedback and extrinsic rewards. These conflicts are anathema to the requirements of an effective PMS as relevance to job performance, distinguishing high and low performance and fairness and acceptability. Moreover, the organization's measures, standards and methods might increase the conflict within the workplace A more dense conflict arises regarding the internationalization initiatives of Irish organisations. Contemporary trends and Labour changes implicate HR functions including employee attraction and retention, job design, employee motivation, reward systems and employee relations
Effective management of performance is a source of sustainable competitive advantage. For a firm to achieve this, performance management system and performance appraisal method must be used not just as evaluation and documentation tool but also as a strategic tool. In this way, there will be a holistic analysis of performance at organizational, process and individual levels.
TRAINING AND DEVELOPMENT
Organizational learning and development (L&D) is not in its infancy. In fact, L&D is one of the imperatives of human resource management as it can improve performance at individual, collegial and organizational levels. As the process of ‘increasing one’s capacity to take action, organisations are now increasingly becoming particular with organizational learning and therefore collective development. Organizational learning, on the other hand, refers to the “efficient procedure to process, interpret and respond to both internal and external information of a predominantly explicit nature. According to (1999), the emergence of the concept of organizational learning is central on the hitherto idea that prior advocacies of learning are tended to its commercial significance and are lacking of empirical information on learning processes.
Strategically, organizational learning, which makes use of training and development (T&D) as one of the several responses, deals with the acquisition of understanding, know-how, techniques and practices. These intellectual intangibles can be translated into an organizational resource through the people that acquire, infer and utilize such towards the achievement of the organisation-wide L&D ( 2006.) T&D are planned learning experiences which teach employees how to perform current and future jobs more effectively. (2002) emphasize that training focuses on present jobs while development prepares employees for possible future jobs. Basically, the objective of training and development is to contribute to the organization's overall goal.
Changes in Approaches of HRD
Human resource development (HRD) plays an important role in modern organisations. As (1998. ) put it, as “an organized learning activities arranged within an organization in order to improve performance and/or personal growth for the purpose of improving the job, the individual, and/or the organization.” Such definition purports the three important notes: the personal development (individual), professional development (job), and the organizational development (organization). Increasingly, HRD and T&D become hierarchical. (1998) maintain that the presence of formal hierarchy influences systems thinking and organizational learning. In reality, the self-select role of employees thereby assumes an organizational title, an associated status, apposition in the hierarchy and role responsibilities
The professional legitimacy of T&D had been also critical as it requires the increased ‘educational’ base. As puts it, ‘managerial learning’ is one of the major institutional barriers to making investments in organizational learning. The era of intense competition and the clash for competitive advantage calls for broader and deeper skills bases. Beyond the traditional division of labor, integrationist would provide the employees the incentive to cooperate in contributing their skills and efforts toward the achievement of common goals (2001) made mention that T&D could be made more plausible when organisations use their knowledge and experience to improve organizational task performance. Learning involves knowing organizational rules, procedures, operating manuals, strategies, norms behaviors and, in general, the culture that governs the organisations
Moreover, evidences prove that leadership style influences the incidence or quality of the T&D schema because leadership structure is a determinant of the feasibility and quality of T&D initiatives. , (2006) argue that transformational leadership was associated with more intensive organizational learning activity with a stronger learning facilitative culture than transactional leadership For structuring, these are the organizational structure itself, norms (policies and procedures), roles, technology leadership, education/training/development and rewards and recognition. Making sense to this are shared context (mission, objectives and goals), language and symbols, values and assumptions and schemas and scripts
(1987) asserts that the tripartite sharing of responsibility is the crux of a more effective learning process. Organizational learning is the process by which organisations obtain and use new knowledge, tools, behaviour and values, and it happens system-wide. At all levels, newly learned knowledge is translated into new goals, procedures, expectations, role structures and measures of success. As such, the more learning is built into the culture of the organisation, the more likely it is that the kinds of task and personal learning will take place.
Nowadays, the trend increasingly focuses on the concept of T&D as an integral tool in accelerating the competitive advantage, innovation and organizational effectiveness. As organizational learning leverage organisations in creating knowledge repository, identifying and codifying competencies and routines which includes acquiring, storing, interpreting and manipulating information from within and external to the organisation, the way people approach their work through sharing processes generates quality performance for both individuals and the organisation (, 2003,). To simplify, learning is the dynamic process that manifest itself in the continually changing nature of the organisations. These are exemplified by innovation, collaboration, culture shifts and high morale.
Aside from competitive intelligence and technical expertise, there are also organizational capabilities that are being tap through T&D. Leadership, organizational learning and employee productivity comprise organizational capabilities. Through organizational learning, leaders communicate, direct, negotiate, influence, adapt and most of all gain employee commitment ( 2001.) Though organizational learning is inclined on the ability to learn from competitors, it is through organizational learning too that employees become more productive and more committed. This happens when they believe that the management has the skill to lead them to success and to provide them with knowledge and resources they need to meet customer requirements.
Organizational T&D is responsible for talent management as it systematically develop learning processes, providing employees with learning opportunities that develop their capabilities, realize their potential and enhance employability. Not only that, T&D is also central on yielding to high quality people and providing development opportunities to managers to increase their capacity in contributing to the achievement of the organizational goals (2003). And as already mentioned, T&D should facilitate the lessening of restrictive job descriptions while also encouraging the cross-functional cooperation. The supportive atmosphere augments the commitment two-way resulting to productive individuals who feel a sense of ownership and empowerment (1998).
Roles of Different Parties in T&D
The reasons and motivation behind the proposed training programs are:
1. To improve performance – in order to correct deficiencies in the performance of the staff, training must be conducted. One of the rationales for the training programs is to remove current and avoid future career deficiencies. Although training cannot solve all the problems of ineffective performance, a sound training program is instrumental in minimizing those problems.
2. To update employees’ skills – in order to keep up with the advances and changes in the external and internal environment, the skills of the employees must be updated. Employee skills must be updated through training so that changes are successfully integrated into the organization.
3. To promote job competency – in order to update the knowledge, skills and abilities of a newly promoted employee, training is necessary. Training can be used to fill the gap between the new employee’s predicted and actual performance.
Another rationale for the design and the choice of training methodologies are the principles of learning. The recommended training programs are built around the learning principles that are discussed below. Learning can be defined as knowledge obtained by self-directed study, experience, or both; the art of acquiring knowledge, skills, competencies, attitudes, and ideas retained and used; or a change of behavior through experience 1989 cited in 2000). (1990) believes that learning has little to do with taking in information; rather it is a process that enhances capacity. Learning is about building the capacity to create that which one previously could not create. Principles of learning are the guidelines to the ways in which people learn most effectively. The more the principles are included in training, the more effective training is likely to be ( 1990).
1 Motivation – in order to learn, a person must want to learn. In the context of training, motivation influences a person’s enthusiasm for training, keeps attention focused on the training activities, and reinforces what is learned.
2. Behavior Modeling – majority of what an individual learns is gained through observation of others. One will imitate other people’s actions when they lead to desirable outcomes for those involved (1990).
3. Participation – another way to inspire trainees is through their active participation in the training process. Activities that facilitates active participation enable trainees to become directly involved in the act of learning. Learning usually is quicker and more long-lasting when the learner can participate actively. Participation improves motivation and apparently engages more senses that help reinforce the learning process ( 1990).
4. Repetition of Practice – regardless of individual differences and whether a trainee is learning a new skill of acquiring knowledge of a given topic, the person should be given opportunity to practice what is being taught. Practice is also essential after the individual has been successfully trained ( 1990). There are two aspects of practice – active practice and over learning ( 1989). Active learning allows the trainees to repeatedly to perform the task or use the knowledge being learned. Over learning occurs when trainees are given the opportunity to practice far beyond the point where the task becomes ‘second nature’ and is said to be ‘over learned’.
5. Application – training is useless unless learning can be applied.
Benefits of T&D
Thereby, training and development is beneficial not just for the organisation itself but also to the individual employees. On the one hand, training and development leads to improved profitability and/or more positive attitudes toward profit orientation, improves the job knowledge and skills at all levels of the organisation, improves the morale of the workforce and helps the employees identify with organizational goals (1990). On the other, training and development benefits individual employees through helping them make better decisions and effective problem solving, assisting in encouraging and achieving self-development and self-confidence, helping an employee a person handle stress, tension, frustration, and conflict, increasing job satisfaction and recognition and moving the person toward personal goals while improving interaction skills (1990).
Examples of Successful T&D Programmers
Since its inception, training at Hamburger University has emphasized consistent restaurant operations procedures, service, quality and cleanliness. It has become the company’s global center of excellence for McDonald’s operations training and leadership development. At McDonald’s, the training mission is to be the best talent developer of people with the most committed individuals to Quality, Service, Cleanliness and Value (QSC&V) in the world. Our strong commitment to the training and development of our People has resulted in many “firsts” and honors, including being…
- The first restaurant company to develop a global training center
- The only active QSR currently to receive college credit recommendations from the American Council on Education (ACE), the United States’ oldest and most recognized unifying body for higher education
- Continually recognized for excellence in training