Free «Performance Management» Essay

Introduction

In the face of recent challenges, modern companies change their approach towards performance management processes. Achievement of a sustained success requires constant implementation of fast and confident decisions, as well as improvement of organizational performance. It allows measure the value of the performance management (Axson 2010, p. 24). According to Armstrong (2006, p.1), the effective result is based on a common understanding of an agreed framework of planned goals, standards and competence requirements. There is certain confusion about the term performance management, which is sometimes confused with human resources and personnel systems, but it is much more encompassing because of involvement in decision making and calculated risk taking that manage the performance of an organization (Cokins 2004, p.1). While the performance of employees is an essential element in improving of an organization’s performance, in the broad framework of performance management, human capital management is just one component (Cokins 2009, p.9).

Aim of Performance Management

Armstrong (2006, p.2) states that the main goal of performance management is focusing on high performance culture which leads to responsible and thoughtful participation in the continuous improvement of business processes and the skills of each person. Such processes complement the contributions within a framework that is provided by effective leadership. The key is in aligning personal aspirations with company’s vision while identifying, measuring and developing the performance on the whole (Tobey & Benson 2009, p. 73).

Pulakos (2009, p. 22) points out that it is essential to split the main goals of a performance management system in order to achieve the maximum benefit. Concentration on decision-making or development one at a time helps avoid some of the problems and develop the most productive strategy. Thus, performance management can be defined as ‘the translation of plans into results’ (Cokins 2009, p. 9).

Characteristics of Performance Management

Performance management allows measuring output and its expectations. Therefore, it implies the continuous dialogue concerning achievements and objectives, requirements and plans. Pulakos (2009, p. 20) asserts promotions, bonuses, assignments and reductions serve as a basis for performance management system. Enhancing the skills of employees also stimulates their development.

Performance management is a continuous, flexible and evolutionary process that focuses on planning the future performance and improvements, rather than retrospective appraisal (Armstrong 2006, pp. 3-4).

Predictive analytics allow manage the anticipatory circumstances before the problem occurs. Consequently, a wide range of methodologies has to be implemented and integrated in order to complete the full vision of the performance management framework and lead to an effective strategy and result (Cokins 2009, p. 10).

The Meaning of Alignment

According to Armstrong (2006, p.2), one of the most fundamental purposes of performance management is to align individual goals to organizational vision and ensure that individuals possess and support corporate core values.

Alignment can be attained not only by guiding teams or individuals to a certain goal, but through giving an opportunity to formulate their own goals within the framework of the defined strategy and values of the company. Therefore, ‘responsibility is shared and mutual expectations are defined’ (Armstrong 2006, pp. 7-8). Facilitation of the alignment of organizational activity with performance requirements leads to the creation of highly effective human resource management (Tobey & Benson 2009, p. 73).

The Process of Performance Management

There is a significant difference between performance appraisal and performance management. The last one is a continuous and complex process whereas the appraisal has an occasional character. According to Armstrong (2006, pp. 9-10), the processes of performance management consist of:

• Planning: concordance of primary goals and competence requirements, creation of performance improvements and individual development plans.
• Acting: execution of certain actions that result in pursuing main objectives.
• Monitoring: observation of all activities designed to facilitate the attainment of the aim.
• Reviewing: assessment of results.

Pulakos (2009, p. 37) points out the eight steps of performance management though these processes may vary.

The first step concerns the establishment of goals of the company. It also deals with the organizational questions such as hierarchy and structural levels. Define of the primary objectives of the company is the first task that leads to the creation of an effective strategy.

The second step serves to explain the employees, in a form of discussion, what is being expected. At this point, the alignment of personal and corporate purposes is essential.

The third step is about the performance planning process, which should be based on constant feedback provision. It allows implement changes in case they are needed.

The fourth step implies the collection of employee’s perception of their performance, which provides a material for understanding the subordinates. Employees are also provided with an opportunity to contribute and enhance their input into the direction of company’s development.

The fifth step allows obtain performance information, which is often referred to as 360-degree feedback. The view on various aspects of employee’s performance provides a complete picture of his or her effectiveness.

The sixth step results in rating the employee’s performance. Both job behavior and results are taken into account.

The seventh step is about organizing formal review session where the results of assessment are declared.

The last step focuses on the employee’s appraisal and rewards. Promotions, bonuses or, vice versa, payment reductions are effective instruments for adjusting and stimulating the efficiency of employee’s work and involvement (Pulakos 2009).

Performance Management in Action

Nonetheless, performance management should not be referred to as a mechanic process based on occasional formal appraisals. The activities that are described above should be coherent to all aspects of the performance management process. Therefore, the high-performance culture and the alignment of individual objectives with company’s vision should be emphasized in a continuous and visible way. The key is to develop joined-up process, which performs monitoring of results and its effectiveness on a regular basis. Individual tasks are being adjusted according to new requirements that arise (Armstrong 2006, p. 19).

The last few years have seen an explosion in the introduction of new tools and systems designed to contribute to a company’s performance management processes. A new class of software that focuses on such objectives as planning, forecasting and reporting has appeared (Axson 2010, p. 224).

Such software holds the promise of helping companies to increase their profit and enhance their growth. There is a fundamental disconnect between corporate strategy and day-to-day activities resulting in being the problem for most organizations. As it was discussed before, at the executive level such topics as goals, initiatives, strategy and risks are discussed, but daily activities of these organizations are not connected to them. As a result, performance can be measured but not managed (Clay 2005, p. 62).

In order to realize the breakthrough performance management a certain list of actions has to be implemented. According to Clay (2006, p.68), there are numerous approaches to performance management. A purpose-built application, comprehensive management framework and scalable architecture are requirements of the critical system. The core competence and the focus necessary to deliver on these requirements will inevitably come from a specialist, not a generalist.

Cokins (2009, p. 71) points out that performance management is rather the assemblage and integration of existing improvement methodologies than a brand-new one. In order to obtain the maximum benefit, all of the methodologies must be seamlessly integrated and precisely synchronized. This integration is highly dependable on the company’s weaker spots and links; therefore, they should be taken into consideration. The starting point also depends on which of the performance management methodologies provides the fastest significant result. Thus, organizations embrace not just the narrow financial definition of dashboards and better financial reporting but attain the full vision of the performance management framework. In case executive leaders have communicated the essential strategy to their subordinates and are open to perform constant improvements and updates to their plans, managers and employees are able to act in a coordinated manner without wasted time and effort. Therefore, speed plays a crucial and vital role in communications that can result positively if the message received and understood. Performance suffers when managers and employees are obliged to react without knowing how to act in a certain situation.

The key to breakthrough performance management is coupling the capabilities of a Strategic Management System with performance metrics. While there are numerous approaches to performance management, the critical system requirements are a purpose-built application, comprehensive management framework, and scalable architecture. The core competence and the focus necessary to deliver on these requirements will inevitably come from a specialist, not a generalist (Clay 2005, p. 68).

Risk Management

Each implementation is being realized with an expectation to gain benefits. Nevertheless, not all these changes lead to a considerable improvement. In order to achieve the maximum potential level of performance, constant measurements have to be made. The results allow apply practically all the theoretical researches (Axson 2010, p. 27).

Risk is associated with new costs and, therefore, problems as additional expenses are not the usual subject of a budget. Not all companies can afford quantifying their risk exposure. It is not an easy and cheap investment, the development of a detailed and long-term plan which predicates possible future circumstances results in being a worthwhile. Although the global economic crisis of 2008–2009 has led to conclusions that such researches are conducted in vain, it allowed understand the value of explicitly addressing risk and uncertainty in all aspects of the performance management process (Axson 2010, p. 196).

When managers and employees have to react to unexpected circumstances, performance suffers vastly. Therefore, it is essential to provide unique measures in order to predict such situations. It is impossible to avoid them, but at least these problems can be handled with the low-loss result, which affects performance on the whole.

The integral parts of any effective performance management process are risk monitoring, its identification and management. Axson (2010 p. 197) emphasizes that success is being defined by those organizations that can anticipate and react best to changes in the marketplace.

Performance Measures and Assessment

It is impossible to improve performance without possessing information about its measurements. The process of comparison of defined expectations with the obtained results allows analyze the effectiveness of chosen strategy and development needs. Consequently, it provides the information required to identify strengths that should be enhanced as well as weaknesses that should be overcome. Performance management means encouraging employees to take responsibility for their actions and performance. It is impossible to realize unless they can measure, evaluate and observe the progress in order to facilitate the attainment of the aim.

In order to achieve this, there should be agreed and reliable performance measures or criteria for assessment. Measurement is a highly significant aspect of performance management. For the purpose of generating and providing feedback, it identifies where everything is conducted in a good way, so as to enhance the foundations for building further success, as well as determines the weak spots, so that corrective action can be taken (Armstrong 2006, p. 59-60).

In case an organization is interested in identifying and responding to the threats adequately, it is crucial to enhance intelligence into an organization’s performance management processes to assess the continued relevance of its products and services (Axson 2010, p. 200).

In a generic sense, performance management system must stimulate the use of certain means, in order to assist in the process of achievement of certain targets inherent to the framework (Broadbent & Laughlin 2009, p. 293).

Folen and Browne (2005, p. 663) assert that organizational performance has always exerted considerable influence on the actions of companies. Consequently, the ways and means of accurately measuring this performance is perceived as being an increasingly influential field of research for both organizations and academics alike. Indeed, in the last years or so performance measurement has been the peak of this activity.

The first places emphases upon the requirements of sound performance measures, while the second examines the recommendations that have been made regarding the design and development of performance management frameworks and systems. Recommendations that represent a spin-off from the first core area are those that attempt to document the process of selecting performance measures, which pre-suppose definite selection mechanisms are in place. Since the procedure of selecting a performance measure is, to a certain extent, a subjective process (often involving top management sitting around a table and choosing one measure from a number of alternatives) more research is required upon the actual selection activity (Folen & Browne 2005, p.664).

The term framework refers to the active employment of certain sets of recommendations: for example, a set of measurement recommendations may suggest the development of a structural framework or they may give rise to a procedural framework. A performance measurement framework contributes to the process of performance measurement system establishment, its clarification, determination of boundaries, specification of different views and dimensions (Folen & Browne 2005, p.665).

In comparison to performance management frameworks, there are remarkably few performance management systems in existence that have been academically developed. Most of them developed in companies. The basic requirements for a successful performance management system are two frameworks—one structural and one procedural; as well as a number of other performance management tools (Folen & Browne 2005, p.668).

According to McKenna, Richardson and Manroop (2011, p. 148), performance management and evaluation is widely accepted as a central feature of the human resource management system in contemporary organizations. It is viewed as representing partial interests though it was designed to benefit all employees. Performance management and evaluation systems are concerned with transmitting management's expectations about required performance to employees, who will then internalize those expectations as a form of control. In this case, the main purpose of mangers is persuasion of employees in order to accept the defined way in which work is done and the behaviors and identity of the person doing it (MvKenna, Richardson & Manroop 2011, p. 154).

There is a wide range of opinions stating what exactly should be measured –behaviors, results, or both.  In case the assessments are focused on behavior, it allows distinguish the most crucial dimensions or competencies that are required to perform effectively on a job. It can be the ability to communicate or think in a critical manner, to plan and organize, manage resources. An important aspect of this assessment lies in the definition of standards that describe levels of performance effectiveness in abovementioned activities. Pulakos (2009, p. 27) states that these standards can help managers to ‘match their observations of employee performance to an appropriate rating level in each area’.

It is worth mentioning that although results-oriented approaches to performance management are intuitively appealing, little consideration is given to how employees go about achieving their results. If a person is unhelpful and difficult to work with or cause problems, it is not relevant if he or she achieve outstanding results whereas performance is not effective. However, it also can be the other way round. An employee may have never accomplished something of immense importance, but at the same time this person possesses remarkable personal characteristics. Therefore, it is necessary to focus on both, results and behaviors, while assessing an employee’s performance assessment (Pulakos 2009, p. 27-29).

Cokins (2004, p.263) emphasizes that fixing the performance measurement system may stimulate the improvement which will result in aligned strategies and execution at a much better level of performance.

Conclusion

Performance management is the key process through which work gets done. It deals with the way organizations communicate expectations to employees in order to achieve key goals in a coordinated manner.

Nevertheless, performance is not only about the targets that employees are meant to achieve but also about the way they achieve them. High performance results from the effective use of skills, knowledge, competencies, appropriate behavior. Assessment of the way results were attained allows implement improvements in future.

Each link of a performance management’s chain is equally indispensable. Hierarchy plays a pivotal role in defining the ones who are in charge of the whole company, who bear the responsibility for each decision made, who direct all the energy of the company on improvement. Nevertheless, the top of this hierarchical pyramid is not only the only one which affects the performance management a lot. Each employee is an essential component of this whole system. Results are achieved due to the mutual understanding and cooperation. Therefore, success is something that can be reached only in case that all particles of a large mechanism are working together.

Performance management is a continuous and complex process, which includes a full spectrum of actions designed to develop strategy and goals, make decisions, monitor their execution on all levels, forecast the possible output in accordance with the performed input, and of course obtain the desired results.

Performance management allows connect the working procedure and the results. Formation and establishment of company’s policy, standards and values define the priority in its activity. General involvement in the performance management process enables each employee to contribute to company’s primary goal and help turning possibility into reality.