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Understanding Key Components Of Performance Management

Paper Type: Free Essay Subject: Business
Wordcount: 1970 words Published: 1st Jan 2015

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An effective performance management system integrates organisational, business and individual planning and performance. Performance management systems components include:

Development of clear job descriptions

The selection of right people with an appropriate selection process

Provide effective orientation, training and development.

Clarify performance objectives and linking these with organisational business plans.

Conduct regular performance appraisal of individuals against the achievement of these objectives.

On-going coaching and feedback

Recognition or compensation that reward people for their performance

Provide career development opportunities

Actions to deal with poor performing employees.

Evaluate the involvement of individual, team and organisational performance.

One of the main issues mentioned in the case study was regarding recognition regarding pay and performance. ‘Research on high performing companies has consistently shown that they have at least one common characteristic: their people understand the strategy of the business and believe that if they perform well, they will be recognized and rewarded by the organization.’ (Wilson Group, 2010) If Colbran Institute is able to develop a appraisal system where recognition is documented and rewards Colbran Institute will be in a better situation when it comes to employee morale and motivation and be able to achieve company goals.

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Performance Appraisals

Performance appraisals are one of the most important components of performance management and are designed to measure and improve employee performance. Edwin B. Flippo wrote in his book titled Personnel Management that ‘performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to his present job and his potential for a better job.’ (Flippo, Edwin B. 1979) The performance appraisal process articulates the standards of work expected of employees and the values and behaviours employees are expected to uphold in meeting their job requirements, communicating and working with others.

The information that performance appraisals provide, provides foundations for recruiting and engaging new employees, development and training of existing employees, and maintaining a quality team by adequately and properly rewarding their performance. If a reliable performance appraisal system is not put in place, a human resource management system will fail, resulting in the total waste of the valuable human assets an organisation has.

‘The key objective of appraisal is to provide employees with feedback on their performance provided by the line manager.’ (Caruth, Donald. 2008). The main objectives of performance appraisals are to:

Assess the performance of employees over a period of time

Help manage the gap between actual and desired performance

Indentify strengths and weaknesses of employees, which in turn will identify training and development needs.

Provide feedback on past performance

Give clarity of the responsibilities and expectations of the employee in the upcoming appraisal period.

Therefore, Performance management leads to higher performance that is more closely directed to the strategic objectives of the organization whereas Performance appraisal and feedback assist employees to understand what work they do well and how they can improve their performance.

Issues Identified

From reading the case study provided by Colbran Institute there seems to be a number of issues regarding the use of the graphical rating scale performance appraisal system. The graphical rating scale is one of the most popular methods of performance appraisal, it is easy to understand and cost effective to setup and manage. It involves listing subjective traits that the organization considers important for effectiveness on the job for example integrity, reliability, initiative and objective factors such as quality of work. The employee then gets a rating against each trait; these scores are then added up and produce an overall performance score for the employee.

As seen with Colbran Institute the graphic rating scale does have a number of disadvantages; issues that have been brought forward include:

Rater Errors

Generalization of traits

No real measurement achieved

Issues from pass work history are not reflected.

This form of performance appraisal is subject to rating errors mainly due to rater bias which result in incorrect appraisals. Rating errors include central tendency, leniency, severity and the halo effect. In Colbran Institute’s situation the rating errors consist of leniency and the halo effect. Leniency is demonstrated when the evaluator rates most employees very highly across performance dimensions rather then spread them throughout the performance scale, in Isabel’s case she has rated most employees as either good or excellent.

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Generalisation of traits is another issue that occurs when using the graphical rating system as it might have traits such as creativity which is assessed the same on all employees appraisal. This could become an issue if the employee is working in a position where creativity isn’t something that relates to their work. They could be a data entry clerk for example which doesn’t involve any creativity; therefore they might get marks down for this because it is unable to be shown; whereas someone that works in marketing would be the completely different.

Another issue Colbarn Institute has is the generalities of the documentation produced from the appraisal. Allan suggests to Isabel “What is good quality to you might be average to me or someone else and vice versa.” This is something that needs to be considered with maybe a review by a second and third level manager. But you will still have the issue so of employees not understanding what is expected from them, for instance an employee is given the rating of 2 on ‘motivation’, the question is how is he able to improve this?

Another common error in performance appraisal is the halo effect. This occurs when a manager’s general impression of an employee, after observing one aspect of performance, influences his/her judgment on other aspects of the employee’s overall performance for the assessment period. This is demonstrated in the case study when Allan asks Isabel about past performance of her employees and she replies with “Well in the odd case, a couple of them have let things go a bit.” This is not reflected anywhere in the appraisal.

Task 2: (500 WORDS)


An effective performance appraisal system provides guidance so employees understand what is expected of them in their position. It provides flexibility so that employee creativity is encouraged and strengths are utilized. It provides enough control so that employees understand what the organization is trying to achieve. This is why I have put forward Management By Objectives appraisal system as the recommended system that Colbran Institute should take on board.

Management by Objectives

Management by Objectives was first introduced in 1954 by Peter Drucker in his book ‘The Practice of Management’.

MBO is an appraisal method where the manager and the subordinate define common objectives and major areas of responsibility, then compare and direct their performance against these objectives. It aims to increase organizational performance by aligning organizational and individual goals throughout the organization.

George Odiorne in his thesis describes Management by objectives as ‘a process whereby the superior and subordinate managers of an organization jointly identify its common goals, define each individuals’ major areas of responsibility in terms of results expected of him and use these measures as guides for operating the unit and assessing the contributions of each of its members’.(Odiorne, George S. 1965)

In Management by Objectives appraisal system, objectives are written down for each level of the organization, and individuals are given specific aims and targets. ‘The principle behind this is to ensure that people know what the organization is trying to achieve, what their part of the organization must do to meet those aims, and how, as individuals, they are expected to help. This presupposes that organization’s programs and methods have been fully considered. If they have not, start by constructing team objectives and ask team members to share in the process.’ (Heller, Robert 1998)

Advantages and Disadvantages

MBO overcomes some of the issues that arise from the Graphical Rate Scale as a result of assuming that the employee traits needed for their job success are the same for the whole organization and can be reliably identified and measured.

The MBO method concentrates on actual outcomes, instead of assuming traits. An employee has demonstrated an acceptable level of job performance if the employee meets or exceeds the set objectives. Employees are not judged on their potential for success or on their supervisors’ subjective opinion of their abilities by on real outcomes.

The main principle of the MBO appraisal system is that direct results can be observed, where as the traits (which might not even relate to an employees position) and attributes of employees must be guessed.

Management by objectives also has its disadvantages like any appraisal method. The main issue with this appraisal technique is the initial development of objectives can be time consuming, which takes employees and managers away from there actual work. When writing objectives for a performance appraisal it must be realize that in this day and age priorities and goals are constantly changing. This is something organizations have to be able to deal with to keep ahead of the game.

The Performance Management scheme

The new appraisal system will fit into the overall performance management scheme by aiming to increase organizational performance by aligning goals and management objectives throughout the organization. All managers and staff will participate in the strategic planning process, in order to improve the implement ability of the plan and implement a range of performance systems, designed to help the organization stay on track. Colbran Institute employees will get more input into identifying their objectives, milestones and timelines for completion and have a clear understanding of how their roles and responsibilities contribute to the aims of the organization as well as its strategic goals. Management by objectives also includes ongoing tracking and feedback in the process to reach objectives.

MBO would be appropriate for Colbran Institute to take on board because it is a knowledge-based organization where the employees are competent in their jobs. It is appropriate in this situation as we won’t to build employees’ management and self-leadership skills and utilize their creativity and knowledge.


This report has analyzed the role of performance management at Colbran Institute. It has taken a look at the current performance appraisal method and put forward a new structure which involves Management by objectives. Management of objectives is an efficient and balanced technique that will allow management to receive maximum results form their current employees by focusing on achievable goals.


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