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What Is Performance Management?

Paper Type: Free Essay Subject: Management
Wordcount: 5439 words Published: 9th Jul 2018

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This chapter starts with the various definitions of performance management as described by different authors. Literature review is a process that empowers readers with a lot of information and knowledge, it can however be argued that such a process can be challenging as one has to integrate viewpoints of various authors in order to come up with a new viewpoint. (Brynard, et al 1997: 54) stated that “a researcher should always try to follow the last mentioned action, as this is the path to the creation of “new” knowledge”.

2.1 Defining Performance

Maila (2006) stated that performance implies the action of doing things that is using things, attending to conditions, processing, communicating and achieving results. Performance is the actual work that is done to ensure that an organisation achieves its mission. In summary, performance encompasses inputs, conditions, processes elements, outputs, consequences and feedback.

According to Maila (2006), the end product of performance should be measured against four elements that are: quantity, quality, cost or risk factors and time. The idea of measuring the end product is fully supported as it can be argued that a product can be in any form that is good or bad, hence the need to have it measured.

2.2 What is performance management?

Different authors have attributed different meanings to performance management as illustrated below:

In 1998 Armstrong and Baron define performance management can be defined as ‘strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors’.

Moreover Performance management is a system for integrating the management of organisational and employee performance (Williams, 2002 as cited by Maila, 2006:13).

Also Performance management is defined as “the systematic process by which an agency involves its employees, as individuals and members of a group, in improving organisational effectiveness in the accomplishment of agency mission and goals”, this was obtained through (U.S. Office Personnel Management, (Undated)

Fletcher (1992) defines performance management as “an approach to creating a shared of the purpose and aims of organisation, helping each individual employee to understand and recognise their part in contributing to them, and thereby managing and enhancing the performance of both individuals and the organisation.” He suggests that the approach include development of the organisation objectives and mission, enhancing communication within employer and employees so that they will be well aware of the objectives and planning of the business. This approach can also clarifies individual performance, rewarding and improving the performance of the staff and career development

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It has been pointed by Michael Armstrong (1994) ‘Performance management is means of getting better results from the organisation, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and attributes competences requirements. It is a process of for establishing shared understandings about what is to be achieved, and an approach to managing and developing people in a way which increases the probability that it will be achieved in the short and long term.’

The researcher has found some common words to arrive at this definition: performance management is a continuous process between staff and supervisors agreeing on the activity to be performed, how it should be measured and within what period, with an aim to accomplish a goal at employee and organisational level.

Performance management may be defined as a formal and systematic process, by means of which the job-relevant strengths and weaknesses of employees are identified, observed, measured, recorded and developed. Performance management provides the opportunity for the organization to evaluate and take stock of its human resources. It also provides information so that important decisions can be taken and gives feedback for further development of staff (Doris, 1994:160).

It gives management the opportunity for communication with staff, to clarify expectations and to take part in the development of each staff member. For the employer, it gives the opportunity to discuss with employees their performance and career goals for the future (Doris, 1994:161).

Moreover Armstrong (1994) Performance is a process for establishing shared understanding about what is to be achieved, and an approach to managing and developing people in a way in which increases the probability that it will be achieved in the short and long term. It focuses on improving performance trough better result from organisation, team and individual by understanding and managing performance within agreed framework of planned objectives.

According to IRS Management Review in 1996 to Performance management is a way of translating corporate goals into achievable objectives and cascade down throughout the organization to produce optimum results. Being a continuous and evolutionary process, performance improves over time. It relies on consensus and cooperation rather than control or coercion and encourages self management of individual performance.

Performance management is an ongoing communication process, undertaken in partnership, between an employee and his or her immediate supervisor that involves establishing clear expectations and understanding about:

  • The essential job functions the employee is expected to do.
  • How the employee’s job contributes to the goals of the organization.
  • What “doing the job well” means in concrete terms.
  • How employee and supervisor will work together to sustain, improve, or build on existing employee performance.
  • How job performance will be measured.
  • Identifying barriers to performance and removing them.

(Doris, 1994:163).

2.3 Aims of performance management

The overall aims of performance management is to establish a high performance culture in which individuals in which individual and teams take responsibility for the continuous improvement of the business process and to make significant contribution to individual and organisational effectiveness and growth.

2.3.1 Employee development

Performance management is concerned with sustainable improvement of individuals, increasing their job satisfaction and achieving their finest potential for their personal advantage and that of the organisation as a whole.

2.3.2 Communication and Involvement

One of the major aims of performance management is to promote commitment to the organization and its goals by putting together individual and organizational objectives. Performance management creates a climate where there is permanent dialogue between managers and their staff. Managers can clarify expectations, organisation’s strategies and also the mission, values, norms and objectives of the organisation. Conversely, employees also can speak out their objectives, opinion and expectation and how they should be handled and treated.

2.3.3 Assess Performance

Performance management facilitates accuracy and objective measurement and assessment of performance in relation to the established aims and principles, so that employees receive feedback from managers’ and supervision about their work.

2.3.4 Identify Training Needs

A Training Needs Analysis (TNA) is used to determine an organization’s training needs. The basis of the TNA is the gap analysis. This is an assessment of the gap between the knowledge, skills and attitudes that the people in the organization currently hold and the knowledge, skills and attitudes that they need to meet the organization’s objectiveshttp://www.nwlink.com/~donclark/hr/performance.jpg

2.3.5 Provide a basis for reward

Performance management offers a basis for rewarding people in relation to their contribution by financial and non-financial means. It consists of performance related pay (PRP) and the Employees can “feel” the impact of their hard work by quickly appreciating the results.

2.4 Evolution of Performance Management

As far back as World War I, WD Scott was qualified with coming up with performance appraisal. Formal Performance Appraisal systems were well recognized by the mid 1950s, with personality-based systems being commonly used. McGregor (1957) illustrated the unease surrounding the use of personality-based ratings and advocated a more participative approach and performance-based approach, including an element of self-appraisal.

In the 1960s, the influence of the management by objectives movement meant that performance appraisal developed a greater importance on goal-setting and the assessment of performance-related skills. In the 1970s, appraisal practices became more open to analysis and, as a consequence, a number of legal cases were brought. One effect of this was an increase in research into rating scales and their use.

Through the 1980s and 1990s, the concept of performance management came into the system, and this, according to Williams (1998), provided a more holistic approach to generating motivation, getting better performance and controlling human resources. 

For example, in the UK school system, performance management is central to efforts to improve standards in education (both locally and nationally).

Therefore, when understanding about appraisal it must quickly become clear that our attention is not just on perfect measurement. We are also concerned in issues such as:

  • What persuades the quality of performance appraisal data?
  • How do employees notice the appraisal process?
  • How might the appraisal process be employed to motivate and develop staff?

While, traditionally, job related tasks may have been perceived as the key elements in appraisal, appraisal now engage in a broader matter. Briscoe and Hall (1999) propose that employee development is underpinned by a set of ‘meta competencies’ including qualities such as perfect self-awareness, feedback seeking, and openness to a range of information and perceptions etc. Other factors such as communication and teamwork skills, stress and conflict reduction, handling of emotion and care are now often observed as important concept to be considered and handle through performance appraisal and management processes.

New recent improvement, include the reducing hierarchical environment of many organisations, have led to the increased use of multi-source, multi-rater feedback methods, more commonly known as 360-degree feedback. The sorts of changes that have overhauled organisations have distressed the environment of work itself, and the continuing rate of change means that the definition of what a job is, and what good performance is, are less stable concepts.

It is also worth recalling that the majority of research on performance appraisal is drawn from a UK / US perspective. However, as Fletcher (2008) points out, national culture is likely to have a major impact on the way appraisals are carried out. Fletcher (2008) argues that in Western (high individualism) cultures where being assertive and determination is appreciated, appraisal is generally focused on the individual and what they do; in Asian cultures (strong collectivism) the “sense of hierarchy and acceptance of authority, the focus on ‘Western’ performance appraisal practices on individual performance, accountability and open confrontation are unlikely to be seen as appropriate” (p. 175). Therefore, it is not always possible to believe that the findings from a piece of performance appraisal study will generalise across all national and organisational cultures.

2.5 Methods of appraising performance

Performance appraisals are conducted by companies in order to evaluate the strengths and weaknesses of the employees; the frequency and methods of the performance appraisals are determined by the corporation. There are several performance appraisal methods that can be used to provide feedback on employee performance. Performance appraisals are used to provide feedback on an employee’s performance, provide the basis for a merit increase, create a development plan and provide the foundation for future promotions.

Performance appraisal is conducted through different ways in various organizations. These ways are classified in two types: Traditional and development methods.

Traditional methods are methods that have been in use in the organization since long. It is normally based upon their traits and is related to the self-appraisal of employees.

2.5.1 Paired Comparison

In this style, there are a number of options which will be able to make full use of it. Each option can be compared with the others. Then, the results will be calculated and the one which has the highest score will be opted.

2.5.2 Graphic Rating Scales

It is one of the most popular methods of performance appraisal. In this method, each employee is rated according to their performance. . The factors that need to take into consideration are the personal characteristics and characteristics related to the job performance of the employees. Figure 3 shows an example of the graphic rating scales.

2.5.3 Weighted Checklist Method

In this method, the appraisal is made where the jobs are evaluated based on the performance and characteristics of the employee. It is a type of rating performance appraisal. The checklist contains a list of allegation on the basis of which the employer describes on the job performance of the employees.

2.5.4 Free Essay method

A statement is prepared by the manager which will be focused on the worker’s strong and weak behaviour. It may also suggest certain remedy in case of problems concerning the employee. The statement may be written and edited by the appraiser alone, or it be composed in along with the appraisee. The essay can be open-ended but in most cases there are guidelines that need to be followed.

2.5.6 Critical incidence method

The rater is required to record the good and bad behaviour of the employees related to a certain incidence. The recorded statement will normally consist of a brief of what happened in the incidence. There are two factors that make the use of critical incident successful, first, the manager must be given ample time to observe the subordinate during evaluation. The manager must take time to record the incident as many of the incidents may be forgotten.

2.5.7 Ranking

This form of performance appraisal, the manager will compare the employee with other employees having the same kind of job. The performance is ranked from best to worst. This method is least favoured types of evaluations, yet many large employers utilize this, method of appraisal. 

Development methods are methods that have been introduced during the last decades. It is also known as result method.

2.5.8 Assessment center

Under this method, several evaluators come together to judge employee performance in job related simulations by making use of a variety of criteria that are considered important in the appraissee’s job.

2.5.9 Behavioural Anchored Rating Scale (BARS)

This style is based on rating the employees’ behaviors in order to determine how effective the workers are. It is normally the combination of critical incidence and graphic rating scales.

2.5.10 360 Degree Feedbacks

It is a style which obtains feedback from internal and external people in order to get more accurate perspective of an employee’s performance. Internal customers are those who work in the organization like managers, supervisors while external customers are those who are outside the organization like clients, suppliers. 360 Degree Feedback is a system which employees obtain confidential, anonymous feedback from their colleagues. The feedback process gives people an opportunity to adjust behaviours and develop skills that will help them to excel at their jobs. 

2.5.11 Management by Objectives (MBO)

Management by objectives is one of the most comprehensive methods of performance appraisal. It begins with when goals are set and ends with the results. It also consists of monitoring constantly the employees to improve their performance so a regular feedback is given to them.MBO is considered more than an evaluation program and process. With this technique, a manager can control, plan, organize, practice and communicate.

2.6 Performance management cycle

A performance management cycle (PMC) is a system used by managers and executives in organisation to support employee growth and job satisfaction. As illustrated below performance management cycle linked together.

Perhaps one of the most important concepts of performance management is that it is a continuous process that reflects normal good management practices of setting direction, monitoring and measuring performance and taking action accordingly. The management cycle can be categorised as shown below:

The strategic objectives for organisation as a whole as well as each line of business/ corporate function and each functional area are determined each year.

The organisation goals are being broken down in line if business/corporate function goals and from there flowing down to individuals.

Appropriate communication skills are being used to make employees understand the measurement of their performance and the system that will be used.

The determinations of team member’s contribution are being identified before agreement takes place.

Success hint are also specifies as per business plan and establishment objectives.

Key result Area (KPAs) and key performance indicators are identified and by taking into consideration relative weights before concluding performance agreements.

The planning phase must be agreed by line managers and employees.

The performance agreement should contain a job profile job description delegation of authority (if any), individual development plan and statement of individual vision, mission and values. Also it has Key areas result, measurable criteria, and weight.

Both employees and relevant managers should keep a copy of performance in which they should agree on the key result areas and measurement criteria, discuss barriers of performance, personal development and career planning and coaching.

A formal review and assessment is being conducted and employees are being made aware so that they can be prepared for performance appraisal.

Feedback is honest open fair and constructive to the level promising. It should be understandable, brief and based on facts and solid examples.

The manager s and employees will bring about a conclusion about the performance.

The weakness on performance will be identified and corrective measures will be taken.

Them the employees is being rated accordingly and then they are being rewarded are paid.

2.7 performance management process

A performance management process sets the stage for rewarding excellence by supporting individual employee accomplishments with the organization’s mission and objectives and making the employee and the organization recognize the value of a specific job in understanding outcomes. By establishing clear performance opportunity which includes outcomes, performance and behaviours, it helps the employees in reflecting in what exactly is expected out of their jobs and setting of standards help in removing those jobs which are of no use any longer. With regular feedback and coaching, it helps to know the problems at an early phase and taking corrective actions.

Different models have been developed to describe the process of performance management and how it operates. According to figure 2.2 it comprises of performance planning, performance monitoring, performance development, performance review and rewarding.

2.7.1 Performance Planning

Performance planning is the core business process. It involves agreement between employer and the individual on what the employee need to do for the achievement of the objectives, raise standards, improves performance and develop the required competencies. The aim is to ensure they apply these every day at work.

Employee performance planning should be flexible so that they can regulate for changing program objectives and requirements. These plans contribute to the achievement of continuous development that is predicted and everyone is capable of learning and doing better jobs. It also helps in enhancing the potential of individual to acquire higher level careers.

2.7.2 Performance Monitoring

Progress towards meeting the objectives agreed at the planning meeting should be monitored throughout the cycle. All arrangements relating to the monitoring programme should have been agreed at the planning meeting and where possible a timetable for action established should be made. Thus employees are able to received ongoing feedback of their progress at work. Feedback should encourage reflection and self review.

Monitoring performance include the Checking of new plan that need to be followed and at a suitable moment, return to the appraisal stage to measure the impact of the changes on the behavioural and performance processes. Having a continuous monitoring, unacceptable performance can be identified and proper measures can be taken rather than waiting till the summary rating levels.

2.7.3 Performance development

Performance development is held as a very important aspect in the growth and progress of individuals in their individual careers. It includes several strategic processes that are included and employed with the idea of developing individual capabilities that will benefit the employee, particularly, and the organisation as a whole.

While performance development usually targets organizations as a whole, individuals can also adopt this concept as a means to improve their own personal competencies. By carrying performance management it provide opportunity for Recognition and career. Situations for improving good performance also stand out and action can be taken to accomplish the organization’s overall purpose.

2.7.4 Performance Review

The performance review is a key element in the performance management process. It can provide accurate feedback and also the areas of strength and areas in need of improvements and development is needed. In addition, it emphasises what has been done well in order to do it in better way in the future. There is an exchange of views and both parties together come to an understanding about what should to be done to develop performance and defeat shortcomings raised during discussion.

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2.7.5 Rewarding

Rewarding means providing encouragement and recognition of employees, independently and as members of groups, for their performance and recognizing their contributions to the organisation’s mission. To motivate staff and create a climate for enhancement, organisations need to make an obligation to a plan for recognising and rewarding performance which can both financial and non-financial rewards and both positive and negative rewards. A planned, strategic path of action is necessary to ensure that employees obtain rewards adequately with their performance, be that at an individual and or a team or group level, in a reasonable manner in the organisations. Rewards can be in the form of cash, praises, time off and other non- monetary items.

2.8 Benefits of Performance Management

Performance management provide an opportunity to concentrate on work activities and goals, identify and correct existing problems and motivate employees to perform better. In the same line, there is an enhancement in the performance of the company. There are several benefits when an organization performs a performance management in its organisation and they are listed below.

Need for training and better understanding of job responsibilities

To begin with, it helps employees understand how their job responsibilities ultimately affect the overall objectives of an organization. Through the performance management, employees use this opportunity to indicate a need for training, express a desire for additional responsibilities, ask questions about the job and in some cases provide feedback that will help them meet the goals. Besides, it can be a positive way to identify developmental opportunities and can be an essential part of a succession planning process.

Increase productivity and reward the employees

Additionally, with performance management, it is easier to accurately gather data regarding employee improvement and to award acknowledgement and any other rewards to those employees, ensuring everyone who makes meaningful achievements at an organization, gets their due compensation. This reward system implemented at Organization may provide an incentive to strive towards productivity and at the same time, maintaining good working habits. With this reward system, motivation and workplace morale are both improved.

Improve Areas of Weakness

Through performance management, we are able to search for employees’ weaknesses and enable them to improve for further career development. For example, if an employee inspires to become a manager, performance reports will reveal about his lack of leadership skills. Thus, we will be able to focus on his weak points where he needs coaching and other relevant skills. Employees also reveal that these appraisals assist them in deciding if they are in an organization where they feel that their values and personality are being respected.

Succession and Career planning

The Performance Management process provides valuable information that can be used through succession and career planning. Employee ambition can be clarified and where possible integrated into general planning of the employee’s goals and outputs as well as his development plan. There is also the clarification of the manager’s goals and direction concerning the employee and his role within the department. Compilation of formal training and development plans per employee is obtained to ensure the development of the employee based on the results of the performance evaluation phase of the process.  

Opportunity for Dialogue

Performance management provide an opportunity to build their relationships. Employees are given sufficient time to communicate and interact more often with work related issues. This usually allows a better flow of ideas and communication is enhanced. Besides, with adequate communication throughout the year ensure that the employees always know where they stand.

2.9 Drawbacks of performance management system

Although performance management can be very beneficial to the employee, no empirical studies can show how performance management systems actually enhanced performance at an organization. In fact, when it comes to performance, these classical approaches are difficult to be adopted, as the method does not produce systematic and verifiable information. Some common drawbacks are discussed below.

Time consuming and focus on paper work

Performance management are also not often appreciated due to the fact that, they are considered to be time consuming and toilsome. Hence, it can be tiring for both supervisors and employees as they lose interest rapidly and haphazardly fill out the paperwork.


Performance reports may cause employees to accomplish certain duties for their individual purpose in order to receive a better evaluation rather than to contribute to the general mission of the business. Sequentially to have job security, workers may become overly concerned with improving in areas where they have achieved inadequately, even to the detriment of the areas in which they formally surpassed.


Performance appraisal ratings can lead to demotivation and low staff morale. Negative feedback like criticism where managers document only on issues that need to be corrected and not on positive things that employee does thus this fails to motivate employee concerned but also causes him/her to perform worse. This can raise mistrust, fear and insecurity in the organisation.

One size fits all fantasy

Organisations tend to use a standard system across the organisation. Very a single tool which means a single rating form is used for everyone. This does really make sense; as people at different levels in hierarchy cannot be assessed in the same way as the level of responsibility and authority vary.

Leniency Error

Leniency error is the tendency of a supervisor to rate an employee higher than what his performance deserve. Reasons that a supervisor might do this could include evading conflicts, or thinking that by giving the employee a high rating, he will work harder to live up to the rating.

Halo Error

The halo effect is when a supervisor forms a positive thought of an employee’s skill in one part and then gives her high ratings across all rating criteria. When a supervisor rates employees with the qualities that he believed more essential greater in all rating areas than employees who do not have those qualities the supervisor is making the halo effect error.

Playing God

Some managers are reluctant to conduct an appraisal program as they do not want to judge others. Even if a manager actually feels that a particular employee has not made well and he/she should be rated poor, not many truly rate him/her poor. To them, the clear process of judgement can be dehumanisazing and demoralising and a cause of anxiety and depression to employees.

2.10 Empirical Evidence of the Impact of Performance Management on Organisation Success

Recent studies have been identified trend in the effective performance management systems on organisational success.

According to the results of the World at Work/Sibson 2010 Study on The State of Performance Management 47 % of respondents specified that a performance management system has helped out the organization in realizing its strategic goals. Performance opposed to competitors is also a key result of performance management. 60% of study participants designated company performance as better than average against competitors, and 40% signified that performance was typical. Employee trust is another essential outcome on excellent performance management system. Nevertheless, only 30 % of the respondents reported their employee’s belief the performance management system.

The study of the World at Work/Sibson in 2010 on The State of Performance Management pointed out that improvement in performance management is necessary in many businesses and that performance management is usually very essential in higher-performing companies. In most cases, this has not altered since the study was accomplished in 2007. While some organizations are successful in using performance management to distinguish high performers from low performers, many still are making great effort to progress performance management from an HR practice to something that is business significant to the organization. Predominantly in a time of economic complexity, when improving business results is essential, motivating performance management by having leadership aid and effective implementation is essential.


Impact of organizational culture on performance management

An additional study on the impact of organizational culture on performance management practices in Pakistan in January 2010 where 60 emplo


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