Performance Management is a process that consolidates goal setting, performance appraisal, and development into a single, common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic aims.

Performance Management is both a strategic and integrated approach to delivering successful results in the organisation by improving the performance and developing the capabilities of teams and individuals.

Learn about:-

1. Introduction 2. Definitions of Performance Management 3. Scope 4. Setting Objectives 5. Concerns 6. Components


7. Implications 8. Process 9. Essence 10. Engendering Trust 11. Ethics. 12. Benchmarking 13. Methods 14. Benefits

15. Pitfalls 16. Performance Management Vs. Human Resource Management 17. Solution to the Problems of Performance Management.

What is Performance Management: Definitions, Scope, Objectives, Concerns, Components, Process and Other Details

Performance Management – Introduction

Performance management is an ongoing process in organisations. In order to make the organisation successful and progressing, it is very important to have it going in the organisation continuously. And when this happens regularly it comes in the form of periodic reviews.

Through constant research it has been identified that employees need feedback on the performance that they have shown. Some sort of encouragement and motivation is required while on the job. Feedback shared by the management may be positive or negative, helps employees to enhance their performance and be a better person on the job.


Another point why employees need feedback is many a times, the performance appraisal system is reward based, i.e., the performance of the employee when evaluated gets appropriate rewards to enhance the motivational level of the employees. Hence to get rewards and earn status for themselves employees seek feedback from the management.

Now, it is the responsibility of the management to share periodic reviews with the employees on how they are performing and where they need to improve in order to be eligible for rewards or to be able to contribute to the overall objective achievement of the organisation.

Periodic reviews simply mean, assessing the performance of the employees regularly after a specific time interval. Employees are given certain short term goals to achieve and their performance is evaluated on the basis of this goal achievement. This helps the employees gain confidence and understand the bigger picture much clearly.

Performance Management – Definitions (With Phases)

Performance Management consists of activities which ensure that goals are consistently being met in an effective and efficient manner. Today, all the major activities of HR are driven towards development of high performance leaders and fostering employee motivation. So the role of HR in today’s context has changed from being just an appraiser to a facilitator/enabler.


The process of performance management begins when any new employee joins the organisation and ends when the individual quits from the organisation. We can also say that performance management is a systematic process by which the entire organisation’s performance can be enhanced by improving the performance of the individual within a team framework.

Managing employee performance and aligning their objectives, facilitates the effective delivery of goals. There is a clear and immediate correlation between using performance management programmes for improved business and organisational results, as employees are the most important contributors in the success or failure of any organisation.

Performance Management can focus on the performance of an organisation, a department, an employee, or even the processes to build a product or service. Performance Management basically prepares the employees by improving their competencies to meet present and future challenges.

It typically involves three phases:


i. Planning,

ii. Monitoring, and

iii. Rewards.

Good planning begins with analysing the exact goals the organisation needs to attain and to develop realistic ways to achieve them. Monitoring during performance management involves not just monitoring the progress of each department and employees but also providing them with constant feedback whether it is in the form of praise and reward or in constructive criticism. Rewards can improve morale, boost productivity and help move closer to goals. If performance management is to be successful, the rewards need to be utilised.


Armstrong and Baron (1998) – “Performance Management is both a strategic and integrated approach to delivering successful results in the organisation by improving the performance and developing the capabilities of teams and individuals.”

Gary Dessler – “Performance Management is a process that consolidates goal setting, performance appraisal, and development into a single, common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic aims.”

Performance Management is the continuous process of –

i. Identifying


ii. Measuring

iii. Developing the performance of individuals and teams.

iv. Aligning performance with strategic goals of the organisation.

Performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organisation.

Performance Management – Scope

1. Identifying Performance Parameters – When any organisation decides to go for performance management activity, it is very important to decide the parameters of performance, because when the parameters are clear and set, both, the employer and the employees can better understand their role in the activity and can reach to the goal effectively and efficiently.


2. Setting Performance Standards – Once the parameters are set, the next step is to identify the performance standards. Performance standards are nothing but analysing and finalising the expected level of performance. This is decided in advance so that gaps, if any, can be corrected at the earliest.

3. Planning Performance of all Constituents – Performance management activities involve continuous improvement of all the processes and people in the organisation. So after setting the performance standards, to get the desired results, it is imperative to mould the behaviour and performance of the employees in a particular way so that it generates the preferred output.

4. Identifying Competencies / Competency Gaps – When we are in the process of moulding the behaviour of the employees, it is important that we understand the competency gaps if any. Gaps are nothing but a space between standard competencies and expected competencies. Once it is identified that there are gaps, these can be healed with the help of training and development programmes.

5. Planning Performance Development Activities – To bridge the gaps between standard and actual performance, performance development activities are planned in the organisation. These activities are in the form of on-the-job training, management games, case studies, outbound training etc.

6. Creating Ownership – This is one of the most important aspects in the entire performance management initiative. Until and unless the employees feel that they are the owners of their organisation and their smallest leap of step is going to affect the organisation in either a positive or negative way, they will not behave in an expected manner.


7. Recognising and Promoting Performance Culture – It is very important that the employees become used to performing better. If the organisation follows performance culture, every employee would be performance oriented and there are minimal chances of dissatisfaction, errors, and wastages among the employees.

Performance Management – Objectives

Failing to plan is planning to fail. This sums up the importance of the planning part of the performance management process. Effective performance planning is the critical first phase of performance management. If done well, it can set up people and thus the organisation to succeed.

Before one gets to ‘performing’, it is important to get down to ‘planning’ what is to be done. Planning of performance begins with the setting of objectives. In its simplest form, objective setting is the process by which corporate objectives are broken down into deliverables for functions/business units, departmental teams and then individuals.

1. To motivate the employees towards superior level of performance. When the employees are motivated and committed towards their work, they need little supervision and tend to perform their work on their own. This makes the employees more independent and helps understand the goals and objectives in a much clearer way. In this way, the organisation as well employees grows at the same pace.

2. To help the employees understand the knowledge, skills, and attitudes for enhancing their own performance level for the growth and development of self and organisation. It is very important for the employees to know what level of knowledge and skills they possess. Only when they are fully aware of it, they can develop it further. Hence actual performance is needed to be known in order to achieve the standards. Performance management process always helps employees know their current position and at the same time prepare them to take up future challenges.

3. Boosting the morale of the employees for achieving high performance levels and thereby achieving high rewards for their performance, in short setting the performance based reward system in the organisation. It is always observed that employees will not work up to the mark till the time they understand what they are going to get in return.


Hence a reward system is introduced in the organisation and it is purposefully linked with the performance management process. When employees come to know about a specific reward that will be given to them once they achieve the desired level of performance, they tend to become more confident, committed and involved. This helps the employees to enjoy their work and reap the benefits and the organisation is benefitted with more output and happier employees.

4. Setting a strong two-way communication system between the employees and their supervisors is important. Having a clear dialogue between the two helps the employee to understand the expectations of the organisation from him/her and how far he/she has been able to achieve the same. Communication plays a vital role in any process in the organisation. Whatever plans and goals that management has in mind towards the growth and development of the employees must be communicated to the employees as they are the executors of the plan.

Once it is clear that employees and the management are looking at the same goal in the same way, it helps to strengthen the process in a great way. Employees in such regards need very little supervision and percentage of mistakes is also lowered due to clear understanding of the expectations.

5. Strong communication system as regard performance management helps early detection of performance inefficiencies. Thus, when an inefficiency is detected at an early stage it can be overcome through constant monitoring, mentoring and informal talks. A strong communication system is an integral part of the performance management process. It is imperative to make the performance standards clear to the employees which will not only help them to do their work efficiently but will also help the organisation to measure the performance of the employees.

6. Encouraging personal growth and career advancement are the basis of the performance management process. This is a very important aspect of the performance management process. It is designed in such a way that it promotes personal growth and career advancement along with organisational growth and development. When the employees realise that they are growing along with the organisation, they feel happier and tend to work even more for further growth and development.

Performance Management – 6 Major Concerns

The concerns of Performance Management are as under:


1. Concerned with the Output – The output is nothing but the results achieved, outcomes, processes required for reaching the results and also inputs like knowledge, skills, and attitude required to meet the output.

2. Concerned with the Measurement of Results – The result measurement must be done accurately and with a lot of care, since the rewards and/or punishments are solely dependent upon the measurement of output. This also involves review of progress in the achievement of set targets.

3. Concerned with Planning – While any organisation is planning for performance management activity, it must have the business plan ready. Having a proper plan in place shapes the future activities in a positive way.

4. Concerned with Continuous Improvement – Performance standards will not be achieved until and unless there are regular and continuous improvements in the current processes and practices. Continuous improvement leads to continuous development which in turn creates learning culture and an open system of communication.

5. Concerned with Establishing Appropriate Culture – 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 organisation which binds the team together.

6. Concerned with the provision of procedural fairness and transparency in the process of decision making.

Performance Management – Components and Interfaces

A performance management system has the following components and interfaces:


1. Goal- setting,

2. Regular reviews,

3. Annual appraisal,

4. Development process and

5. Linkage to other systems.


1. Goal Setting:

This process is the foundation for a good performance management system. It brings in the clarity required to deliver the required result. The organizations expectations are set in the form of “key result areas”, along with strong indicators of the required standards. The benefits of giving clear directions are many. It helps to increase productivity by enabling people to focus on the requirement. It minimizes frustration and enables employee satisfaction.

2. Regular Review:

Reviews are critical components of system. Reviews give timely feedback to the individuals. It is important to schedule formal review during the course of the year. These can be half -yearly or quarterly depending on the need. Structured mid-term review enables the organization to take stock of performance during the given period. It gives individual an opportunity to discuss his/her achievements during the given period and to look at areas of improvement. In a dynamic environment it is important to keep abreast of market situation. Reviewers can be used to make midcourse correction in the KRA’S.

It is possible that the macro environment has changed and that some of the objectives have to be reviewed. For example certain sectors of the economy may be doing extremely well and the organizations may need to review sales number based on these indicators. Reviews need to be structured so that there are no surprises in the annual appraisal.

Regular and structured reviews are a critical component of the performance management system and this is essential to ensure that the performance management system is not same as the annual performance appraisal. As a part of this sub-system, we have processes such as coaching, mentoring, performance improvement plans.

3. Annual Appraisal:

A typical appraisal system could be designed on one of the following:

i. Confidential report – The report is written by the supervisor and is not shown to the individual. Decisions, such as promotion and changes in compensation are made based on this report.

ii. Reports by the supervisor that is shown /given to the individual and discussed.

iii. Self-appraisal by the individual, value added comments by the supervisor and a discussion – in this system, the individual writes a self-appraisal vis-a-vis KRA’s are set at the start of the year. The manager adds his or her comment.

Organizations follow one of the following methods of ratings:

(a) Rating given by the manager

(b) The individuals and the managers give the rating and the organization has a mechanism to deal with the differences between the two. There is an opportunity for the individuals and the managers to discuss the contents of appraisal. People working in the software industry or in a project environment may raise a question about the relevance of the annual appraisal.

Then there are also professionals who work with different projects teams during the course of the year. In this case we could have reviews signed off at the end of each project. These could be collated at the end of the year to look at overall performance and linkages to other systems.

4. Development Plan:

This pertains to training and development sub-system. A part of the development plan stems out of the annual appraisal. This is the result of the area of improvement that emerges from the appraisal and competencies required for new roles, if relevant. A good training and development process will also take the necessary inputs from the organization’s business plan. This is required if the organizations is investing into new business or entering new markets.

5. Linkage to Reward System:

Linkages to the process such as compensation, rewards progression and succession planning-the performance appraisal system, in many organizations, has a link to the reward system. Individuals judge the performance management system and the culture of the organization based on the message sent by the reward systems. If the reward system recognizes individual’s contribution and ignores contribution made to team objectives, the people in the organization start focusing on individual tasks.

Therefore, linkage too many of these systems need to be contemplated upon, articulated to the people and implemented with consistency.

Dr. Douglas McGregor in the HBR (Harvard Business Review) Classic, An uneasy look at Performance Appraisal, wrote, “Managers are uncomfortable when they are put in a position to play God”. They do not want to pass judgment on personal worth of their team members. This article was written a year ago and is still relevant in current context. An effective system focuses on results on behavior that facilitate or constrain the achievement of results.

Organizations and the individuals benefit when there is a balance in the “Evaluation” and “Development” content of the appraisal process. It is unlikely that organizations will do away with the evaluation component; however it is important to realize that people perceive real value when the system gives them adequate opportunity to develop.

Dr. Deming in his book, ‘out of the crises’ mentions the importance of taking system variables into account while dealing with performance. There are times when the organizations processes hinder the performance of individuals.

The system need to be continuously reviewing the operational processes in the organizations, to ensure that they facilitate and enable performance. There is no point in rating the individual’s performance as “not as per expectation” if the root cause lies in the system and not with the individuals competency or inclination.

Therefore, the performance appraisal process is an integral part of the performance management system. The benefits to the organizations and the individuals will accrue if we take a holistic and balanced approach.

Performance management systems need to be implemented for managers as well. Managers are the ones who develop employees and help them achieving personal as well as organisational goals.

Given below are the components of a manager’s performance and development plans:

1. Ascertaining Performance Development Needs:

Before implementing any plan in the organisation, it must be ensured that it caters to the needs of the managers. The needs of the managers can be ascertained by taking into consideration the kind of role they play, the level of responsibility that they possess and the skills that they require to move ahead in the organisational structure and also in their career.

Managers are the ones who share the performance plans with other employees working in the organisation. Hence great care must be taken while planning for performance management activity for them. The goals set for them must include improving the performance of the employees working under them, providing timely and honest performance feedback to the employees etc.

The manager can be successful only when he understands the performance needs of the organisation. As they will help him plan for the performance management activities for the employees as well as self. Once these needs are properly assessed, the appropriate plan can be designed for the performance development of managers.

2. Appraisal of Present Management Talent:

This is the most important component of a manager’s performance development plan. In this step, the potential of the managers is assessed and their current skills level is identified. Then the output is matched with the standard set by the organisation and gaps, if any, in the performance are then covered with the help of management development techniques present in the organisation.

Appraisal of present management talent is very much needed if the organisation wants to be strong performance wise. When the performance of the managers is assessed and rewarded, the managers feel confident about the skills and knowledge they possess at the moment and also motivate them to perform even better in the next assessment cycle. Appraisal of performance always provides positive motivation to the individual and promises improved level of performance during the next appraisal cycle.

3. Planning of Individual Development Programme:

The performance needs of each individual are different because basically each person is different from the other. Hence the performance need of each individual must be assessed carefully so that he can contribute to the overall growth and development of the organisation effectively. On the basis of individual needs assessment, developmental programmes are scheduled and conducted.

The performance of the organisation and of the individual must be planned, managed and assessed independently. This helps the organisation understand what level of performance do the employees display and what improvements they must demonstrate in order to grow and develop further.

Individual development programme also provides a platform for the employees to understand their own strengths and weaknesses and also gives them a chance to improve their grey areas and develop the strong points. It thus becomes easier for the management to assess the performance needs of the individual and appropriate training can be provided to them for betterment of the performance.

4. Competency based Performance Training:

For managers it is very essential to have competency approach attached. Because at the managerial level enhancement of competencies is very much needed rather than just skills development. For managers it is more about competencies rather than skills and attitudes. Hence they are presented with a basket of competencies and their performance is managed alongside the competencies that they are expected to possess.

When the managers develop required competencies at work, they can better groom the employees working under them. Hence competency based performance management system must be implemented in the organisation especially for the managers. At the same time, proper training must be given to them so that they better understand their roles and can grasp whatever is being taught to them and implement the same at their work.

Performance Management – Implications

The nature of organisations and the structure of jobs are changing rapidly, and many of these changes have implications for performance management.

Two examples of the many changes occurring at the organisational level are:

1. The increasing “flattening” of many companies through the elimination of layers of management, and

2. The “rebuilding” process after major organisational restructuring, through which organisations report a new or renewed commitment to specific values, such as – customer service.

The first trend is relevant to performance evaluation because there are fewer people in the management positions to evaluate performance. Those managers who remain often have responsibility for a larger number of employees and often have many other responsibilities, and within flatter organisations many employees have more discretion over the way they perform their jobs, which makes it harder for a manager to recognise performance issues and problems through observation.

The majority of performance management programmes are driven by the need to arrive at a rating used to determine the size of the employee merit increases and, in some cases, incentive awards. As a result, many supervisors determine the amount of merit increase they believe is adequate to retain and reward employees, then use company guidelines to support it into a performance rating that justifies the desired increase.

Another common use is to make termination and promotion decisions. In fact, the bulk of the supervisor’s effort is arriving at a judgment of performance. Employees, of course, are likely to contest that judgment unless they are rated at a high performance level. As a result, the focus on improving individual performance is displaced by the focus on judging and rewarding.

The focus of most performance management programmes is on individuals, not teams. Team performance is not typically considered in most performance feedback. People and Their Jobs – What’s Real, What’s Rhetoric? Rating the performance of individuals alone often results in destructive competition and conflict among team members. Given how frequently people work in teams these days, the focus on individuals is outdated and often counter-productive.

Performance management should be based on the complete details, facts and events taking place throughout the year which needs continuous monitoring and checks through various means. Such need for details can lead to micromanagement by the superiors.

Apart from limiting the employee’s growth and learning, micromanagement also hinders healthy superior subordinate relationships and eventually the manager’s career development. Therefore, a better idea would be periodic discussions and feedback based on the overall performance of the employees and the results achieved.

Performance Management – Process

Performance management implies a marked shift in the relationship between managers and their staff. The manager is faced with a new and more challenging situation- counselling skills; effective listening; good communication; and the ability to handle and encourage upward appraisal all come to the fore. In essence, the development of a performance management system leads directly on to the need for a more systematic approach to skills-based management development.

The Process of Performance Management:

Step 1 – From the business plan, identify the requirements and competences required to carry it out.

Step 2 – Draw up a performance agreement, defining the expectations of the individual or team, covering standards of performance, performance indicators and the skills and competences people need.

Step 3 – Draw up a performance and development plan with the individual. These record the actions needed to improve performance, normally covering development in the current job.

They are discussed with job holders and will cover, typically:

i. The areas of performance the individual feels in need of development.

ii. What the individual and manager agree is needed to enhance performance.

iii. Development and training initiatives.

Step 4 – Manage performance continually throughout the year, not just at appraisal interviews done to satisfy the personnel department. Managers can review actual performance, with more informal interim reviews at various times of the year.

i. High performance is reinforced by praise, recognition, increasing responsibility. Low performance results in coaching or counseling.

ii. Work plans are updated as necessary.

iii. Deal with performance problems, by identifying what they are, establishes the reasons for the shortfall take control action (with adequate resources) and provide feedback.

Step 5- Performance review. At a defined period each year, success against the plan is reviewed, but the whole point is to assess what is going to happen in future.

Organisations are introducing such systems for much the same reason as they pursued management by objectives.

In other words, they are aiming to:

i. Tie in individual performance with the performance of the organisation.

ii. Indicate where training and development may be necessary.

This plan + do – review cycle is the basic process of people management.

It operates at two levels:

i. The macro level-The management of the year’s activity.

ii. The micro level- The development of performance through involvement at the doing stage.

Processes for Managing Performance:

Process One – Performance Planning:

Getting a performance management system up and running starts with proper planning. An organisation needs to ensure they have defined performance goals set in place before a performance period — that is, either after a performance appraisal or at the start of a new position.

In the planning phases, we need to guarantee that the goals are aligned with organisational goals. Once these goals are finalised they can be communicated directly to the employee.

One tip for creating goals is to include no more than three challenging, but attainable, goals. Defining three goals as the main focus is enough for employees to work towards. More than three challenging goals can be overwhelming and stressful. Although some positions will be an exception, try to remain fair and review the responsibilities of the position carefully before creating an employee’s goals.

The manager’s role is to encourage employees and ensure that they are provided with the resources and help needed to overcome any obstacles in the period of a performance review.

Process Two – Ongoing Feedback:

Once the performance period has started, this is the time for organisations to provide ongoing support and monitoring to keep employees on the right track. Managers should be available to provide regular feedback about the behaviours and results discussed in the planning phase.

To be effective, managers should provide candid feedback, focusing on behaviours rather than traits, along with productive discussions on how to improve. For further effectiveness, these conversations should take place routinely and informally through follow-up meetings. Employees should be encouraged to seek feedback and bring up any issues that arise during the performance period.

Process Three – Employee Input:

As the performance period is coming to an end and prior to the formal performance appraisal process, ask employees for their input and their experience, achievements, and thoughts on their performance. These can be considered in the evaluation process. Good performance management is a joint collaboration between employees and the organisation — including employees in the process will increase their participation, as well as their understanding of their importance and influence in the organisation.

Process Four – Performance Evaluation:

Conducting the performance evaluation is the key to the whole performance management process and should be allowed ample time and resources to be completed. The actual employee evaluation measure should focus on five to ten behavioural dimensions (or whatever appropriate number of dimensions, depending on the position).

Behavioural dimensions should follow this structure:

(i) Be related to organisational goals.

(ii) Be derived from a review of the competencies needed to perform the specific job.

(iii) If the competencies needed are unknown or unclear, a job analysis can be conducted.

(iv) A job analysis involves systematically gathering information about the job through reviewing job descriptions, interviewing employees, observing employees doing the job and other methods.

Once the behaviour dimensions to be included in the performance evaluation are established, performance criteria can be determined.

For example, in a customer service position, the competency of handling customer complaints may be evaluated on a scale, such as – 1 (exceeds expectations), 2 (meets expectations), and 3 (below expectations).

Descriptions of the specific behaviours associated with each of these would be provided to the manager rating the employees — meaning each level of performance should be clearly defined. While creating the performance criteria can be difficult, it’s important to focus on the results, i.e., whether the employees succeeded in delivering the bottom-line, and also how the employee performed to deliver this bottom-line.

Process Five – Performance Review:

The last stage of the performance management process is where most of the hard work that has gone into the performance period can be seen and understood. During the performance review, results of the performance appraisal are discussed, and the manager and employee make plans for improvement through developmental strategies. Managers discuss the ratings with the employees, giving specific feedback regarding the rationale behind the ratings.

To facilitate development and increase employee performance, managers can use “Developmental Handbooks.” These handbooks consider each competency that is covered in the performance appraisal process. For each competency specific, developmental activities are described. These include formal training programmes available to employees, books, websites, as well as on-the-job and other developmental activities that will help them to improve in that competency.

Finally, managers should not discuss consequences of the performance appraisal associated with compensation at this meeting. This meeting is solely for the purpose of review and discussing the employee’s performance and steps for future development. Instead, a separate meeting should be allocated to discuss any implications for pay, promotion, or other consequences.

The performance management process consists of the following stages:

1. Establishing Performance – This stage involves the establishment of the performance objectives, competence requirements and performance related agreements with the employees and their supervisors.

2. Performance Planning – This step involves agreeing objectives and competence requirements and agreeing upon performance related action plans, performance improvement and personal development plans.

3. Acting – This involves carrying out various activities required to achieve objectives and plans and observing developments in the overall performance.

4. Monitoring and Evaluating Performance – This involves checking on the progress in achieving performance objectives and evaluating the performance and achievements accomplished.

5. Rewarding – This step involves recognizing the contribution in terms of performance accomplishments and achievements by compensation and rewards.

6. Identifying Performance Problems – It involves identification of the bottlenecks and roadblocks of performance and also areas of improvement.

7. Performance Development Planning – It involves planning of developmental activities so as to enhance capabilities of people and contribute to the overall performance improvement.

Performance Management – Essence of Performance Management System

A Performance Management programme may not always improve performance, however it largely tries to open up the opportunities to improve the company’s profitability. A large majority of managers and other employees agree that their performance management programmes do not improve business results.

A recent study conducted by McKinsey & Company suggests that only 30 percent of employees say they receive feedback of real value in improving their performance. A performance management programme may not always improve performance and only such companies are among a small minority of global companies.

Typically the essence of a performance management system is as under:

1. To review the performance of the employees over a given period of time and taking steps to manage it further.

2. To judge the gap between actual and standard performance.

3. To help the management in exercising organisational control.

4. To diagnose the training and development needs of the future.

5. To provide information to assist in HR decisions like promotions, transfer etc.

6. To provide clarity of the expectations and responsibilities of the functions to be performed by the employees.

7. To judge the effectiveness of the other human resource functions of the organisation such as recruitment, selection, training and development.

8. To reduce the grievances of the employees.

9. Helps to strengthen the relationship and communication between superior- subordinates and management – employees.

Performance Management – Few Points for Engendering Trust in the Organisation 

Performance management is a relatively new concept in the field of management. Performance management includes the integration of skills, knowledge, attitudes and mutual trust that the employees and the management has on the process.

Trust is the bond between an organisation and employees. We know that it is very difficult to be in a relationship with someone or work with someone whom we don’t trust. In order to get the most out of employees and make them achieve the organisational goals and objectives, it is very important that you trust them and they trust you in return.

Given below are few points for engendering trust in the organisation:

1. Be open and communicate important issues to the employees. The more the process is transparent, the more employees will trust the process and the organisation,

2. Always provide such assignments to the employees that will make them stretch their abilities. This will make them understand that the process is for the development of their personal career.

3. Actively listening to what the employees are saying and being open to their needs always help in stimulating the trust of the employees.

4. Always being ethical in approach helps the management to gain trust very easily from the employees.

5. Involving employees in decision making and meetings.

6. Being respectful while talking to people working in the organisation.

7. Supporting and encouraging employees in whatever they do.

8. Maintaining confidentiality wherever required.

Performance Management – Ethics

Ethics in performance management are considered to be the cornerstone of the process. In the process of managing and improving performance true and concrete feedback plays vital role. Overall objective of the Performance Management System of achieving high performance and greater productivity can be achieved only when the processes and people involved in the process are ethical.

Hence the culture of ethics needs to be inculcated in the culture of the organisation. Honest assessment of the performance and equally honest feedback will help achieve this objective of bringing ethics in the performance management.

To get the trust and confidence of the employees on any process or function in the organisation, it is very essential that it is ethical in nature. The process must also teach ethics to the employees as to while managing their performance and going to the next level performance wise, the employees must take sincere efforts and even if it takes more time it must be honest in nature. Ethical performance management not only promises growth and development of the employee but also of the organisation as a whole.

Ethics basically means giving ethical treatment to the employees, stakeholders, owners, customers, society etc. When the business operates in an ethical fashion, the employees, the society starts trusting them and that helps to create goodwill and reputation in the minds of the customers, employees and everyone associated with the organisation.

Hence ethical operation will always help the organisation sustain in the competition for a longer period of time and help create a competitive advantage for itself. Because the primary objective of any organisation is to create and make profits for itself, but when it operates in an ethical way it automatically fetches more business towards it. Ethics and ethical behavior are the essential parts of any business entity and that show healthy business practices. In addition to that, ethical practices also ensure long term sustainability and competitive ability for the business.

Objectives of Ethics in Performance Management:

Managers themselves are always concerned about the ethical beliefs and behaviours of their employees. It is always advisable that the organisation has the culture of ethics. Every organisation is run on the basis of trust and the feeling of belongingness towards each other. This is possible only when both the management as well as employees believe in ethics and influences others to follow ethics.

Given below are some of the objectives of bringing ethics into performance management:

1. Reliability and Validity:

This is the most important objective of performance management system. Every employee is anxious to know how he/she has performed in the last quarter / year and what management is expected out of them. A concrete feedback and SMART (Specific, Measurable, Attainable, Realistic and Time bound) goals can be set in front of the employees only when they trust the feedback given by the management. And there comes reliability and validity part into picture. The data or the facts presented by the management must be trustworthy.

Future requirements of training and development as well as transfer and promotion depend upon this data. If this step goes wrong, the manpower planning for next year is going to go for a toss. Similarly, it should be valid. Employees must be able to relate the feedback to the work that they are doing and must find ways by themselves for improving their current state of performance. To achieve this objective, brining ethics into the process of performance management is a must.

2. Job Relatedness:

This is the second most important objective behind having ethics in performance management system. The way the feedback needs to be reliable and valid at the same time, it must be related to the job that the employee is doing. For example, if a person is working as sales executive, his performance feedback must be related to selling techniques, maintaining database of clients etc., and not researching the area before selling.

Giving unrelated feedback confuses the employee and he may not achieve the targets for next quarter or year. Job relatedness plays a vital role in improving the performance of the employees to a great extent. When the employees receive feedback about the work that they are doing and it is perfectly on time that clicks them. They will always remember the feedback that was given to them on time and which was related to the kind of work that they have undertaken.

3. Standardisation:

This is a third and by far the most important objective why ethics should be in performance management. Standardisation is the process of developing and implementing technical standards (Wikipedia). If a standard is set, it becomes easier for the management to measure the performance and it is also beneficial for the employees as they get to know what level of performance is expected out of them in order to get a pay hike or promotion. When standards are set, the process becomes even more transparent as both the parties to performance management get to know their roles and confusion has no role to play.

Standards always act as a benchmark in any activity. When you have a benchmark set it becomes easier for the employees to know where exactly you need to reach and what skills and competencies are required by the employees in order to reach the standards. Hence standardising the process makes the system much more ethical than before.

4. Practical Viability:

This is the fourth important objective regarding why ethics in performance management are required. The standards that are set must be practical and also the feedback shared by the management should be practical in nature. Practical means achievable and can be performed in reality. This is again a very critical issue in the performance management process.

The standards that are set in front of the employees regarding performance management must be practical and realistic in nature. This means they must be achievable in practice. If the standards that are set are too theoretical and closely impossible to achieve, then employees will easily lose interest in between and might not enjoy the performance management activity with commitment and enthusiasm.

In fact, the performance improvement activity is a very interesting phenomenon and employees enjoy if the goals and objectives are made clear to them. Once they know the importance of improving the performance, they enjoy the process of self-discovery and take honest efforts to improve their performance at work. This makes the process convenient for the management as well as for the employees.

5. Legal Sanction:

It should have legal compliances with the legal provisions concerned of the country. Legal sanction is a very critical issue in this regards. When we talk about ethics, legality of the object and actions surely comes into picture. Whatever plan the organisation has in mind for the employees it must be ethical in nature and at the same time it must be legally acceptable. Otherwise the employees would be trapped in the legal formalities.

Having illegal objective or illegal processes not only disturbs the employees’ working but also reduces the commitment and goodwill of the organisation from the minds of internal as well as external customers. Hence, legal sanction for each and every activity carried out by the organisation must be obtained.

6. Due Process:

Formal procedures should be developed to enable employees to pursue their grievances and having them addressed objectively. Performance management is a process and not a onetime activity. There are certain steps that are needed to be followed in order to get desired level of output and performance.

Once the process is set and is shared with the employees who are a part of performance management programme, half of the work is already done. When employees are fully aware of the process, they know it very well as to what level of performance leads to what. They can assess their own performance and seek assistance wherever needed. Having transparency in the process increases trust and belongingness towards the organisation and management.

Significance of Ethics in Performance Management:

1. Asset Protection:

When there is a strong culture of ethics in business, employees tend to be more careful and consider themselves accountable for all the actions they perform. Employees can respect the assets of the organisation only when organisation show them respect and dignity. This needs to reflect in every step organisation takes and hence same is applicable while sharing the performance feedback with the employees.

The feedback even if it is not positive must be shared in such a way that it encourages the employee to perform better the next time i.e., it should not demotivate him/her. A demotivated employee is likely to be rough and casual while handling the assets of the business, e.g., if the performance feedback is not shared and discussed properly, the employee may might use the business line for making long distance personal calls for a longer time.

2. Productivity and Teamwork:

Business ethics are most important when it comes to increasing the productivity and teamwork amongst the employees. To increase the productivity, it is very important to improve the performance. For this timely feedback and post-performance appraisal discussion must take place.

Because an employee needs to know where he is going wrong exactly and what he needs to do in order to make his performance count. Similarly every employee must take the criticism positively and consider it as a chance to prove him/herself. If each employee performs at this the level of productivity team work will reach new heights. This is possible when the entire process of performance management is ethically driven.

3. Public Image:

The one, who makes ethical choices, earns a lot of respect and establish a strong image in the public. This is possible by shouldering corporate social responsibility ethically. If the organisation where you are serving, has a respectable name in the society, you will definitely think a thousand times before committing any unethical act.

Productivity can be increased only if the performance of the employees is in line with the expectations of the organisation. When all the employees in the organisation are performing well, automatically the public image of the organisation in the eyes of the society goes up.

4. Decision Making:

Ethical manner of the organisation supports decisions based on ethics. The role of decision making in performance management comes at the time of giving performance grades to the employees and also on deciding the performance linked benefits to the employees. Ethical decision making enhances accountability and transparency in the entire process and employees consider the process as trustworthy.

An ethical decision making process makes the overall process of performance management concrete as it is the last step in the performance management, (feedback).

Ethical Issues in Performance Management:

Ethical issues increase in the area of performance management. Areas of ethical misconduct under performance management include performance linked cash and incentive plans, performance appraisal, job discrimination, restructuring and layoffs etc.

Let us see each of them in detail:

1. Performance Linked Cash and Incentive Plans:

This usually includes deciding the base salaries depending upon the grades a particular employee has received. The issue here is, the HR department is forced to design high-salary-incentive plan in order to retain the employee in the organisation. Hence, many a times the grades shared through the process of performance management may not be true.

Ethical issue arises when the HR department is put to pressure to favour the executives’ interests over those of other employees. Thus, the performance linked cash and incentive plans need to be closely monitored in order to avoid any kind of ethical issue.

2. Performance Appraisal:

Performance appraisal in itself gives space to ethical issues. Appraisal of individual’s performance is based on observation and judgment. Here there is a lot of scope to be biased and have prejudices in mind.

Many managers rate a particular employee depending upon the unrelated factors. Ethics must be the foundation stone of performance evaluation. High ethical performance review must provide honest and true feedback to all the employees and mutually develop a strategy to bridge the gap between actual performance and standard performance.

3. Job Discrimination:

Job discrimination refers to making adverse decisions against employees based on their membership to a certain group. Bringing in job discrimination in the process of performance evaluation and management is not at all advisable. The employee must be evaluated and guided on the basis of the work that he has done in the past or he is doing currently.

Personal prejudices, sex, race, cast, creed must be kept away from this process. Involving them in the system of performance management can only give false results and as an outcome, the employee and/or the organisation will not able to grow further in the long run.

4. Restructuring and Layoffs:

Restructuring and layoffs are ethically important. If they are conducted in a positive and transparent manner, it could really turn ethical. However, there are a lot of chances that there could be unethical practices followed in the organisation regarding laying off a particular employee. This must happen in a fair environment and the employee must be laid off with respect and dignity.

Ethical Dilemmas in Performance Management:

While planning for ethical performance management, the HR department is faced with a lot of ethical dilemmas.

The ethical dilemmas arise from three sources:

1. Face to Face ethics,

2. Corporate Policy Ethics and

3. Functional areas ethics.

Let us look at them one by one:

1. Face to Face Ethics:

Since performance management system is one of the functions of HR department, it involves a lot of human element in most of the transactions. Employees in each department in the organisation are connected to each other and transact with each other for some or the other work. And there is no such formal relationship that exists between the two parties.

For example, The Quality Assurance Manager might overlook a minor defect in the goods supplied by the supplier and approve a lot of order from him only because of the relationship both of them enjoy. Similarly, it is very likely that the manager over rates the performance of a particular employee because of the similar relationship existing between the two. Thus, this ethical dilemma in performance management must be avoided.

2. Corporate Policy Ethics:

Companies are frequently faced with ethical dilemmas that influence processes across all departments and divisions.

Following contradictory situations are typical:

(a) You are interviewing ex- product manager who just left a competitor’s company. You are thinking of hiring him. He would be more than happy to tell you the competitor’s plans for the coming years. What would you do?

(b) You have just finished appraising your team’s performance. One your team member has not performed up to the mark in the past quarter but you know that he is really a good employee and has a potential to do big wonders for the organisation where he serves. Through your performance assessment, he has received the lowest grade and you very well know that this is going to demoralise him even more. What would you do?

Many a times, it happens that you want to assess the performance of the employee by keeping in mind quantitative as well as qualitative aspects. But corporate policy ethics does not allow this all the time. And hence in situations like these, the managers are faced with corporate policy ethics dilemmas.

3. Functional Area Ethics:

Functional areas of business confront ethical issues. To avoid functional area ethical dilemmas, organisations are required to adopt certain standards. Like for example, relating to preparation of financial statements, standards like Generally Accepted Accounting Standards (GAAPs) should be adopted, whose main purpose is to establish uniform standards for reporting financial statements etc.

Similarly in case of managing performance of the employees and thereby of the entire organisation, standards like PCMM (People Capability Maturity Model) must be adopted that helps the organisation to measure its performance as well as its employees’ performance.

Performance Management – Performance Benchmarking

The meaning of the term has undergone through several generations during the last century. As defined in dictionary benchmarking refers to measurement with reference to an established yardstick or standard. Another meaning, typified by terms like competitive benchmarking, diagnostic benchmarking etc. relates to a diagnosis i.e., identification of strong and weak points in an organization. The third generation, known as process benchmarking had its origin with the Xerox Corp, USA when the company started adapting better practices from Japanese and other companies.

“Benchmarking is a continuous, systematic process of evaluating and comparing the capability of one organization with others normally recognized as industry leaders, for insights for optimizing the organizations processes.”

Benchmarking is a systematic tool that allows a company to determine whether its performance of organizational processes and activities represent the best practices. Benchmarking models are helpful in determining how well a business unit, division, organization or corporation is performing compared with other organization or corporation is performing compared with other organizations of the same type or category say, small scale industries, medium scale industries or large scale industries.

A benchmark is a point of reference for a measurement. The term ‘benchmark’ presumably originates from the practice of making dimensional height measurements of an object on a workbench using a gradual scale or similar tool, and using the surface of the workbench as the origin for the measurements.

Most organizations modify the benchmarking concept to suit their own strategies and objectives.

“Benchmarking is simply about making comparisons with other organizations and then learning the lessons that those comparisons throw up”.

“Benchmarking is the continuous process of measuring products, services and practices against the toughest competitors or those companies recognized as industry leaders (best in class)”.

Performance analysis forms the basis for your current process improvement which enables you to improve the employees in near future. Performance benchmarking removes misconceptions, and lets us see the actual need for improvement.

Performance Benchmarking is a practical approach to share, compare, correct and transform internal functions and processes of participating member organizations in virtually any operational area.

The performance benchmarking is focused on three specific areas:

a. Operational efficiency

b. Quality of service

c. Business benefits

The metrics and findings from the assessment are used for comparison with companies whose video conferencing implementations are delivering outstanding performance results. The goal is to provide information and tools that allow you to improve overall performance.

Benchmarking helps to identify and facilitate sharing of key performance factors for peer organizations. It evaluates performance measures and plays vital role in goal-setting as it relates to key stakeholders like customers, investors, regulators and government. In other words a benchmarking exercise essentially results in identification of a most desirable performance level i.e., benchmark for an activity, an event or equipment in terms of suitable criterion.

It also enhances networking opportunities for operational benchmarking specialists and encourages collaboration on the development of industry performance measurements. Above all organizations can benefit from a single quality practice, the impact of moving from “conformance” thinking to “performance” thinking leads to a big change in performance.

Some people mistakenly assume that performance management is concerned only with following regulatory requirements to appraise and rate performance. Actually, assigning ratings of record is only one part of the overall process (and perhaps the least important part).

Employee performance management includes:

1. Planning work and setting expectations,

2. Continually monitoring performance,

3. Developing the capacity to perform,

4. Periodically rating performance in a summary fashion, and

5. Rewarding good performance

1. Planning:

In an effective organization, work is planned out in advance. Planning means setting performance expectations and goals for groups and individuals to channel their efforts toward achieving organizational objectives. Getting employees involved in the planning process will help them understand the goals of the organization, what needs to be done, why it needs to be done, and how well it should be done.

The regulatory requirements for planning employees’ performance include establishing the elements and standards of their performance appraisal plans. Performance elements and standards should be measurable, understandable, verifiable, equitable, and achievable. Through critical elements, employees are held accountable as individuals for work assignments or responsibilities.

Employee performance plans should be flexible so that they can be adjusted for changing program objectives and work requirements. When used effectively, these plans can be beneficial working documents that are discussed often, and not merely paperwork that is filed in a drawer and seen only when ratings of record are required.

2. Monitoring:

In an effective organization, assignments and projects are monitored continually. Monitoring well means consistently measuring performance and providing ongoing feedback to employees and work groups on their progress toward reaching their goals.

Regulatory requirements for monitoring performance include conducting process reviews with employees where their performance is compared against their elements and standards. Ongoing monitoring provides the opportunity to check how well employees are meeting predetermined standards and to make changes to unrealistic and problematic standards. And by monitoring continually, acceptable performance can be identified at any time during the appraisal period and assistance provided to address such performance rather than wait until the end of the period when summary rating levels are assigned.

3. Developing:

In an effective organization, employee developmental needs are evaluated and addressed. Developing in this instance means increasing the capacity to perform through training, giving assignments that introduce new skills or higher levels of responsibility, improving work processes, or other methods. Providing employees with training and developmental opportunities encourages good performance, strengthens job-related skills and competencies, and helps employees keep up with changes in the workplace such as the introduction of new technology.

Carrying out the processes of performance management provides an excellent opportunity to identify developmental needs. During planning and monitoring of work, deficiencies in performance become evident and can be addressed. Areas for improving good performance also stand out, and action can be taken to help successful employees improve even further.

4. Rating:

Although group performance may have an impact on an employee’s summary rating, a rating of record is assigned only to an individual, not to a group.

5. Rewarding:

In an effective organization, rewards are used well. Rewarding means recognizing employees, individually and as members of groups, for their performance and acknowledging their contributions to the agency’s mission. A basic principle of effective management is that all behavior is controlled by its consequences. Those consequences can and should be both formal and informal and both positive and negative.

Good performance is recognized without waiting for nominations for formal awards to be solicited. Recognition is an ongoing, natural part of day-to-day experience. A lot of the actions that reward good performance – like saying “Thank you” – don’t require a specific regulatory authority. Nonetheless, awards regulations provide a broad range of forms that more formal rewards can take, such as cash, time off, and many non-monetary items. The regulations also cover a variety of contributions that can be rewarded, from suggestions to group accomplishments.

Benchmarking for Excellence in Performance:

In order to become capable of competing with global players, an organization needs to formulate not only an appropriate strategy but also achieve excellence in its execution. Calingo (2002) highlights that excellent organizations have achieved customers but also in anticipating changes and discovering new ways of creating products and services as learning organizations. Excellent organizations are world-class organizations that are able to compete with anybody, any place and any time. This is also referred to as competence dominance.

The term organizational excellence was first coined by Peter and Waterman (1982) in their efforts to find out the characteristics of those American firms which were called as “Excellent Firms”. A similar study on British organizations was conducted by Goldsmith and Clutterbuck (1984), producing similar conclusions to those of American counterparts.

Hickman and Silva (1985) think excellence to be a product of organizational strategy and culture for constant changes. Lessem (1990) stressed development of leadership to instill shared values and fired up championship to drive an organization towards excellence. Chakravarthy (1986) strongly argues that excellence is related to the quality of a firm’s adaptation both internally and externally.

This paradigm used for the first time by Peters and Waterman (1982) looks at a congruence among seven dimensions of organizational effectiveness as proposed by Mc Kinsey’s 7s model.

These dimensions are:

1. Strategy

2. Structure

3. Systems

4. Skills

5. Staffing

6. Styles

7. Super-ordinate goal

After examining these factors and studying their congruence the authors identified several principles of management which form the foundation of an excellent organization.

There are about four principles like:

1. Action orientation

2. Customer centredness

3. Autonomy

4. People focus etc. that remain uncovered through the examination. This has been further used for improving the performance.

Setting Benchmarks:

1. Metric Benchmarking:

According to this interpretation, a benchmarking exercise involves identification of a most desirable performance level that may be to benchmark an activity, an event or an equipment with a suitable criteria. This method of setting benchmarks is concerned with pooling large amount of data through a survey. The critical aspect for such benchmarking has been identification of an appropriate set of criteria and the availability of reliable data.

2. Diagnostic Benchmarking:

This involves measuring and comparing various units in order to find gaps and the reasons behind it. Therefore such an exercise involves an analyst to collect relevant data on three entities – performance results, work practices and processes and enabling the conditions both within and outside the organization. Here the focus may be on an organization or it’s SBU (Strategic Business Unit). The main purpose behind all this exercise is to perform SWOT analysis and identify the company’s Strengths, Weaknesses, Opportunities and Threats.

In this exercise, performance indicators reflect performance results, processes and enablers are worked out and then aggregated with the help of suitable weightages to arrive at composite ratings. The point of difference lies with the previous benchmarking and diagnostic benchmarking involves quantification of processes and enablers which drive the performance results. This also helps in identifying best practices. However, it is to be noted that there is no single best practice because the best is not best for everyone.

The most critical issue for application of such benchmarking has been selection of right performance framework for an organization.

3. Process Benchmarking:

It is identified as a method of identifying, learning and adopting outstanding practices from others. It requires a suitable learning climate in an organization. Few Indian companies like Modi Xerox and Tata Steel have been continuously pursuing process benchmarking.

Performance Management – Top 20 Methods of Organizational Performance Management Systems

There are numerous, major methods and movements to regularly increase the performance of organizations. Each includes regular recurring activities to establish organizational goals, monitor progress toward the goals, and make adjustments to achieve those goals more effectively and efficiently. Typically, these become integrated into the overall recurring management systems in the organization.

Any or all of the following approaches will improve organizational performance depending on if they are implemented comprehensively and remain focused on organizational results. Some of the following, e.g., organizational learning and knowledge management, might be interpreted more as movements than organization performance strategies because there are wide interpretations of the concepts, not all of which include focusing on achieving top-level organizational results.

However, if these two concepts are installed across the organization and focus on organizational results, they contribute strongly to organizational performance. On the other hand, the Balanced Scorecard, which is deliberately designed to be comprehensive and focused on organizational results, will not improve performance if not implemented from a strong design.

Method # 1. Balanced Scorecard:

Balanced Scorecard focuses on four indicators, including customer perspective, internal- business processes, learning and growth and financials, to monitor progress toward organization’s strategic goals.

Method # 2. Benchmarking:

Used as a standard measurements in a service or industry for comparison to other organizations in order to gain perspective on organizational performance. For example, there are emerging standard benchmarks for universities, hospitals, etc. In and in itself, this is not an overall comprehensive process assured to improve performance; rather the results from benchmark comparisons can be used in more overall processes. Benchmarking is often perceived as a quality initiative.

Method # 3. Business Process Reengineering:

Aims to increase performance by radically re-designing the organization’s structures and processes, including by starting over from the ground up.

Method # 4. Continuous Improvement:

It focuses on improving customer satisfaction through continuous and incremental improvements to processes, including by removing unnecessary activities and variations. Continuous improvement is often perceived as a quality initiative.

Method # 5. Cultural Change:

Cultural change is a form of organizational transformation, that is, radical and fundamental form of change. Cultural change involves changing the basic values, norms, beliefs, etc., among members of the organization.

Method # 6. IS09000/IS014000:

Is an internationally recognised standard of quality, and includes guidelines to accomplish the IS09000/14000 standard. Organizations can be optionally audited to earn IS09000 certification. Another major quality standard is the Baldrige Award. IS09000 is a quality initiative.

Method # 7. Knowledge Management:

This focus is on collection and management of critical knowledge in an organization to increase its capacity for achieving results. Knowledge management often includes extensive use of computer technology. In and by itself, this is not an overall comprehensive process assured to improve performance. Its effectiveness toward reaching overall results for the organization depends on how well the enhanced, critical knowledge is applied in the organization.

Method # 8. Learning Organization:

Peter Senge’s Learning Organization in his “Fifth Discipline” focuses on enhancing organizations systems (including people) to increase an organization’s capacity for performance. Includes extensive use of principles of systems theory. In and of itself, this is not an overall comprehensive process assured to improve performance. Its effectiveness toward reaching overall results for the organization depends on how well the enhanced ability to learn is applied in the organization.

Method # 9. Management by Objectives (MBO):

Peter Drucker’s MBO aims to align goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identifying their objectives, time lines for completion, etc., includes ongoing tracking and feedback in process to reach objectives. MBO’s are often perceived as a form of planning.

Method # 10. Outcome-Based Evaluation:

Outcomes-based evaluation is increasingly used, particularly by non-profit organizations, to assess the impact of their services and products on their target communities. The process includes identifying preferred outcomes to accomplish with a certain target market, associate indicators as measures for each of those outcomes and then carry out the measures to assess the extent of outcomes reached.

Method # 11. Programme Evaluation:

Programme evaluation is used for a wide variety of applications, e.g., to increase efficiencies of programme processes and thereby cut costs, to assess if programme goals were reached or not, to quality programmes for accreditation, etc.

Method # 12. Strategic Planning:

This is an organization-wide process to identify strategic direction, including vision, mission, values and overall goals. Direction is pursued by implementing associated action plans, including multi-level goals, objectives, time lines and responsibilities. Strategic planning is, of course, a form of planning.

Method # 13. Total Quality Management (TQM):

TQM includes set of management practices throughout the organization to ensure the organization consistently meets or exceeds customer requirements. Strong focus on process measurement and controls as means of continuous improvement. TQM is a quality initiative.

Method # 14. Behaviourally Anchored Rating Scales:

Behaviourally Anchored Rating Scales (BARS) is a relatively new technique which combines the graphic rating scale and critical incident method. It consists of pre-determined critical areas of job performance or sets of behavioural statements describing important job performance qualities as good or bad (inter-personal relationships, adaptability and reliability, job knowledge etc.) These statements are developed from critical incidents.

In this method, an employee’s actual job behaviour is judged against the desired behaviour by recording and comparing the behaviour with BARS. Developing and practicing Behaviourally Anchored Rating Scales requires expert knowledge.

Method # 15. Human Resource Accounting Method:

Human Resource Accounting method tries to find the relative worth of human assets in terms of money. The performance of the employees is judged in terms of costs and the contribution of employees.

The cost includes all the expenses incurred on them such as compensation, recruitment and selection costs, induction and training costs, etc., whereas the contribution includes the total value added in terms of money. The difference between costs and the contribution will be considered as the performance of the employees. Generally, output (contribution) has to be higher than input (costs).

Method # 16. 360 Degree Performance Management Feedback System:

It has four integral components:

i. Self-Appraisal – Self appraisal provides an opportunity to an employee to look at his/her strengths and weaknesses, achievements and judgment of his/her own performance.

ii. Superior’s Appraisal – Superior’s appraisal forms the traditional part of the system where an employee’s responsibilities and actual performance is rated by the superior.

iii. Subordinates’ Appraisal – The appraisal by the subordinates rates an employee on the parameters such as communication skills, motivational abilities, ability to delegate work, leadership quality and other such competencies.

iv. Peers’ Appraisal – Also known as internal customers, the correct feedback given by peers rates an employee on abilities and competencies such as working in a team, cooperation and sensitivity towards others.

Method # 17. Assessment Centres:

An assessment centre involves the use of methods like social or informal events, tests and exercises, assignments administered to a group or set of employees to assess their competencies such as interpersonal skills, intellectual capabilities, planning and organising abilities, motivation, career orientation, etc., to take higher responsibilities in future. AT and T was the first organisation in 1956 to use assessment centre as the basis of large scale study of managerial progress and career development.

Some companies run a series of extended performance management sessions, called assessment centers, each lasting one or two days or sometimes longer. They are commonly held either on employers’ premises or in a hotel and are considered by many organizations to be the fairest and most accurate method of performance management.

For example, MARICO assessment centre consists of a number of exercises, which will include a presentation, an individual exercise, group work and an interview. The exercises are designed to measure the skills and behaviours required to be successful, including flexibility, challenge, customer focus, cooperative commitment and result focus.

Method # 18. Critical Incidents Method:

The evaluator rates an employee on the basis of critical events and how he behaved during those events or incidents. It consists of negative as well as positive assessment points. The drawback of this system is that the evaluator has to note down the critical incidents and evidence of his behaviour as when they occur.

Method # 19. Paired Comparison Method:

This method compares each employee with all others in a group, one at a time. After all comparisons come to end, employee is given his final ranking on the basis of overall comparisons.

Method # 20. Easy Appraisal Method:

This is a traditional form of appraisal popularly known as “Free Form Method” consists of description of the performance of an employee by his superior on the basis of certain inputs such as quantity of work, quality of work, attitude, sincerity, loyalty, hard work, ability to get along with others, attendance and late coming record, punctuality, ability to accept command of superiors and, obedience. A major weakness of this method is the inseparability of the bias and subjectivity of the evaluator.

Performance Management – Benefits

Performance management is a very important part of human resource management. The focus of it is on development aspects of individual and organisational performance. The approach of performance management is positive. In present highly competitive environment, a high degree of skill and commitment is needed to understand the environment and perform accordingly.

Everybody is benefited by actions of performance management. It is bit difficult to summarise the benefits of it in detail. It is possible to get all employees to reconcile personal goals with organisational goals. One can increase productivity and profitability for any organisation and that leads to progress of the organisation.

It can be applied by organisations or a single department or section inside an organisation as well as an individual person. The process is a natural; self-inspired performance process and appropriately named the self-propelled performance process (SPPP).

It is claimed that the self-propelled performance management system is:

(a) The fastest known method for career promotion;

(b) The quickest way for career advancement;

(c) The surest way for career progress;

(d) The best ingredient in career path planning;

(e) The only true and lasting virtue for career success;

(f) The most neglected part in teachings about management and leadership principles;

(g) The most complete and sophisticated application of performance management;

(h) The best integration of human behaviour research findings, with the latest management, leadership and organisational development principles;

(i) The best automated method for organisational change, development, growth, performance and profit;

(j) The quickest way for career building, career development and moving up on the stepping stones of the corporate career ladder;

(k) The surest and fastest way for increased motivation, productivity, growth, performance and profitability for both the individual and the organisation;

(l) The best career builder and career booster for any career; and inspirational, as it gets people moving, makes them self-starters in utilising own talents and initiative, automatically like magic.

It helps in creating good working environment of openness, mutual trust, cooperation and team-spirit. People work with their high degree of motivation and without work stress. In healthy working environment people work in team and that leads to multidimensional benefits to individuals, teams, departments, sections, divisions and organisation as a whole. The benefits of it are numerous and these are financial and non- financial both. Managing employee or system performance facilitates the effective delivery of strategic and operational goals.

Following are the gains from performance management:

(a) Financial Gains:

Financial gains from performance management are the following:

(i) Improve productivity and production of the company.

(ii) Reduce costs due to sincere and skilled manpower.

(iii) Complete the projects well in time because everyone is giving his best performance at work.

(iv) Aligns the organisational and individuals goals and that avoids all delays in performance.

(v) Through proper and timely communication the objectives are clarified and desired action can be achieved from employees as management wants.

(b) Non-Financial Gains:

Following are non-financial gains from performance management:

(i) Healthy working environment avoids work stress of the employees,

(ii) Optimizes incentive plans to specific goals for overachievement, not just business as usual.

(iii) Employees feel satisfied when the working environment is friendly.

(iv) Employees get chance for further career development, training and promotion, etc.

(v) A sense of belongingness, attachment and commitment develops among employees.

(vi) It leads to a high degree of motivation in employees and further creates a sense of loyalty towards the organisation.

(vii) Persons understand the importance of their roles and get engaged in contributing to the organisational goals.

(viii) Create transparency in approach and dealing among employees.

(ix) High confidence in organisation and its processes like salary, bonus, promotion, etc.

(c) Effective Management Control:

(i) Approach of person is flexible, responsive to management needs and performing the tasks.

(ii) Displays better data relationships.

(iii) Helps to comply in inspection, audit and other legal.

(iv) Simplifies communication of strategic goals and gets involvement of lower level employees too.

Some Other Benefits of Performance Management:

1. Performance Management Focuses on Results, Rather than Behaviors and Activities:

A common misconception among supervisors is that behaviors and activities are the same as results. Thus, an employee may appear extremely busy, but not be contributing at all toward the goals of the organization. An example is the employee who manually reviews completion of every form and procedure, rather than supporting automation of the review. The supervisor may conclude the employee is very committed to the organization and works very hard, thus, deserving a very high performance rating.

2. Aligns Organizational Activities and Processes to the Goals of the Organization:

Performance Management identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. This chain of measurements is examined to ensure alignment with overall results of the organization.

3. Cultivates a System-Wide, Long-Term View of the Organization:

Richard A. Swanson, in Performance Improvement Theory and Practice explains an effective performance improvement process must follow a systems- based approach while looking at outcomes and drivers. Otherwise, the effort produces a flawed picture. For example, laying off people will likely produce short-term profits. However, the organization may eventually experience reduced productivity, resulting in long-term profit/loss.

4. Produces Meaningful Measurements:

These measurements have a wide variety of useful applications. They are useful in benchmarking, or setting standards for comparison with best practices in other organizations. They provide consistent basis for comparison during internal change efforts. They indicate results during improvement efforts, such as employee training, management development, quality programs, etc. They help to ensure equitable and fair treatment to employees based on performance.

Some other benefits of performance management are given below:

a. It helps an individual to think about what results are really wanted. The individual is forced to be accountable, to “put a stake in the ground.”

b. It depersonalizes issues – Supervisor’s focus on behaviors and results, rather than personalities.

c. Validates expectations – In today’s age of high expectations when organizations are striving to transform themselves and society, having measurable results can verify whether grand visions are realistic or not.

d. Helps ensure equitable treatment of employees because appraisals are based on results.

e. Optimizes operations in the organization because goals and results are more closely aligned.

f. Cultivates a change in perspective from activities to results.

g. Performance reviews are focused on contributions to the organizational goals, e.g., forms include the question “What organizational goals were contributed to and how?”

h. Supports ongoing communication, feedback and dialogue about organizational goals. Also supports communication between employee and supervisor.

i. Performance is seen as an ongoing process, rather than a one-time, snapshot event.

j. Provokes focus on the needs of customers, whether internal or external.

k. Cultivates a systems perspective that is, focus on the relationships and exchanges between subsystems, e.g., departments, processes, teams and employees. Accordingly, personnel focus on patterns and themes in the organization, rather than specific events.

l. Continuing focus and analysis on results helps to correct several myths, e.g., “learning means results”, “job satisfaction produces productivity”, etc.

m. Produces specificity in commitments and resources.

n. Provides specificity for comparisons, direction and planning.

o. Redirects attention from bottom-up approaches (e.g., doing job descriptions, performance reviews, etc., first and then “rolling up” results to the top of the organization) to top-down approaches (e.g., ensuring all subsystem goals and results are aligned first with the organization’s overall goals and results).

Performance Management – 8 Major Pitfalls (Reasons Why Performance Management Fails in the Organisation)

Performance management is the most talked about process of the human resource department, as it is believed that the success and failure of the organisation largely depends on the way people behave and perform against the standards set. However in spite of the highest degree of care the taken during the performance management process, there are certain limitations that are faced.

Below are the reasons why performance management fails in the organisation:

1. Achievement of Targets:

This is mainly related with the lenient and casual attitude that the employees have towards the target set for them. This in turn affects the overall performance management activity of the organisation. This failure occurs mainly because the standards that are set for the employees are ambiguous and employees don’t clearly understand what exactly is expected out of them.

And when the assessment of the performance is going on there is a possibility that the situation becomes full of debate, disagreements and chaos. To avoid this, every organisation must set SMART goals for its employees and by SMART we mean, Specific, Measurable, Achievable, Realistic and Time bound. This makes the before and after stage of performance management simpler.

2. Lack of Integration:

Performance management is an integrated approach and it must be implemented in the same way in the organisation. There must be a synergy between performance management strategy and other strategic aspects of the organisation. Performance management system cannot succeed on its own, strategic objectives, strategic planning must be harmonised to have a collective effort and the performance management system can be effectively used.

3. Lack of Leadership Support:

The implementation of the performance management system needs the support of the top management. And it must be driven by leadership and management. The leadership must be implemented with the commitment of implementing the performance management system in the organisation. If this support is not there, the system cannot be implemented effectively. Organizations having a strong performance oriented culture have strong values that results in better and enhanced productivity.

4. Lack of Rewards:

A reward system that encourages high performance and discourages low and mediocre performance must be put in place. This encourages all the employees to follow the system religiously and be eligible for the rewards. However absence of such a reward system will definitely lead to failure of the performance management system. There would not be any motivation to the employees for following the system. Much emphasis of the rewards must be on the non-monetary rewards as it increases the motivational level. And consequently results into higher output.

5. Lack of Monitoring:

Performance management system needs regular monitoring and check-up. Problems and grey areas in the system must be identified at an early stage in order to strengthen the performance process. Monitoring and check-up helps the organisation to collect the information, analyse and interpret it. This information can be further used for appropriate purposes.

6. Lack of Evaluation:

This is the most crucial factor responsible for failure of the performance management system. This helps to detect the problem at a very early stage and ensures quick action to the problem identified. The performance management system must be regularly monitored and evaluated. The success or failure of the entire performance management system depends upon this factor.

7. Design Challenges:

The performance management system must be designed in such a way that it addresses particular problems or needs of the organisation. The people who are involved in designing the performance management system must possess a high level of competence and must have a thorough knowledge of the organisation for which the system is being designed. Having an incomplete and incompetent system leads to loss of credibility, time, resources, costs, and it also adds to increased resistance of people towards change.

8. Implementation Failure:

Even if the system is designed perfectly, the main challenge lies with the implementation part. Leaders in the organisation need to manage couple of run time issues while implementing the performance management system in the organisation. This should be a continuous activity and must be remembered to not to conduct it just once or twice a year. Also the performance feedback must be timely and true.

Performance Management – Performance Management Vs. Human Resource Management

Both the terms refer to one and the same function of management and that is managing the people at work. However, Human Resource Management is mainly focused on best utilising the man power by understanding their strengths and weaknesses and engaging them in different occupations so that their productivity can be increased. Therefore, training and development and employee engagements are part of it.

Personnel Management, on the other hand, is mainly concerned with maintaining good employee- employer relationship and activities connected with it. Therefore, Personnel Management mainly works around Industrial/ Employee/ Labour Relations and activities connected with grievance handling, negotiations, enforcement of labour statutes, looking after welfare of employees and so on.

Difference # Personnel Management (PM):

1. Strategic nature – Predominantly dealing with day- to-day issues. Ad-hoc and reactive in nature: a short-term perspective rather than strategic.

2. Psychological contract – Based on compliance on the part of the employee.

3. Job Design – Typically Tayorlist/Fordist.

4. Organisational structure – Hierarchical. Tendency to vertical integration.

5. Remuneration – Collective base rates ‘Pay by position’. Any additional bonuses linked to Taylorist work systems.

6. Recruitment – Sophisticated recruitment practices for senior staff only. Strong reliance on external local labour market for most recruitment.

7. Training/development – Limited and usually restricted, to training non-managerial employees. Narrowly job-related. Management development limited to top executives and fast-track candidates

8. Employee relations perspective – Pluralist – collectivist; low trust.

9. Organisation of the function – Specialist/professional. Separated from line management. Bureaucratic and centralised.

10. Welfare role – Residual expectations.

11. Criteria for success of the function – Minimising cost of human resources.

Difference # Human Resource Management (HRM):

1. Strategic nature – Dealing with day-to-day issues; but proactive in nature and integrated with other management functions. A deliberately long-term, strategic view of human resources.

2. Psychological contract – Based on seeking willing commitment of the employee.

3. Job Design – Typically team based.

4. Organisational structure – Flexible with core of key employees surrounded by peripheral shells. High degree of outsourcing.

5. Remuneration – Market-based. Individual and/or team performance. ‘Pay for contribution’.

6. Recruitment – Sophisticated recruitment for all employees. Strong internal labour market for core employees. Greater reliance on external labour market for non-core.

7. Training/ development – Transformed into a learning, and development philosophy transcending job-related training. An ongoing developmental role for all core employees including non- management. Strong emphasis on management and leadership development. A learning organisation culture.

8. Employee relations perspective – Unitarist – individualistic; high trust.

9. Organisation of the function – Largely integrated into line management for day-to-day HR issues. Specialist HR group to advise and create HR policy.

10. Welfare role – No explicit welfare role.

11. Criteria for success of the function – Control of HR costs, but also maximum utilisation of human resources over the long term.

Performance Management – Solution to the Problems of Performance Management

The performance of the employee in the organisation is dependent upon many factors including his potential, technical know-how, knowledge of the organisation, competencies etc. It is the integration of all the skills of the employees that make him the best performer in the organisation.

Unless the employee has sufficient amount of knowledge, skills and attitudes, he/she cannot be effective on the job. If the job that is allotted to the employee is not giving him the opportunity to solve problems and use his knowledge, skills and attitude, he is likely to be frustrated at the job and his motivation level is likely to be low.

Problem solving is a highly-cognitive process that needs the person to know how to deal with a problem and get to the solution in the most appropriate manner. Problem solving is the most crucial skill required to be possessed by the managers and leaders. The occurrence of problem solving phase comes at the time of evaluation and review phase of performance appraisal.

Problem solving is undertaken with a specific objective, for example, ascertaining why an employee is unable to achieve desired level of performance in spite of getting all the other things right. This requires high level of skills possessed by the managers who are assessing the performance of the employees.

Problem solving also involves the process of decision making and hence is the problem is solved completely and effectively, and then the decision making can happen in the most effective manner. Appropriate solution can be provided to the employees in order to improving their performance if the detection of problem has happened accurately.

Following are the points to be remembered during problem solving:

1. Use creative strategies for problem solving

2. Try and generate outstanding solutions to the problem

3. Focus on solving the problems rather than indicators

4. Use logical and analytical skills

5. Approach problem with open mind away from biases, and

6. Don’t be afraid to make mistakes.