Performance management is the process of building a work environment in which the managers and the employees are enabled to perform to the best of their abilities. It is an ongoing process of communication between a supervisor and an employee that occurs throughout the year. It is a process to support accomplishing the strategic objectives of the organization. The communication process will include clarifying expectations, setting objectives, identifying goals, providing feedback, and reviewing results. This process provides both the manager and the employee the chance to determine the shared goals that relate to the overall goals of the company by looking into employee performance. Performance management is used to establish an outline for employees and their performance managers to assess and to come to an agreement on specific concerns and aims that are following the overall structure of the company. With this process, both parties have clear objectives that would help them in their work and their professional growth. It is carried out by those who oversee the performance of other people in an organization. Performance management defines a manager’s interaction with an employee, and it also makes every interaction opportunity with an employee into a learning occasion (Heathfield, 2020). Performance management began around 60 years ago as a source of income justification. Since it was used to determine an employee’s wage based on performance, organizations used performance management to drive behaviors from the employees to get specific outcomes (“Performance Management – What is Human Resource? (Defined) Human Resource Management Topics – labor Laws – High Courts & Supreme Court Citation – Case Laws”, n.d.)
A performance management system has three parts, which are performance management, measuring performance or performance appraisal, and feeding back performance information. A performance management system may contain all of these components. However, it is the overall system that matters, not the individual components. An effective performance management system will address the following elements. The first component is performance planning, which is jointly done by the employee and also the employer or manager at the beginning of a performance session. The planning process begins with the reviewing of overall expectations. These expectations include collaborating on the development of performance objectives. Individual development goals are also updated. A performance plan is developed in a model that directs the employee’s efforts toward achieving specific results to support organizational excellence and employee success. Performance appraisal and reviewing is the other component. The entire process of review seeks the active participation of both the employee and the appraiser for analyzing the causes of loopholes in the performance and how it can be overcome. Goals and objectives are discussed throughout the year, during check-in meetings, which provides a framework to ensure employees achieve results through coaching and mutual feedback. At the end of the set performance period, the employee’s performance is reviewed against expected objectives, as well as the means used and behaviors demonstrated in achieving those objectives. The employee is informed by the employer about the areas of improvement and also information on whether the employee is contributing to the expected levels of performance or not. The employee receives open and very transparent feedback, and along with this, the training and development needs of the employee are also identified (Juneja, n.d.).
There are three general purposes of performance management. These are the strategic purpose, administrative use, and developmental use. The strategic intent is a process that involves making and implementing strategic decisions to meet the set personal and organizational objectives. A strategic plan will ensure that your goals are realistic and aligned with the organization’s internal resources. The advantages of the strategic purpose of performance management are increased productivity and operational efficiency. It also leads to accelerated growth and more significant revenue. Developing measurement and feedback systems leads to better organizational performance and ensures long-term survival in the market (Pulakos & Mueller-Hanson, 2015). The administrative purpose in performance management information is used to make salary decisions, inform on promotions, retention-termination, layoffs, and recognition of individual performance. When the feedback is given openly and regularly between managers and their employees, it removes the fear factor because the channels of communication are clear and opened. Already, employees have some insight and understanding about where they stand in their performance. Through that feedback, they readily take steps to develop in areas that needed more attention by pursuing prescribed or self-driven learning and development activities. If employees play an active role in the appraisal process, they should know what that process entails. It will also help if the management tells the employees how they will use their self-appraisal and training the managers to make a point of referencing self-appraisal feedback during the performance review discussion. The developmental purpose improves the performance of employees. It also helps good performers get training and opportunities for growth. Given proper training and guidance, top performers in an organization can be promoted to higher managerial positions. In contrast, the poor performers are given a chance for further improvisation or dismissed if their performance does not meet the standard requirements. In turn, this will increase new talent hire, thus promoting human resources in the organization (“Performance Appraisals: Development vs. Administrative | Monar Consulting, Inc.,” 2012).
There are different strategies and approaches to performance management that organizations can use to measure the performance of their employees. Each of these approaches differs in characteristics and suitability. There are five major approaches. The comparative approach involves ranking an employee’s performance in comparison to that of other employees in the group. Individuals are listed based on the performance scale, from the highest to the lowest performer. There is the attribute approach where employees are rated based on a specific set of parameters set. These parameters include but not limited to problem-solving skills, teamwork, communication, judgment, creativity, and innovation. The behavioral approach is another strategy for performance management. A behavioral approach consists of a series of vertical scales for different dimensions of the job. These scales are based on parameters that are decided consensually from all employees. These parameters are called anchors. Employees are then ranked through each of the anchors according to their performance. The behavioral approach is convenient for reliability and accuracy, although its major drawback in this approach is the voluminous data that the managers have to remember. Another of the strategies is the result approach. This approach is a concept wherein the organization rate employees based on employee performance results. The main advantage of the result-based method of performance measurement is that it will convert a strategy into operations and activities with a more comprehensive view since it takes into consideration the external environment of the job, such as customers and learning, market information, and growth. It does not solely rely on financial indicators of job performance. Finally, the quality approach is an approach that focuses on improving customer satisfaction by reducing errors and achieving continuous service improvisation. This approach takes into consideration both person and system factors (Giri & Chetty, 2017).
Organizations can use all these approaches together effectively to evaluate employee performance. This has a positive impact on the motivation of the employees, and they tend to improve their performance. They can identify their strengths and weaknesses and work on improving their skillsets. Since the employees are well aware of the organizational goals, they can also work on improvising their skills further to achieve them. Employee performance enhances the communication between an employee and the supervisor to discuss job duties and work-related issues for a healthy work environment. With the changing trend, more recent techniques and approaches are being formulated to measure employee productivity and organizational performance.