Performance Management Notes

Definition

‘Systematic process for improving individual, team and organisational performance

(which) focuses on what needs to be done to help the organisation
achieve its business goals.’ (Armstrong, 2012)

Importance of Performance Management (Organisational Perspective)

 Development Purpose - Improving performance through discussing

development needs, identifying training opportunities and planning action.
 Management Purpose - Decisions about pay-rises, bonuses, promotions
and careers and work responsibilities.
 Establishes Objectives - through which individuals and teams can see their
part in the organisation’s mission and strategy.
 Improves Performance - among employees, teams and, ultimately,
organisations.
 Holds people to account - for their performance by linking it to reward, career
progression and termination of contracts.

Importance of Management (Individual’s Perspective)

 Improves their performance and productivity

 Enhances employee motivation, satisfaction and commitment
 Answers questions which are key to development and retention:
- What is expected of me?
- What are we trying to achieve?
- How can I improve?
- How can I achieve my goals?
- How can I contribute?
4 stages of a performance management system

1. Definition of a business role – Job description and objectives of

department/group
2. Planning performance – Individual objectives and Development plans
3. Delivering and Monitoring – Ongoing manager support and Ongoing review
4. Formal assessment and reward – Annual assessment and Link to pay

(Torrington et al, 2017)

APPRAISAL

Definition

“Performance appraisal is systematic evaluation of the individual with respect to his

or her performance on the job and his or her potential for development” (Beach,
1985).

 Provides an opportunity for managers and their employees to review their

work-related behaviour
 It provides information upon which to make promotion and salary decisions
 It is part of the company’s career planning process

Method of Appraisal

 Attribute Approach – focuses on the extent to which individuals have certain

attributes believed desirable for the company’s success. This technique
defines a set of traits such as initiative, leadership, competitiveness, etc.
which are used to evaluate individuals using these factors. Ex: Graphic rating
scale.
 Comparative Approach – it requires the evaluator to compare an individual’s
performance with that of others. Ex: Ranking, Forced Distribution Method.
 Behavioural Approach – it attempts to define the behaviours an employee
must exhibit to be effective in this job. The behaviours must always link to
desired results for the organisation to achieve in the business environment.
Ex: Critical incident method (done by recording employee’s positive and
negative work-related behaviour)
  Result Approach – requires management to set specific measurable goals
with each employee and then periodically discuss the employee’s progress
towards the goals.

Deloitte: Reinventing Performance Management

• Instead of the traditional appraisals, managers will feedback on a project-by-project

basis.
• The advantages are that objectives can change regularly with business needs and
employees can focus on what they need to do to make a difference rather than
fixating on a number.
• Similarly, Accenture, Microsoft, aim to deliver timely feedback that encourages
employees to learn as they go.

“Performance Snapshot”: it lets them see performance quickly and reliably across
the organisation.
• Check-ins conducted more frequently; regular goalsetting occurs in an open,
collaborative process.
• Feedback collected continuously and easily reviewed at end of year (often through
apps and mobile tools).
• This feedback will focus on answering four questions, of which two are limited to
yes-or-no answers, about the worker’s performance.
• Managers focused on coaching and developing people

Key Points

• Performance Management is viewed as an essential management tool yet often

causes more problems than it solves.
• Setting objectives, receiving insightful feedback and discussing future development
are core to effectively managing performance.
• We are driven to progress in meaningful work and achieving goals enables us to
know we are making progress.
Questions Related to Performance Management and Appraisal From PAST
PAPERS (excluding 2016)

1. Performance appraisal is an essential feature of performance management.

How, and in what ways, are these two concepts linked?
2. To what extent do the practices of Performance Management and
Performance Appraisal complement each other?
3. The aims of performance appraisal are admirable; the weaknesses are in the
implementation. To what extent would you agree with this statement?
4. Why do organisations persist with performance appraisals when the evidence
suggests that they are unreliable, inconsistent and open to managerial bias?
5. “Performance management is an outdated HR practice” to what extent would
you agree with this statement?

Managing individual performance in organisations traditionally centred on

assessing performance and allocating reward, with effective performance
seen as the result of the interaction between individual ability and motivation.
it is recognised that planning and enabling performance to have a critical
effect on individual performance, with performance goals and standards,
appropriate resources, guidance and support from the individual’s manager all
being central. Performance appraisal systems have operated in many
organisations since the 1950s and are distinct from performance management
systems, which have changed (and broadened) the nature of performance
appraisal.

Performance management is ‘‘a continuous process of identifying, measuring,

and developing the performance of individuals and teams and aligning
performance with the strategic goals of the organization’’ (Aguinis, 2009). On
the other hand, performance appraisal is the depiction of the strengths and
weaknesses of employees in a noncontinuous manner, typically just once a
year. This process is often perceived as a bureaucratic waste of time created
by the human resource department (Aguinis, 2009). in sharp contrast to
performance appraisal, performance management is ‘owned’ by those who
participate in the system: raters and ratees. Performance management
benefits most those who take part in the system and is not an HR function
exclusively but rather a business unit function.

Performance appraisal

Traditionally performance appraisal systems have provided a formalised

process to review employee performance. They are centrally designed,
usually by the HR function, and require each line manager to appraise the
performance of staff, often in just one performance review meeting a year.
But while performance appraisal has gradually been applied to wider groups
of employees, beyond managers and professionals, there are concerns that
appraisal systems are treated as an administrative exercise, are ineffective
and do little to improve the future performance of employees. An
appraisal/review process is incorporated into this but is distinct from a
traditional appraisal system. Performance measures may be either
quantitative or qualitative. Qualitative appraisal is often an unstructured
narrative on the general performance of the appraisee, although some
guidance might be given about the areas on which the appraiser should
comment. The problem with qualitative appraisals is that they may leave
important areas unpraised, and that they are not suitable for comparison
purposes. When using quantitative measures, it is common to use a Likert
scale to rate performance with either numbers or letters. These ratings can
be contentious as, despite being seemingly objective they can be subject to
bias and are often resented by employees. Performance review/appraisal
attracts perhaps most criticism of any aspect of a performance management
system. Its effectiveness hinges on a range of different factors and there is an
increasing body of evidence that strong working relationships are needed for
its success (Cappelli and Conyon 2018, Meinecke et al. 2017). Common
problems include unclear objectives, inconsistent ratings, lack of feedback,
poor preparation for the meeting and lack of development opportunities.
Aguinis and Pierce (2008) have also found that many employees are
dissatisfied with the level of feedback and frequency of performance review.
Fairness and trust in supervisors are thus essential to an effective appraisal
(Byrne et al. 2012). The tendency for managers and supervisors to be lenient
in their performance appraisals remains one of the most significant problems
related to performance appraisal systems (Kneeland, 1929; Pulakos &
O’Leary, 2011).

Performance management systems

While many appraisal systems are still in existence and continue to be

updated, performance management systems are recommended as a better
way to manage employee performance. performance management, as
opposed to performance appraisal, provides strategic links to organisational
objectives, provides ongoing feedback to improve performance and is a
continuous process driven by management, rather than an annual event
owned by HR. foundation of performance management relies on a view that
performance is more than ability and motivation. Performance management
systems, and performance review/appraisal in particular, can be used to
allocate reward. This can be both financial and non-financial reward, although
much of the debate centres around financial reward. It is not difficult to
understand why. Performance management systems are effective and
relatively uncontentious in supporting non-financial rewards such as training
and development, quality of working life and strong supervisor/employee
relationships. The allocation of financial reward is much more contentious
(Aguinis and Pierce 2008).