Introduction Although it is a concept that has commanded attention from the management world over the past twenty years, and has contributed to the efficiency and effectiveness of numerous organisations, yet performance measurement remains a critical and much debated issue. Most of the criticisms are directed to the performance appraisal process. Some call it useless and some even said it makes organisations worst (Bacal 1994, Deming 1986). However, these arguments against performance management were made a long time ago, with some more than twenty years ago.
With the advance in technology and globalisation, who is to say that performance management has not improved? In the later chapters, we will take a look at the evolution of performance management to find out its beginnings and influences from earlier management theories. Through this essay, we will discover that performance management today is not just about appraisals, but is a developing process that serves to facilitate communication, efficiency, effectiveness and attaining both long and short-term goals.
Performance Management According to Bacal (1999), performance management is a continuous communication process between employees and managers to develop a clear understanding of aligning organisational goals with personal efforts to improve both employees’ and organisation’s performance. To understand how this works, Lucas et al (2006) broke down the process into three parts: objective-setting, performing and developing, and performance review.
Several activities are conducted for each part of the process, it is important that all parts are carried out for the process to be effective. Figure 1. 1 presents the critical parts and activities of the performance management process. Figure 1. 1 Performance Management Process, Adapted from Lucas et al (2006). The first part of the performance management process is objective-setting. In this part of the process, there are two fundamentals that employees should be clear about: (i) the organisation’s mission and strategic goals and (ii) the job description.
Employees and managers would come together to negotiate a performance agreement, as according to Armstrong and Baron (2005), are the expectations that are discussed and agreed upon between employee and managers; the objectives that need to be achieved, how performance are evaluated, and the skills that are required to deliver. Shields (2007) stressed the importance for employees to be educated on how to set accurate and meaningful goals and expectations which needs to be valid, reliable and self-regulated.
Figure 1. 2 shows the ‘SMART’ method of goal-setting. Figure 1. 2 ‘SMART’ Goal-setting, Shields (2007) SSpecific and Stretching Clear, unambiguous, straightforward, understandable, challenging. MMeasurable and able to be Monitored Related to valid quantifiable measures (KPI) that will allow progress to be tracked during the performance cycle. AAgreed and Accepted A target that the employee has co-determined which he/she feels a sense of ownership.
RRealistic and Representative Challenging but position-valid and within the capabilities of the individual. TTimely Achievable within the defined time scale with progress subjected to continuous feedback. When the employee is clear about his job scope and expectations, has complete understanding of the organisation’s purpose and the goals it strives to achieve, he knows what to do to efficiently help the organisation achieve its goals (Smither 2009).
In the second part of the process, managers would observe his employees to ensure that performance is satisfactory and coherent with the performance agreement. Cardy and Leonard (2011) adds that when managers identify performance or behavioural issues, they will work with the employee to develop a performance improvement plan where managers will provide ongoing consultation, coaching, counselling and performance feedback to help employees receive clear performance direction and ongoing feedbacks to encourage higher levels of commitment and performance (Franke 2004).
These performance data are recorded for evaluation and considerations for personal development planning. Employees will discuss with their managers to agree upon a development plan to undergo trainings that will not only focus on development in their current job but also to gain knowledge and skills to increase their ability to undertake wider responsibilities in order to achieve higher level organisational goals (Armstrong & Baron 2005).
Usually once or twice a year, a formal performance review is conducted to allow managers and employees to jointly explore new grounds for improvement and identify solutions to issues that hinder the employee’s ability to achieve standards stated in the prearranged performance agreement (Management Study Guide 2011). There are many approaches to conduct performance reviews, such as the 360-degree evaluation, which is a multi-rater approach, where feedbacks are drawn from customers, bosses, colleagues and the employee.
Using the pre-determined performance agreement as a measure, decisions would be made to either improve the performance of the employees, take the required corrective actions, or the related Human Resource decisions like rewards, promotions, demotions or transfers. Performance Management Criticisms and Evolution Although the performance management framework has been regarded as a great contribution to organisations effectiveness, it has received criticisms from various management theorists.
Deming (1986) criticised performance appraisal by saying it ‘nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, and nourishes rivalry and organisational politics’. He is supported by others such as Lee (2006) commenting that “appraisals were never designed to improve performance, only to measure and rate it”. These criticisms have some things in common. These comments might have been true in performance management’s most traditional form, however, like any successful system, it has since evolved through developments to overcome its shortcomings.
The origins of performance management theory and practice can be traced back to the introduction of scientific management in 1911 by Fredrick W. Taylor. It focused primarily on productivity by implementing job dilution, knowledge transfer and monetary incentives. Taylor believed in using scientific methods to find the “one best way” to carry out jobs. He divided jobs into parts and trained workers to perform their assigned tasks in a standard procedure.
To increase motivation, monetary incentives were awarded to workers who achieve or exceed production standards. Elton Mayo, however, thought that employees are not only motivated by money but could be better motivated if their social needs are met. In 1927, Mayo carried out the Hawthorne experiment where he observed that through communication, team work and involvement, productivity increased. Mayo discovered that using the knowledge of social science, he is able to secure the commitment of his employees.
This formed the basis of the Human Relations Movement (Pugh & Hickson 2007). In 1957, Management by Objectives (MBO) was made popular to the management world by Peter Drucker. According to Lussier (1997), it is a performance appraisal process between management and employees where they would come together to set objectives, review performance and reward employees according to their performance. Van Fleet (1991) further explains that organisational goals are set by top management which will be communicated to each department to form departmental goals.
Each employee will then approach individual’s manager with a set of proposed short-term verifiable goals for discussion, which will be jointly reviewed and modified until both parties are satisfied. The employee will be periodically assessed for the progress made towards these goals. A final review meeting is held at the end of the work cycle to evaluate the degree of goal attainment and are rewarded on how well they have attained their goals. Throughout the years, characteristics from various management systems were contributed to the formation of the traditional form of performance management system.
According to Curado and Manica (2007), traditional performance management is primarily cost and efficiency based, placing high importance on short-term profit orientation by individuals as measures to performance. Bacal (1993) adds that “traditional performance management systems can foster a lack of collective responsibility for the achievement of organizational goals, encourage competition rather than cooperation, and can impede the development of effective teamwork”. These criticisms are similar to those of Deming’s argument.
The following chapter will evaluate the argument to see if these issues still persist in performance management today. Evaluation of Criticisms The argument against performance management is that it “nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, and nourishes rivalry and organisational politics” (Deming 1986). To effectively evaluate this argument, I will break it down into two parts. “Nourishes short-term performance, annihilates long-term planning… ” In the context of MBO, this might have been valid.
Singla (2009) observed that the MBO approach focused extensively on short-term objectives instead of long-term planning, thus managers would seek ways to achieve those goals in the shortest time possible. An example would be a situation that requires increasing profits. Manager achieves this by withdrawing research units and trainings to cut costs. Although effects would be fast but this would cause long-term damage to the organisation. Developments in performance management have managed to overcome this issue by introducing the balanced scorecard.
In the early 1990s, the Balanced Scorecard was introduced by Dr Robert Kaplan and Dr David Norton as a strategic management tool. Its purpose is to translate strategic organisational goals to performance objectives, measures, targets and initiatives in four perspectives: financial, customer, internal process, and employee learning and growth (Niven 2006). Kaplan and Norton (1996) designed the scorecard to have performance objectives from all four inter-related perspectives and their performance drivers which can be measured by the attainment of its strategic outcome measure.
All operational objectives, no matter short or long-term, maps out to form the organisation’s long-term goal. Therefore, with the awareness of the cause and effect of each objective, employees are able to set goals that are aligned to attain organisation’s long-term strategic goals. “… Builds fear, demolishes teamwork, and nourishes rivalry and organisational politics” In performance management’s traditional form, appraisals are held once a year on the basis of the individual’s ability to produce goods, and not on other intangible factors such as behaviour.
Conflict within work teams is common as every team member vies for credit and shuns blames as employees were only concerned with their individual’s objective (Huxtable 1995). Lee (2005) commented that traditional appraisals are pointlessly documenting the past as past efforts can neither be changed nor change future efforts. Managers falsely belief that employees who get poor ratings will be motivated to perform better as negative reinforcements and punishments are the most effective motivational tools.
Employees under management with such mentality would naturally worry about job security and feel nervous and fearful. Performance management today has revised its format of performance appraisal as organisations move towards a team-based environment. Pynes (2008) observed that as team goals are getting common, team members often work as individuals collaborating with one another to achieve team goals. Group performance reviews have also been implemented; team objectives are set together by team members and individual goals are set after that so as to not affect team objectives.
Team work will also enable individuals to self-assess their relationship between their performance and the team’s success. Group incentives such as goal-sharing, gain-sharing and balanced scorecard provides both financial and non-financial bonuses. As the focus of individual goals has been lifted off, rivalry and organisational politics would dissipate so as to work harmoniously to achieve common team goals. Performances reviews are redefined to be positive and forward-looking so as to encourage progress rather than instil fear which demoralises employee.
Armstrong (2006) adds that performance reviews aims to achieve: (i) planning, by revising the performance agreement, (ii) motivation, by giving forward-looking advice, commendation, appreciation and development opportunities; (iii) learning and development, to encourage independent learning and performance improvement through coaching and other activities and lastly, (iv) communication, a two-way channel for managers and employee to communicate about job expectations, work issues and goals. Conclusion
Performance management is a management process which includes objective-setting, performing and developing, and performance review. Although this process is generally accepted, there are some critics who think otherwise. Like any other successful systems, there are bound to be people who can accept and some that will criticise this management process. There is no perfect system. The argument that performance management “nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, and nourishes rivalry and organisational politics”, was made many years ago.
With the implementation of the balanced scorecard, on-going coaching and feedbacks, and the introduction of team performance reviews, performance management had successfully overcome those issues. In conclusion, the argument made against performance management is untrue in today’s context. (1992 Words) Reference List 1. Armstrong, M. 2006, ‘Performance Management: Key Strategies and Practical Guidelines’, 3rd Edition, Kogan Page Limited. 2. Armstrong, M. & Baron, A. 2005, ‘Managing Performance: Performance Management in Action’, London, CIPD. 3. Bacal, R. 1999, ‘Performance Management’, New York, Mcgraw-Hill. 4. Bacal, R. 993, ‘A Critical Look At Performance Management Systems – Why Don’t They Work? ‘, Winnipeg, MB, Canada, Bacal & Associates. 5. Cardy, R. L. & Leonard, B. 2011, ‘Performance Management: Concepts, Skills, and Exercises’, 2nd Edition, Armonk, New York, M. E. Sharpe. 6. Curado, C. & Manica, J. 2010, ‘Management Control Systems in Madeira Island Largest Firms: Evidence on the Balanced Scorecard Usage’, Journal of Business Economics and Management 11(4): pp. 652–670. 7. Deming, W. E. 1986, ‘Out Of the Crisis’, Cambridge, MA, The MIT Press. 8. Franke, L. R. 2004, ‘HR Networking: Performance Management’, CCH Incorporated. . Huxtable, N. 1995, ‘Small Business Total Quality’, London, Chapman and Hall. 10. Kaplan, R. S. & Norton, D. P. 1996, ‘Linking the Balanced Scorecard to Strategy’, California Management Review, Vol. 39, No. 1, pp. 53-79 11. Lee, C. D. 2005, ‘Rethinking the Goals of Your Performance-Management System’, Adapted from The Performance Conversations Model of Performance Management, Wiley Periodicals, Inc. 12. Lee, C. D. 2006, ‘Performance Conversations’, Tucson, AZ, Fenestra Books. 13. Lucas, R. & Lupton, B. & Mathieson, H. 2006, ‘Human Resource Management in an International Context’, London, CIPD. 4. Lussier, R. N. 1997, ‘Management: Concepts, Applications And Skill Development’, Cincinnati, Ohio, USA, International Thomson Publishing. 15. Management Study Guide 2011, ‘Performance Management’, Accessed 2nd September 2011, ; http://www. managementstudyguide. com/performance-management. htm; . 16. Niven, P. R. 2006, ‘Balanced Scorecard Step-by-step: Maximizing Performance and Maintaining Result’, Hoboken, New Jersey, John Wiley & Sons, Inc. 17. Pugh, D. S. & Hickson, D. J. 2007, ‘Great Writers on Organizations’, 3rd Edition, Hampshire, Ashgate. 18. Pynes, J.
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