Performance Management I Question 1.Explain

PERFORMANCE Management i

Question 1.Explain the key elements in a performance management process, and discuss why a well designed performance management system is important for both the employee and the organization.

In the current scenario, functions of Human Resource Management have undergone a major change. It has given extreme importance to operational strategies that enable flourishing execution of the key business strategies. In other words we can say that, HR and business strategies complement each other. Now, the major role of HR is to facilitate and improve performance of their employees by providing them a good work environment and maximum opportunities to participate in decision making process. The role of HR has shifted from an evaluator to a catalyst and enabler.

Performance Management Process

Performance management is a significant factor for today's organizations to survive in stiff competition and battle between the organizations for market leadership. The performance management systems play an effective role in the area of?

human resources. The system promotes a consistent and predictable flow of organizational plans at the operational and strategic level. It is the broader and complex function of human resource as it involves multiple activities such as joint goal setting, continuous review of progress made, nonstop communication, feedbacks, emphasis on improved performance, development program of employees and rewarding.

Performance management system is a continuous process that starts when the employee joins an organization and ends with the employee leaving the organization. Performance management system can be defined as an organized process in which organization's overall performance can be enhanced by enhancing the performance of its employees working within the framework of a team. It can also be defined as a way to promote better performance of employees by a good channel of communication to define expectations of employer, roles of every member within a competence framework and setting attainable benchmarks.

An effective performance management system bring clarity and harmony to the organization in terms of performance, which is intended to improve through training and development programs; designed to encourage positive behavior and discourage those who delay or prevent the achievement of goals, expectations and objectives agreed (O'Neill & Holsinger, 2003).

Key Elements in Performance Management Process

There are five important elements of performance management process that ensure success and accomplishments of every employee working in an organization. By looking at each of these key elements, we will be able to know how they contribute to overall progress and success of performance management system. The key elements involved in performance management process are as follows:

1. Performance Planning and Goal Setting

2. Management by Objectives (MBO)

3. Performance Monitoring

4. Development and Improvement

5. Evaluation of Performance

6. Compensation and Rewards

1. Performance Planning and Goal Setting

One of the most important steps in performance management system is setting of goals and performance planning. Goals are set in a very specific and clear way that is understandable for every employee (Kovac, 2006). The way these goals are evaluated from time to time within a certain framework must also be comprehensive. Planning is a period in which managers and employees work together for several reasons such as:

Review the job description of employee to know whether employee has capability to perform tasks that is being assigned to him. If a particular employee is given new responsibilities or his/her duties has been changed then the job description must be updated

Identify and review the association between employee's job description, his/her work plan, objectives and strategic plan of the organization.

Develop a framework that specifies the tasks, expected results, indicators and standards that will be used to evaluate performance of employees.

Identify the most important performance targets for the coming year. These areas can be selected according to the strategic plan of the organization, the desire of the employee to improve performance in some aspect of his work, or the need to bring in the immediate greater attention to particular aspect of the work of the employee. If the employee does not achieve these important goals then overall performance is evaluated as unsatisfactory.

Set goals that will help employee training to improve the knowledge and skills that are useful to their work.

Goals can be related to employee's career, which can be integrated into planning longer-term.

2. Management by Objectives (MBO)

Management by objective (MBO) is one of the performance management program in which managers and employees agree on certain objectives of an organization and work together to achieve those set objectives. MBO team encourages teamwork within the organization (Antoni, 2005). MBO gives great opportunity to employees to participate in decision making process of an organization. By taking part in the process of setting organization's objectives, employees are likely to work efficiently to achieve those tasks.

3. Performance Monitoring and Coaching

The performance management system includes continuous monitoring of the progress of the employees to identify those actions that are correct and those that are incorrect. The manager plays a role of a coaching and mentor for the employees at this stage (Nel et.al, 2012). Managers should have good coaching skills to identify the issues and rectify them. Performance monitoring is a continuous exercise that starts when duties or responsibilities are assigned to employees and end until tasks or goals are achieved. Some organizations established checkpoints about the work progress in relation to the objectives set at the beginning of the period. These checkpoints become crucial during the supervision of employee who has no or less experience.

4. Development and Improvement

During the monitoring of employee activities are developed and improved from time to time and through a number of different ways. Managers need to encourage their employees towards further development and growth of their skills and capabilities to perform the tasks efficiently. The effective performance management system does not stop after employees have achieved their set target or goal but it will encourage the employees to further excel and go beyond their target.

5. Evaluation of Performance and Feedback

Performance evaluation refers to the process by which managers analyze the results obtained and compare those results with the objectives set at the beginning and gives certain feedbacks. Evaluation process includes an overall assessment of the procedure that is carried out. An effective performance evaluation process starts with the identification and discussion of performance expectations, in order to recognize the achievements of employees and resolving their performance problems.

6. Compensation and Rewards

Compensation and rewards can be considered as the most important element of performance management system. Managers can motivate their employees to continue to achieve and enhance their performance through giving them good rewards and compensation. There are certain ways through which managers can compensate and reward their employees when they achieve their target. A good compensation plan ensures good performances from employees. It encourages serious attitude of employees towards their work and it can also ensure low absenteeism of employees.

Importance of Performance Management System

Managing employee performance is one of the biggest concerns of every organization. Performance management is considered mainly in terms of accuracy and quality assessment of individual performance. An overall good performance of the organization is ensured by a good performance management system. Good performance management systems manage the performance of every employee and relate this performance with organizational goals and strategies. In this way, it ensures that the employees' performance increases along with the organization's progress.

Good performance management process increases the organization's performance by:

Making sure that there is a clear understanding between employees about organizational goals and objectives.

Communicating the results expected from each employee and determining whether an employee has certain skills and capabilities to perform that task or function and addressing any issue regarding the completion of task.

Creating an effective communication channel to ensure there is an effective communication within the organization.

Supporting the administrative decisions about promotions, terminations, compensation and rewards.

Ensuring that the work plans of the employees support the strategic direction of the organization.

Identifying the areas of poor performance and establishing plans to improve performance.

A well designed performance management system is beneficial to employees in several ways such as:

It creates a valuable relationship between employees and first line managers that is based on mutual trust and harmony.

It provides transparent feedback to employees on a regular basis when they are performing any task or duty.

It creates an association between the performance and compensation plan of every employee.

It provides development opportunities for employees to enhance their skills and capabilities providing them a good platform to learn.

It ensures that the compensation and rewards system is based on equality which is acceptable to both the employer and employee.

It reports and recognizes employee achievements.

It encourages good performances of employees by giving rewards and incentives.

It provides proper growth opportunities to employees.

Question 2: Discuss four methods for performance evaluation and their pros and cons. provide an example of a job to illustrate each method you discuss.

Performance Evaluation

The performance evaluation process in organizations is an important function of human resource management to assess the performance of employees and identify their strengths and weaknesses. The evaluation of work performance of employees is a technical process which is comprehensively, systematically and continuously carried out by the immediate superiors. The evaluation is conducted to identify attitudes, job performance and behavior of the employee during the performance of their duties and functions.

The evaluation is done at all levels of the organization starting from the top to bottom. One of the most common uses of the performance evaluations of employees is when the employer has to take a decision regarding promotions, layoffs and increment in salaries of employees. The information obtained from the performance evaluation of employees determines the training and development needs of both individuals and organization respectively (Millett & Wiesner, 2000). The performance evaluation approach can be rational or political. The rational approach determines the performance of every employee working in an organization while the political approach determines the performance of employee based on agenda and goals of manager (Nel et.al, 2012).

Methods of Performance Evaluation

The popular methods of performance evaluation are as follows:

1. Immediate Manager

2. Peer Evaluation

3. Reverse Appraisal

4. Self Appraisal

5. Customer Appraisal

6. 360° feedback

1. Immediate Manager

The most common and easiest method for evaluating the performance of employee is immediate manager's evaluation (Nel et.al, 2012). The manager is in the best position to observe and monitor the performance of his/her subordinates. The manager can easily rate performance of employee and match the performance with desired results.

2. Peer Evaluation

Peer review is the performance evaluation process in which co-workers of an employee give formal feedback on his performance during a particular period of time (Nel et.al, 2012). Peer evaluation method has replaced the traditional style of performance evaluation procedures in organizations that are team based.

Peer evaluation provides a more comprehensive feedback about employees' performance as compared to the manager's evaluation. However, the feedback of peers might vary and there might be a conflict between employees about the performance of a certain employee. Peers evaluate good and bad characteristics of each other and the quality of work done. Peer evaluation is empowering the employees to assess each other's skills. This method also helps them to enhance their skills to professionally evaluate each other. Employees feel the sense of responsibility which is a benefit for an organization. For example: employees are required to work as a team on a particular project given by their manager. Employees distribute tasks among each other. All the members of a team are required to complete their task on a given period of time. The project is completed and all members of the team receive appreciation for completing their tasks. At the end, the team members can put into practice a peer appraisal method to evaluate each other's performance during the project.

3. Reverse Appraisal

Reverse appraisal is the method in which subordinates provide their feedback about their manager's performance. The skills and capabilities of a manager are evaluated through this method (Nel et.al, 2012). An employee knows well about a manager's capabilities such as planning, organizing his/her staff and how a manager deals with the staff. This method works more effectively in big organizations where employees are present in a large number. The result obtained from this method in large organizations is reliable. Reverse appraisal is the best tool to monitor manager's behavior with subordinates. We can take the example of subordinates working under first line manager. Subordinates can give their feedback about the performance of their first line manager which is reviewed by the middle manager. Similarly, the performance of middle manager can be evaluated by first line managers and their feedback is reviewed by the top manager.

4. Self Appraisal

One of the biggest concerns for every organization is to evaluate its performance, identify weakness and taking certain steps to improve the performance. Self appraisal is one of the methods to evaluate the organization's performance. Self appraisal is the method in which the employees give feedback about the organization's performance by completing a performance evaluation during a particular period of time (Nel et.al, 2012). The employees get a chance to evaluate their organization's performance and participate in the decision making process about how to improve an organization's performance. For example, an organization which is facing a continuous decline in its sale can implement this method. An organization can design a performance evaluation form and direct all its employees to fill the form. Evaluation interviews can also be conducted. The employees can give their suggestions to improve the sales and reports which are prepared to identify the problems. Finally, recommendations are made to improve the sales of the organization.

5. Customer Appraisal

Customer appraisal is an evaluation completed by the customer. Customer appraisal is the method of performance evaluation in which customers give their feedback about the job performance (Nel et.al, 2012). The customer might be an employee's internal customer or an organization's external customer. The customers might give their feedback on the basis of quality of product or service offered by a company. The feedback by customers can help the organizations to set benchmarks for their services or products. For example, an airline company can publish a questionnaire on its website to evaluate the performance of their air hostess during the flight. The customers visiting the company's website for flight booking can fill the questionnaire and give feedback about the quality of service provided to them. The analysis of questionnaire is done by the company and report can be made to evaluate the performance.