PERFORMANCE MANAGEMENT

____________________

A Written Output Presented

To The Graduate School Faculty of
San Pedro College, Davao City

_______________________

In Partial Fulfillment
of the Requirements for the Course
HUMAN RESOURCE MANAGEMENT

by

MICHAEL PHILIP F. CERVANTES, RN

ABIGAIL L. ALAS, RN

MAY 2017
OBJECTIVES
At the end of this written report, the students will be able to:
1. Define Performance management as a human resources management tool.
2. Explain the three perspectives of Performance Management System.
3. Analyze the different Performance Management Approaches.
4. Differentiate the models used in Performance Management Approaches.
5. Distinguish the different Performance Measurement System.
6. Apply the principles in Rewarding Performance.

INTRODUCTION

Performance Management is a critical human resources management tool. The

use of this tool has extended beyond industrialized organizations to non-government

organizations, government systems, academic institutions and the like.

It has been said that what gets measured gets done, what gets managed gets

done better and what gets rewarded gets done sooner, and this may well summarize

the principles of performance management system. Performance should be managed,

measured and rewarded.

Performance management is a system that impacts and affects everyone in the

organization. It helps the organization achieve business results and maintain its desired

culture.

Within the context of human resources management, it is used to support other

HR systems, such as training and development, career development, succession

planning, leadership development, selection, staffing, placement, compensation and

reward management.

I. THEORETICAL BASES

A. Performance Management: A Strategic and Integrated Management Process

Despite a wealth of research materials on the subject, there is no consensus on

one ideal performance management system (PMS). However, it has been pointed out

that any performance management system should reflect the unique requirements of an

organization. To better understand performance management, three perspectives on

performance management system have been advanced with the objective of putting into

context the practice and system of managing individual and organizational performance

and linking these two levels of performance.

Three Perspectives

1. Performance management as a system for managing organizational performance

2. Performance management as a system for managing employee performance

3. Performance management as a system for integrating the management of

organizational and employee performance

Performance Management at the Organizational Level

The focus is on determination of the organizations strategy, and the

implementation of that strategy through the organizations structure, technology,

business systems and procedure.

 Employees are not the primary focus, although they will be affected by changes

in technology, structure, and operating systems. This is normally done by setting

corporate policy and resource aims and guidelines, specifying a detailed set of plans,

budgets, objectives, targets and standards of performance and regularly and

systematically reviewing the performance of all services (Rogers, 1990).

` From an organizational perspective as presented by Bredrup (1995), it includes

the following activities: (1) performance planning, (2) performance improvement, and (3)

performance review. Performance planning includes activities such as formulating the

organizations vision and strategy and defining what is meant by performance.

Performance improvement takes a process perspective, that is including such activities

as business process re-engineering and continuous process improvement,

benchmarking, and total quality improvement. Performance review embraces

performance measurement and evaluation.

Employee Performance Management

The focus is on engaging employees on planning their goals, managing their

performance, reviewing their progress, and developing themselves. It emphasizes the

contributions of employees and their behaviors or competencies. In the end, employees

who meet their targets and demonstrate exemplary behaviors are rewarded.

Schneier, Beatty & Baird (1986) identified the following elements in this

perspective: planning, managing and appraising (reviewing, rewarding and developing)

Planning involves establishing performance targets, identifying job

behaviors, and identifying performance measures

 Managing involves monitoring behavior and objectives, reinforcing desired

behaviors and objectives attainment, and redirecting inappropriate

behavior.

Appraising involves formal meeting of employee and manager,

performance plan document, focus on future and employees development

and replanning, and new objective establishment.

Integrated Performance Management System

It supports a companys or organizations overall business goals by linking the

work of each individual employee or manager to the overall mission of the work unit. It is

about directing and supporting employees to work as effectively and efficiently as

possible in line with the needs of the organization (Costello,1994 as cited by Williams,

1998).

In this perspective, performance management aligns the organizations strategic

direction with individual performance. Performance management can be viewed as a

tool used to create and sustain a workplace environment where both an organization

and its employees succeed in fulfilling business objectives.

Based on the foregoing, performance management is both strategic and

integrative. It is strategic because it pushes the realization of the strategic goals of the

organization as it encompasses the larger and broader issues and concerns of the

organizations life. It is also in the context that performance management is integrative

because it aligns and links the organizations strategic direction with individual

performance
 In other words, it ensures the fulfillment of organizational outcomes and

individual goals by linking other systems in support of the overall direction of the

organization. Data generated from PMS can be utilized for the other HR systems either

as basis for program development or for evaluation. This essential links PMS with other

HR systems.

In reality, it is the third perspective that concretizes the entire principles and

processes of performance management. This will be evident in the discussion on the

different approaches to performance management.

II. PERFORMANCE MANAGEMENT APPROACHES

Performance management is better understood in terms of the approaches

used by the organizations. The fundamental principle prevalent in these

approaches is that corporate strategic goals provide the starting point for

business and departmental goals, followed by agreement on performance and

developmental goals, leading to the drawing up of performance plans between

individuals and supervisors, with continuous monitoring and feedback supported

by formal reviews. The use of the approaches depends on the unique

requirement of the organization. The approaches may be used independently or

in combination.

Individual or team performance must be capable of being linked in an

understandable manner to organizational performance, and there are various

approaches to doing this. They include the mixed model, balance scorecard,
 European foundation for quality management (EFQM) excellence, performance

prism and investors in people.

A. Mixed Model or Total Performance Management Approach

A performance management system that combines planning, management, and

appraisal of both performance results and competency behaviors is called a mixed

model of performance management or a total performance management approach.

Mixed models assess and reward both performance and competence; what employees

actually did and how they did it. Mixed models are particularly appropriate when

organizations are in uncertain and rapidly changing environments, where results are not

under employee control; for qualitative/ process service jobs, where there are no

measurable outcomes of performance; and for jobs intended for development of future

performance (Spencer & Spencer, 1993). In this model as in the others, the overall

strategic plan is cascaded down so that, ultimately, there is a clear path connecting

each employees job to that plan. Thus, it links the organizations objectives with

employee goals and achievements. As such, performance management is and must be

shared responsibility of employees and managers.

This approach can be divided into four key areas:

1. Planning Performance

Planning means setting performance expectations and goals for teams

and individuals to channel their efforts toward achieving organizational objectives

2. Performance Monitoring and Coaching

 Plans should be monitored continually. Monitoring well means consistently

measuring performance and providing ongoing feedback to employees and

teams on their progress toward reaching their goals. Monitoring performance

includes giving and receiving feedback, coaching counseling, motivating, self-

monitoring, day-to-day planning, and monitoring training and development

activities.

3. Performance Evaluation and Development Discussion

Every now and then, organizations find it useful to document employee

performance and this is done by using a performance evaluation form. Within the

context of formal performance evaluation requirements, rating means evaluating

employee or team performance against the standard s in an employees

performance plan and assigning a summary rating record. The rating record is

assigned according to procedures included in the organizations performance

management system. It is based on work performed during an entire appraisal

period.

Performance Evaluation includes:

Formal review of performance

Performance measurement

Formal team feedback sessions, individual self-review and peer group and

upward appraisal
 Fig. 1. Performance Management Process

B. The Balanced Scorecard

The balance scorecard was originally proposed as an approach to performance

measurement by combining traditional financial measures with non-financial

measures to provide managers with richer and more relevant information about

organizational performance, particularly with regard to key strategic goals

(Kaplan & Norton, 1992).

Aims to:

1. Enable organizations to manage strategy by linking corporate objectives,

initiatives, measures and targets at all levels in the organization

2. Achieve a balanced set of performance measures and targets that allow

managers to track progress in key areas.

 Fig. 2 Balanced Score Card

C. European Foundation for Quality Management (EFQM) Excellence Model

The EFQM excellence model is a comprehensive organizational

development and improvement framework used for assessing strengths

and areas for improvement across the spectrum of an organizations

activity. The model is comprised of nine criteria five enablers and four

results. It is based on the principle that the five key enablers of excellence

are leadership, policy and strategy, people, partnerships and resources,

and processes.

D. Performance Prism

The performance prism is a stakeholder centric framework for

performance measurement and management. The model was developed

by the Center for Business Performance at Cranfield School of

Management, in conjunction with Accenture. It evolved from the balanced

scorecard, but unlike the scorecard, it acknowledges the full range of

 stakeholders that an organization has. Principally, these are investors,

customers, and intermediaries, employees, suppliers, regulators and

communities.

III. Measuring Performance

Measurement is a focal point of performance management. Peter Drucker

said, You cant manage what you dont measure. Robert Kaplan, the

balance scorecard guru, stated further, What is measured becomes visible,

what is rewarded gets done. Measurements are utilized to define how an

organization is measuring up to shareholder and stakeholder expectations;

tell how the organization is doing in the competitive game and enable the

linking of past, present and future outcomes into an integrated whole.

A. The Need for Performance Measurement

To improve performance, you need to know the current performance.

Measurement provides the basis for generating and giving feedback, and thus can build

the platform for further success, or identity where things are going less well so that

corrective action can be taken.

A performance measurement system fulfills the following purposes (Bredrup, 1995):

Decision Support Ideally, measurement should indicate where to act, perhaps

how to act and hopefully monitor the effect of the action. Decisions should be

based on knowledge and measurement plays an important role in providing

information.
 Monitor effect of strategic plans Implementation of strategic plans has to be

monitored to be able to make the necessary corrections to ensure achievement

of long-term goals. Indicators have to be chosen to monitor consequences and

achievement.

Performance evaluation Evaluation is required for a number of reasons, such

as tracking improvement potentials, setting new yardstick, satisfying requirement

from stakeholders, distributing incentives, etc.

Diagnosis A company needs indicators with a diagnostic purpose. If business

achievements are decreasing, the performance measurement systems should be

able to give some warnings in advance and provide input to a search for reasons.

However, it is difficult to isolate the cause and effect relationship.

Management of a continuous improvement process A continuous improvement

process often provides stepwise blue savings like released capacity, reduced

future costs, or increased value for the customer. Measurement is important to

justify further investments and effort in the process, to manage the process and

ensure consistency with strategy, and to transform improvements into business

achievements.

Motivation measuring progress is necessary to justify further effort in the

improvement process. Resistance against change is considerable in most

organizations and lacking progress is enough ammunition to kill a project or a

process.
 Comparison Evaluation of performance and performance planning depends on

a reference to identify performance gaps. Comparative benchmarking enables

the organization to identify these gaps.

Record development Documentation of development could be demanded by

stakeholders, like customers, authorities, and alliance partners or used actively

as marketing tool. Measurement to monitor and record suppliers performance to

given input to their improvement processes could result in productivity

improvement.

Performance measurement will significantly ensure equitable treatment of employees

based on performance.

Performance measurement asks the questions, What is achieved? and How is it

achieved? In other words, performance management measures contribution (what is

achieved) and competencies (how it is achieved). Contributions (real and tangible

results) are seen in terms of outputs and outcomes, which may come in the form of

programs, systems, revenues, target numbers and improvements in turn around time.

B. Performance Measurement System

As stated earlier, an important aspect of performance management is measuring

performance. Measures of performance are defined as the tools for evaluating

whether an organizations goals and objectives are being achieved or not. These

measures are focused on different aspects of organizational activities, and to

provide the user of the measures with concentrated information, the

measurement tools and standards. In the concrete, what is really measured is

 the performance of individuals in the organization. Individual goals aligned with

the organizations direction, when measured, give us a sense of the overall

performance of the organization.

Over a period of time, the performance management systems have evolve from

the usual annual confidential rating to trait appraisal, behavioral measurements, goal-

driven (management-by-objectives) appraisal, behaviorally-anchored rating scale

(BARS), and the latest trend in appraisal being, the 360-degree feedback

1. Management by Objectives

Performance management systems utilizing management by objectives

strategies entail the setting of mutually agreed upon, observable, measurable

objectives and goals between employees and their bosses.

2. Behaviorally Anchored Rating Scales (BARS)

Behaviorally anchored rating scales are descriptions provided on appraisal

forms and surveys which describe a precise level of performance. BARS were

developed with the hope of improving rater accuracy by providing job-related

behavioral anchors and altering the format of rating scales.

3. Quantitatively Measurable Performance Criteria

Quantitatively measurable performance criteria are thought to be objective,

reducing conflict between the employee and the appraiser by restricting the

focus of the appraisal to items that can be measured by number or quantity.

4. 360-degree Feedback

Multiple-rater and 360 and 360 degree feedback became increasingly talked

about in the 1990s, and more recently have been widely used. It consists of
 performance data generated and analyzed from a number of sources: the

employees immediate supervisor(s); peers, and direct reports, suppliers, and

internal and external customers.

IV. REWARDING PERFORMANCE

Rewarding means recognizing employees, individually and as a members of

teams, for their performance, and acknowledging their competencies and

contributions to realizing the organizations strategic goals.