Definition of Performance Management

The role of HR in the present scenario has undergone a sea change and its focus is on evolving such functional strategies which en works towards facilitating and improving the performance of the employees by building a conducive work environment and providing activities of HR are driven towards development of high performance leaders and fostering employee motivation. So, it can be interp

Performance management is the current buzzword and is the need in the current times of cut throat competition and the organizatio as joint goal setting, continuous progress review and frequent communication, feedback and coaching for improved performance, implementation of employee development p and ends when an employee quits the organization. Performance management can be regarded as a systematic process by which t means for promoting superior performance by communicating expectations, defining roles within a required competence framework

According to Armstrong and Baron (1998), Performance Management is both a strategic and an integrated approach to delivering successful results in organizations by improving the performance and developing the capabilities of teams and individuals. The term performance management gained its popularity in early 1980s when total quality management programs received utmost importance for achievement of superior standards and quality performance. Tools such as job design, leadership development, training and reward system received an equal impetus along with the traditional performance appraisal process in the new comprehensive and a much wider framework. Performance management is an ongoing communication process which is carried between the supervisors and the employees through out the year. The process is very much cyclical and continuous in nature. A performance management system includes the following actions.

Developing clear job descriptions and employee performance plans which includes the key result areas (KRA') and performance indicators. Selection of right set of people by implementing an appropriate selection process. Negotiating requirements and performance standards for measuring the outcome and overall productivity against the predefined benchmarks. Providing continuous coaching and feedback during the period of delivery of performance. Identifying the training and development needs by measuring the outcomes achieved against the set standards and implementing effective development programs for improvement. Holding quarterly performance development discussions and evaluating employee performance on the basis of performance plans. Designing effective compensation and reward systems for recognizing those employees who excel in their jobs by achieving the set standards in accordance

with the performance plans or rather exceed the performance benchmarks. Providing promotional/career development support and guidance to the employees. Performing exit interviews for understanding the cause of employee discontentment and thereafter exit from an organization. A performance management process sets the platform for rewarding excellence by aligning individual employee accomplishments with the organizations mission and objectives and making the employee and the organization understand the importance of a specific job in realizing outcomes. By establishing clear performance expectations which includes results, actions and behaviors, it helps the employees in understanding what exactly is expected out of their jobs and setting of standards help in eliminating those jobs which are of no use any longer. Through regular feedback and coaching, it provides an advantage of diagnosing the problems at an early stage and taking corrective actions. To conclude, performance management can be regarded as a proactive system of managing

employee performance for driving the individuals and the organizations towards desired performance and results. Its about striking a harmonious alignment between individual and organizational objectives for accomplishment of excellence in performance.

Objectives & Scope of Performance Appraisal

Performance appraisals are systematic ways of measuring, reviewing and analyzing employee performance over a given period of time and using the information gathered to plan for the employee's future with the organization. This periodical, impartial feedback is used to judge employee effectiveness as well as provide necessary development and training to improve the employee's contributions to the organization's goals.

Significance

Employees are the most significant resource of any business, and performance appraisals reflect the

organization's commitment in developing this important resource of human capital. Performance appraisals grant upper management an opportunity to reward excellent performance or reprimand unsatisfactory performance. This powerful managerial tool should directly reflect the overall organization's goals and objectives; the employee assessment should provide useful feedback about the employee's contributions or lack of contributions toward these goals.

Process

According to North Carolina State University's Employee Performance Appraisal Program, the "appraisal process consists of three stages: planning, managing, and appraising." The planning stage requires communication between the employee

and supervisor about the employee's work plan, development plans and job expectations. The managing stage includes monitoring performance and providing feedback throughout the process. The appraising stage involves making decisions regarding rewards, punishments and possible training or development needed. (See Reference 1: Employee Performance Appraisal Program)

Methods

The most common methods of performance appraisals include straight ranking, paired comparison, scale rating and free response. Managers using the straight ranking method rank employees from best to worst starting with the best employee and worst employee, and working their way toward the mediocre employees, one ranking at a time. The paired

comparison method is a systematic method of ranking employees only after comparing each employee to every other employee. The scale rating method has specific categories relating to performance with employees receiving either a number score, usually between 1 and 5, or a letter grade, such as A, B, C, D, or F, for each category. The free response method is basically a performance appraisal essay written by the supervisor with no requirements or limitations. (See Reference 2: What Are the Different Types of Performance Appraisals?)

Scope

The scope of any performance appraisal should include the following: provide employees with a better understanding of their role and responsibilities; increase confidence

through recognizing strengths while identifying training needs to improve weaknesses; improve working relationships and communication between supervisors and subordinates; increase commitment to organizational goals; develop employees into future supervisors; assist in personnel decisions such as promotions or allocating rewards; and allow time for self-reflection, selfappraisal and personal goal setting. (See Reference 3: Performance Appraisal System)

Considerations

Although performance appraisals have many intended benefits for both the organization and employee, if the process isn't carefully implemented and managed, it can result in employee backlash. Constructive criticism can help improve

performance, but there is a fine line between providing helpful feedback and upsetting an employee. Management should always make sure to recognize and reward excellent performance to avoid coming off as too negative. Employees who work hard and take pride in their work will have a hard time correctly utilizing the feedback if none of their accomplishments or positive contributions are noticed and appreciated.

Limitations of a Performance Appraisal

An employee performance appraisal can be an effective tool for determining the development of your staff. But in order to get results you can apply to staff management from your performance appraisals, you need to understand the limitations of a performance review system. A comprehensive evaluation system is needed to address the limitations inherent in the process.

Relevance

Performance appraisals tend to be uniform throughout an entire company. The production manager uses the same forms and the same process to

complete her employee reviews as the logistics manager. According to the Performance Appraisal website, this creates a limitation in the appraisal system. The standard questions may not apply to each department, or even each individual job. When you try to apply a standard set of values over a system that is based on variables, you get results that may not all be relevant.

Consistency

Each manager in your company has a different approach to managing and has a different demeanor when it comes to employees. When you apply a standard appraisal system, or even an appraisal system that is customized to each department, you are still going to get inconsistent results due to managerial styles, according to the Soft Technology website. For example, if an employee gets an

appraisal from a manager in year one, but gets a new manager in year two, then the resulting appraisals will not necessarily be comparable. There is no consistency between the managers giving the appraisals. Trying to compare each employee using a numbering system is also limited because of the different styles of management in each department.

Motivation

A performance appraisal system based on numbers is designed to identify areas in the employee's performance that require attention. The manager and the employee then work on a developmental program that will address those issues and attempt to improve performance. But the employee may be more motivated to raise her scores rather than learn substantial ways to improve

performance, according to the Performance Appraisals website. The only motivation the performance appraisal offers is the incentive to raise appraisal scores from one year to the next. The system lacks the ability to reward proactive attempts to become a better all-around employee.

Challenges in Performance Appraisal

Performance management systems have several components; however, the actual performance appraisal is the most challenging. The performance appraisal is one part of an entire system employers use to monitor workforce performance and progress. Employees, supervisors and managers often stumble through the performance appraisal due to lack of understanding about job expectations and the appraisal process. Leadership training and how to factor performance appraisal ratings into the compensation structure are two other challenges within the performance appraisal process.

Job Expectations

Job descriptions outline employees' basic duties and responsibilities; however, a job description may not always describe the employer's expectations. For example, an

administrative assistant's job description generally outlines organizational skills necessary to perform the job. Stating organizational skills are necessary is an overly broad statement, when the actual job expectations for the administrative assistant consist of planning board meetings, executive conferences and retreats. Thus, the employee's appraisal should include ratings on how well he performs tasks similar to those of an event planner -- managing logistics related to agenda topics and presentations, negotiating venues and accommodations, coordinating use of multimedia equipment and preparing travel itineraries. Clear job expectations are important for two primary reasons. The employee is aware of the specific tasks and expectation on which he receives performance ratings, and the supervisor is better able to complete a

more accurate and comprehensive performance appraisal.

Appraisal Process

Some of the challenges within the actual appraisal process are related to employee file review, assessing the strength of past performance ratings versus current performance, or determining if an employee's disciplinary records are still relevant and worth discussing in the current evaluation period. The process itself can be lengthy and confusing because there is substantial preparation for supervisors and managers before conducting an employee's performance appraisal meeting. In addition, if the employer requires employee self-evaluations, that requires training as well as responding to requests from employees who want to review their personnel materials.

With self-evaluations, supervisors and managers also must take into consideration the employee's selfrating when conducting their own evaluations of the employee's performance.

Leadership Training

Leadership training could be one of the major challenges in a performance appraisal. Absent training on providing constructive feedback and preventing supervisor bias from creeping into the appraisal ratings, the performance appraisal experience can be intimidating and demoralizing for employees. Leadership training objectives include topics such as how to be fair and objective, what types of employee behavioral issues can be addressed effectively during a performance appraisal and how to help employees establish realistic and

attainable goals for the next evaluation period. Supervisors and managers also learn how to set the tone for the appraisal meeting and establish boundaries yet still encourage candid, two-way dialogue during the meeting.

Compensation

Employers who tie compensation to performance implement a rating system that determines the weight of an employee's contribution compared to the organization's ability to reach certain goals. Other performance management systems simply reward employees across the board with a percentage increase based on the performance rating without factoring individual impact on business goals. Employers should anticipate questions from employees and company leadership about compensation as it relates to performance. Employees

usually want to know how their increase compares to others, but importantly, they need to understand how salary and wage increases are calculated and on what basis their employer awards certain percentage increases. Supervisors and managers with the authority to determine the percentage of an employee's increase are more likely to ask questions about equitable distribution of salary increases.

Methods Used in Performance Appraisal

Performance appraisal methods differ according to an organization's size, number of employees and employee position. Common performance appraisal methods include graphic rating scales, management by objectives, 360-degree feedback and forced distribution. Each performance appraisal method comes with its own advantages and disadvantages; however, the effectiveness of each method depends largely on how frequently managers provide ongoing feedback to employees and how managers conduct performance appraisal meetings.

Graphic Rating Scales

Production-oriented work environments operate at a frenetic pace, and because of this managers of large departments often do not have the time to devote to lengthy, narrative-format performance appraisals. The answer to measuring performance for large departments with little time to spare is a graphic rating scale. Graphic rating scale performance appraisals contain performance standards, or expectations, for each job task. Managers evaluate employees using a numerical scale and add the total to arrive at an average rating for the employee's overall job performance. This performance appraisal method offers precision and ease, particularly when assigning wage increases. Compensation structure tied to precise ratings eliminates much of the subjectivity and guesswork in

determining raises and bonus amounts.

Management by Objectives

Aligning individual employee goals and organizational goals is relatively easy using a management by objectives (MBOs) performance appraisal method. Managers and employees work together to identify employee goals, the steps necessary to attain each goal and the time and resources required for reaching milestones. Benefits of this performance appraisal method include the manager-employee open dialogue and their mutual agreement on goals and objectives. MBOs also provide assurance that employee tasks are relevant to the job and congruent with the company's expectations and goals. Frequent interaction is required as a part of monitoring progress for MBOs

-- it's much simpler to review quarterly milestones and readjust the employee's goals accordingly.

360-Degree Feedback

Companies that use 360-degree feedback realize the importance of well-rounded assessments and varied perspectives when it comes to evaluating the performance of frontline employees as well as managers and directors. In 360-degree feedback appraisals, employees are evaluated by others with whom they have regular interaction in the workplace, regardless of position, level or status. Workers evaluate managers and directors in the same manner directors and managers evaluate workers. Some workers are not accustomed to conducting employee appraisals; therefore, training is an essential step in this performance appraisal method.

In companies that use 360-degree feedback, the human resources staff provides training on how to give meaningful, objective feedback that can be helpful in constructive feedback.

Forced Distribution

The forced distribution performance appraisal method is not without its critics; however, it's a straightforward approach to evaluating performance and limiting the power that nonperformers have in the workplace. Employers who use this method are usually concerned about maintaining productivity and engagement, because the forced distribution ranking method provides financial rewards and motivation for top performers. Managers who utilize forced distribution appraisals determine which employees demonstrate

performance and commitment that earn them ranking in the top 20 percent of the workforce. Average performers constitute roughly 70 percent of employees, and poor performers make up about 10 percent of the workforce. The bottom 10 percent of employees -- poor performers -- are usually terminated or voluntarily resign. Eliminating poor performers frees up time to develop average performers and seek qualified applicants to fill the slots left open by departing employees.