To be specific, performance management have three kinds of purpose: strategic, administrative and developmental.
2.1 Strategic Purpose
Jane Hanson, Organization Development Manager at First Direct said that performance management links in terms of cascading business goals and plans into individual performance and objectives. Thus, a performance management system should link employee activities with the organizational goals. One of the primary ways strategies are implemented is through defining the results, behaviors, and employee characteristics that are necessary for carrying out those strategies, and then developing measurement and feedback systems that will maximize the extent to which employees exhibit the characteristics, engage in the behaviors and produce the results. (Noel, Hollenbeck, Gerhart & Wright, 2006, p.332)
2.2 Administrative Purpose
Corporations use information provided by performance management in administrative decisions like salary administration, promotion, retention-termination, layoffs and recognition of individual performance. (Cleveland, Murphy & Williams, 1989)
2.3 Developmental Purpose
Performance management is used to develop employees who are effective at their jobs. It is going to look at how employees perform not only against the requirements of the role but also in the way they do it. Through performance management, corporations are trying to get people that are good at the people skills as well as the deliverables. The performance management system has been put together to make sure we do that, and try and move away from ticking boxes to make it a more meaningful conversation, identifying where an individual is doing well and where he or she is doing less well.
2.4 Integrated Purpose
Performance appraisal refers to the personnel activity by means of which the organization determines the extent to which the employees is performing the job effectively and / or the potential of the employees.
- Performance Improvement
Formal performance feedback allows the employees, mangers, and personnel specialists to objectively identify the current level of job performance and then to intervene with appropriate actions to improve performance.
- Manpower Planning
Long term manpower plans can be constructed with a thorough understanding of employees’ strengths and weakness.
- Compensation Adjustments
Performance evaluations help decision makers determine how much and who should receive pay raises. Many firms grant part or all of their pay increases and bonuses based upon merit, which is determined mostly through performance appraisals.
- Placement Decisions
Promotions, transfers and demotions are usually based on past or anticipated performance. Often promotions are a reward for past performance and a sign of superior’s confidence in an employee’s future performance.
- Training and Development Needs
Poor performance may indicate weaknesses and the need for retraining. Likewise, good performance may indicate strengths and untapped potential that should be developed. Performance feedback also guides career decisions and helps develop career paths.
- Motivation and Communication Improvement
Whilst good performance results in rewards and bad performance are inhibited by punishment, employees could be motivated to work hard to reach job standard. The appraisal system also promotes an excellent opportunity for both parties to express their opinions related to job performance and overall work situation or problems.
- Feedback to Human Resources Management Process
Good or bad performance throughout the organization indicates how well the human resources functions are performing. For example, mistakes in manpower plans, staffing process deficiencies and job design errors. Many problems (including employees’ personal problems) can be uncovered through appraisals, the human resources department may be able to take appropriate action or assistance to employees.
3. Problems/Difficulties of Performance Appraisal/Review
By appraising staff, managers seek to improve present performance through identifying individual strengths and weaknesses, and future performance by identifying individuals for development.
During the course of appraising staff, some problems may be incurred and thus lowering the effectiveness of performance appraisal. Difficulties of performance appraisal are listed as follows.
- Difficult to find standards
In order to appraising staff, standards or requirements should be pre-determined. But there is a lack of common standards which are relevant and realistic. Besides, there is a lack of accurate measurement of employees’ performance.
- Subjectivity and bias
3.2.1 Halo Effect
A particular characteristic displayed by an employee leads the whole appraisal to be assessed favorably or unfavorably. That means, the appraiser allows one aspect of a person’s character or performance to influence the entire evaluation.
- Central Tendency
The appraiser rates all his personnel within a narrow range. That means, group all staff in a narrow band instead of using the full range of values on an appraisal scale.
- Recency
Assessment are made on the basis of most recent actions or behavior immediately preceding the appraisal, rather than over the full period in question.
- Personal bias/prejudices
If the appraiser likes certain employees or groups better than others, this can influence the ratings he gives. On the other hand, when an appraiser dislikes certain staff, the ratings received by those staff will be distorted.
- Constant Error
The leniency bias occurs when the appraiser tends to be easy-going and habitually gives high ranking. The strictness bias evidence by a harsh evaluation of performance leads to relatively low ranking. This may create problem when attempting to make comparisons between staff appraised by different appraisers.
3.3 Cross Cultural Biases
Every appraiser holds expectations about human behavior based upon his or her culture. When people are expected to evaluate others from different cultures, they may apply their cultural expectations to someone who has a different set of beliefs.
3.4 Negative Attitude and Reaction
There is often a reaction against formal appraisals because of a manager’s tendency to lead to routine form-filling. They think it is just a formality.
To most employees, appraisal is artificial and unnecessary that adversely affects the good relationship with their superiors. They treat it as a control device so they are unwilling to participate and give informative response. Lacks of agreement from employees are very common.
3.5 Lack of senior management commitment to appraisal
Appraisal forms may be filled and reports may also be prepared, but the promises or follow-up actions are often neglected or ignored by senior management. They are also reluctant to improve the appraisal system.
- Ways to Overcome the Limitations of Performance Appraisals
- Training
Training can help to overcome many of the subjectivity and bias problems. Training given to appraisers will assist in developing an awareness of and thus considerations of those problems, as well as how to best handle the appraisal interview to drive optimum mutual satisfaction and benefits. Acceptable, relevant and realistic standards can possibly be developed.
- Simple Design
The design of the method and procedure to be adopted should, while achieving its purpose, be as simple as possible. Often the confidence of those required to operate the scheme is undermined because the opinions or expertise given by the personnel department may be seen as irrelevant and unrealistic in the eyes of appraisers. The problem may be reduced by participation in the scheme’s preparation and planning.
- Education and Participation
If the commitment of all staff is to be maintained, this must be established early on by involving as many staff in the planning of the scheme as possible. Often this will also require the involvement of trade union representative. The scheme must also be seen to be applied to all staff, irrespective of status to ensure equity and acceptance.
- Show Management Commitment
Management must be serious in handling appraisal results. Employees who feel unfairly treated should be allowed the opportunity to state their case or appeal. Follow-up action, once promised, should be implemented or an explanation should be given for failure to do so.
- Conclusion
In conclusion, performance management is one of the principle tools executives, line managers, and employees are able to use to achieve their collective goals. So, human resources professionals today, who think strategically and acquire systems thinking, and who have a healthy respect and attitude with regard to all aspects f managing the performance of an organization and its employees, will become or continue to be very highly valued leaders within their organizations.
Reference
Armstrong, M. & Baron, A. (2005). Managing Performance: Performance Management in Action. Chartered Institute of Personnel and Development, London.
Cleveland, J., Murphy, K. & Wiliams, R. (1989). “Multiple Uses of Performance Appraisal: Prevalence and Correlates”, Journal of Applied Psychology, Vol. 74, pp.130-135.
Institute of Personnel Management (1992). Performance Management in the UK: an analysis of the issues. London, IPM.
Ivancevich, J. M., (2001). Human Resource Management, 8th Edition, McGraw-Hill, Irwin.
Noe, R. A., Hollenbeck, J. R., Gerhart, B. & Wright, P. M. (2006). Human Resource Management: Gaining a Competitive Advantage, 5th Edition, McGraw-Hill, Irwin.
