HRM - 332

Performance Management
Lecture01
 Performance management
• Definition:
- “Performance management is a continuous
process of identifying, measuring, and developing
the performance of individuals and team and
aligning performance with the strategic goals of
organisation”. (Augunis,2005)
- “Performance management is a broad set of
activities aimed at improving employee
performance”.(DeNisi, and Pritchard,2006)
 Performance Management (Contd..)
• Let us consider each of the definition’s two main components.
1. Continuous process:
Performance management is on going. It involves a never
ending process of setting goals and objectives, observing
performance, and giving and receiving on-going coaching and
feedback.
2. Alignment with strategic goals:
• Performance management requires that management
requires that managers ensure that employee’s activities and
output are congruent with the organisation’s goals.
• and consequently, help the organisation gain a competitive
advantage.
 Performance Management (Contd.)
• Note that many organisations have what is
labelled a “performance management”
system.
• However we must distinguish between
performance management and performance
appraisal.
 Performance Management
Consider the following scenario:
Sally is a sales manager at a large pharmaceutical company . The fiscal year will end in one week.
She is overwhelmed with end of the year tasks, including the responding to reviewing the budget
she is likely to be allocated for the following year, responding to customers’ phone calls, and
supervising a group of 10 salespeople. It is a very hectic time, probably the most hectic time of
the year. She receive a phone call from the human resources (HR) department : “Sally, we have
not received your performance reviews for your 10 employees; they are due by the end of the
fiscal year.” Sally thinks, “oh, those performance reviews…What a waste of my time!” From Sally’s
point of view, there is no value in filling out those seemingly meaningless forms. She doesn’t see
her subordinates in action because they are in the field visiting customers most of the time. All
that she knows about their performance is based on sales figures, which depends more on
products offered and geographic territory covered than the individual efforts and motivation of
each salesperson. And, nothing happens in terms of rewards, regardless of her ratings. These are
lean times in her organisation, and salary adjustments are based on seniority rather than on
merit. She has less than three days to turn in her forms. What will she do? She decides to follow
the path of least resistance: to please her employees and give everyone the maximum possible
rating . In this way , Sally believes the employees will be happy with their ratings and she will not
have to deal with complaints or follow –up meetings. Sally fills out the forms in less than 20
minutes and get back to her “real job.”
 Performance Management (Contd.)
• There is something very wrong with this
picture, which unfortunately happens all too
frequently in many organisations.

• Although Sally’s HR department calls this

process “performance management”, it is not.

• Then what is performance management.

 Performance management
“Performance management is a continuous
process of identifying, measuring, and
developing the performance of individuals and
team and aligning performance with the
strategic goals of organisation”. (Augunis,2005)

“Performance management is a broad set of

activities aimed at improving employee
performance”.(DeNisi, and Pritchard,2006)
 Performance Appraisal
• A system that involves employees evaluation
once a year without on-going effort to provide
feedback management system. Instead, this is
only a performance appraisal system.
• Performance appraisal is the systematic
description of employees strength and
weakness.
 Difference between performance
appraisal and performance management
• Performance Appraisal performance management
1. Annual exercise 1. continuous process
2. Emphasis on evaluation of 2. emphasis on performance improvement
Individuals.
3. Emphasis on ratings 3. Emphasis on performance planning,
4. Rewards and recognitions monitoring, appraisal, review and
based on ratings development.
5. Designed and monitored 4. performance linked pay is an integral
By HR department part of the system
6. Development needs are 5. designed by HR department and
identified at end of the year monitored by line managers
6. Development are identified at the beginning
of the year on the basis of competence level
required to do the job
 Performance Management- Case
Study 2
• As an illustration, consider how Merrill Lynch form a performance appraisal system to a
performance management system. Merrill Lynch is one of the world’s leading financial
management and advisory companies, with offices in 37 countries and private client asset of
approximately US$ 1.6 trillion. As an investment bank, it is a leading global underwriter of
debt and equity securities and strategic adviser to corporations, governments, institutions,
and individuals worldwide. Recently, Merrill Lynch started the transition from giving
employees one performance appraisal per year to focusing on one of important principle of
performance appraisal per year to focussing on one of important principle of performance
management: the conversation between manager and employees in which feedback is
exchanged and coaching is given if needed. In January , employees and managers set
employee objectives. Mid –year reviews assess what progress has been made towards the
goals and how personal development plans are faring. Finally the end-of-the year reviews
incorporates feedback from several sources, evaluates progress towards objectives, and
identifies areas that needed improvement. Managers also get extensive training on how to
set objectives, and conduct reviews. In addition, there is a Website that managers can access
with information on all aspects of the performance management system. In sharp contrast to
their old performances appraisal system, Merrill Lynch’s goal for its newly implemented
performance management program is worded as follows: “This is what expected of you, this
is how we’re going to help you in your development, and this is how you’ll be judged relative
to compensation.”
 Performance Management- Case
Study 3
• As a second example, consider the performance
management system for managers at Germany based
Siemens, which provides mobile phones, computer
networks, and wireless technology and employs 4,75,000
people in 190 countries. At Siemens, the performance
management system IS based on three pillars: setting clear
and measurable goals, implementing concrete actions, and
imposing rigorous consequences. The performance
management at Siemens has helped change people’s mind-
set, and the organisation is now truly performance
oriented. Every manager understands that Performance is a
critical aspect of working at Siemens, and this guiding
philosophy is communicated in many ways throughout the
organisation.
 Performance Management (Contd.)
• Performance management system that do not
make explicit the employees contribution to
the organisational goals are not true
performance management system.
• Making an explicit link between an employees
performance objectives and the organisational
goals also serves the purpose of establishing a
shared understanding about what is to be
achieved and how it is to be achieved.
 Performance Management (Contd.)
• This is painfully in Sally case described earlier:
from her point of view, the performance
reviews forms did not provide any useful
information regarding the contribution of
each of her subordinates to the organisation.

• Sally’s case is unfortunately more common

than we would like.
 Performance Management (Contd.)
• A survey conducted by consulting firm Watson
Wyatt showed that only 3 in 10 employees
believe their company’s performance review
system actually helped them improve their
performance.
 The major objectives of performance
management are discussed below:
• To enable the employees towards achievement of superior standards of work
performance.
• To help the employees in identifying the knowledge and skills required for performing
the job efficiently as this would drive their focus towards performing the right task in the
right way.
• Boosting the performance of the employees by encouraging employee empowerment,
motivation and implementation of an effective reward mechanism.
• Promoting a two way system of communication between the supervisors and the
employees for clarifying expectations about the roles and accountabilities,
communicating the functional and organizational goals, providing a regular and a
transparent feedback for improving employee performance and continuous coaching.
• Identifying the barriers to effective performance and resolving those barriers through
constant monitoring, coaching and development interventions.
• Creating a basis for several administrative decisions strategic planning, succession
planning, promotions and performance based payment.
• Promoting personal growth and advancement in the career of the employees by helping
them in acquiring the desired knowledge and skills.
 The Performance Management
Contribution/Advantages (Contd.)
• Motivation to perform is increased:
- Knowledge about how one is doing and recognition
about ones past success provide the fuel for future
accomplishments
- Receiving feedback about ones performance increases
the motivation for future performance.
 The Performance Management
Contribution/Advantages (Contd.)
• Managers gains insight about subordinates:
- Direct supervision and other managers in
charge of appraisal gain new insights into the
person being appraised
 The Performance Management
Contribution/Advantages (Contd.)
• The definition of job and criteria are clarified:
- The job of person being appraised may
clarified and defined more clearly.
- In other words, employee’s gain a better
understanding of the behaviours and results
required of their specific position.
 The Performance Management
Contribution/Advantages (Contd.)
• Self insight and development are enhanced:
- The participants in this system are likely to
develop a better understanding of themselves
and of kind of activities that are of value to
them as they progress through the
organisation.
- Participants in this system also gain a better
understanding of their particular strengths
and weaknesses that can help them better
define future career paths.
 The Performance Management
Contribution/Advantages (Contd.)
• Organisational goals are made clear:
- The goals of unit and organisation are made clear, and
the employees understands the link between what she
does and organisation success.
- This is the contribution to the communication of what
the unit and organisation are all about and how
organisation goals cascade down to the unit and
individual employee.
 The Performance Management
Contribution/Advantages (Contd.)
• Employee becomes more competent:
- An obvious contribution is that employee performance is
improved
- In addition , there is a solid foundation for helping
employees become more successful by establishing
development plans.
 The Performance Management
Contribution/Advantages (Contd.)
• Supervisors view of performance are communicated
more clearly:
- Performance management system allows managers to
communicate to their subordinates their judgement
regarding performance.
 The Performance Management
Contribution/Advantages (Contd.)
• Organisation change is facilitated:
- Performance management system can be a Useful tool to
drive organisational change.
- For example, assume an organisation decides to change
its culture to give top priority to product quality to
produce quality and consumer service.
- Once this new organisation direction is established,
performance management is used to align the
organisational culture with the goals and objectives of
organisation to make possible changes.
 The Performance Management
Contribution/Advantages (Contd.)
• Administrative actions are more fair and appropriate:
- Performance management system provide Valid
information about performance that can be used for
administrative actions such as merit increases ,
promotions and transfers, as well as terminations.
- In general , performance management system helps
ensure that rewards are distributed on fair and credible
basis.
- In turn, such decisions based on sound performance
management system leads to improved interpersonal
relationships and enhanced supervisor-subordinate trust.
Thank you !