An Approach to Performance Management
Performance management is considered to be a key factor for organisations. This is simply because an organisation that it is considered to be “unwell” is regarded to have no strategic focus, and that with low productivity (Crawford, 2005). Performance management is widely defined as a continuous process of identifying, measuring and developing the performance of the organisation’s members and aligning performance with the strategic goals of the organisation” Biron, Farndale, & Paauwe (2011: 1295). The evaluative or measurement process of performance management is referred to as a performance appraisal process. Therefore whereas performance management as a whole is a strategic function, which in most cases is spearheaded by the Human resources department, on the other hand, performance appraisals would be considered as a reactive process of evaluating employees’ outputs or behaviours in relation to strategic objectives of the organisation. Performance measurements may take the form of supervisor-subordinate meetings, three sixty degree ratings, peer ratings, and individual ratings. For some organisations that lack a strategic focus, performance management is taken for granted as a “must do” necessary evil with less regard for its alignment purposes. For these companies, line managers may regard this process as another process that unnecessarily takes a lot of paper work, a lot of time, or a form of a bureaucratic organisational tendency. If this kind of negative mindset about performance management is neglected, an organisation can reap the benefits of performance management. From a literature review survey, Rouse (2003), takes note of some of the benefits of a performance management system (PMS). To mention a few, the author asserts that a PMS system in place smoothens the process of the implementation of a corporate strategy “by indicating what to measure, determining appropriate means of measuring, setting targets and linking the measure with organizational performance” In addition performance management improves organizational performance, process within the organization, team performance, employee performance, customer satisfaction, quality of supervision facilitates the implementation of organizational change with regard to organizational culture and finally gives a company a competitive advantage (Rouse, 2003). In addition, a PMS will smoothen the organizational communication, through the feedback process of individual/group/organizational performance, strengthen team collaboration aimed at the collective achievement of goals, and facilitate a clear understanding and buy-in of the strategic business objectives.
PERFORMANCE MANAGEMENT: A TOOL FOR STRATEGY EXECUTION
Performance management could be viewed at three levels, that is; the strategic level, the operational level and at an individual level:
Individual performance is rooted back in the evolution of organisations. This traditional performance management trend was meant to ensure that performance of individuals in the organisation is progressively streamlined in the organisational hierarchy (Brudan, 2009). The scientific revolution relied on this type of performance management, where individual employees were alienated from their work, where each individual performance was closely watched by the supervisor to ensure that the production line moved smoothly, and where an employee could easily be replaced by the other another. In today’s organisations, depending on the structure of the organisation, spans of control may range from narrow to broader for highly hierarchical or bureaucratic organisations to flatter or flexible organisations respectively.
Operational performance management finds its roots in the field of accounting, where organisational efficiency and effectiveness were measured using financial indicators. With the emergence of a multi-dimensional system of performance measurement, a balanced score card was introduced, where a combination of both financial and non-financial measurements were used. The Balanced Score card transformed from systematizing measures to a strategy control and implementation, combining strategic, operational and individual performance management systems (Brudan, 2009). In addition, as for one of the characteristic of flexible organisations, self-managed cross-functions which allow for individuals across functions within the organisation to embark on creative or innovative projects that will allow for the collective achievement of organisational goals would be an overlap between strategic and operational performance management levels.
Lastly, strategic level performance management will measure performance for organisational objectives.
The view of performance management is shifting from a command and control/mechanistic thinking to a thinking based on the aspects of the Balanced Scorecard, the systems thinking and a knowledge management. This is because organisations are moving towards a service or knowledge based economy. For this changing environment, the systems thinking theory stresses the move towards a learning organisation or knowledge sharing.
Schneier, Shaw and Beatty (1991) outline the five major steps that form a basis for a performance management as a tool for strategy execution. These steps are outlined below;
- Articulate business strategy
- Identify critical success factors
- Develop performance measures
- Fix accountabilities for performance
- Align structure, systems, skills and styles
The articulation of the business strategy requires outstanding leadership from the senior levels of the organization. These leaders should be inspirational and must establish trust between them and their subordinates, to ensure the buy-in and an understanding of the business strategy to their subordinates.
The second step is the identification of the critical success factors (CFS). CSFs are “limited number of areas in which satisfactory results will ensure successful competitive performance for the individual, department or organization. CSFs are the few key areas where “things must go right” for the business to flourish and for the manager’s goals to be attained” (Bullen and Rockart, 1981: 7). Some of the sources of CSFs are: the external and internal environment; low cost production; geographical location; technology; customer awareness; and core competencies-skills and abilities (Schneier, Shaw and Beatty (1991).
The last three steps highlight the importance of developing measurement systems (such as the balanced scorecard), which will communicate employees’ expected behaviour in their work areas, and how employees’ outcomes will contribute to the functional and the business objectives, and in some cases design systems to reward or punish employee’s behaviour.
The stakeholder approach to performance management
The stakeholder approach to performance measurement, accounts for all strategic planning issues, in order to meeting the over all strategic expectations (Figge, Hahn, Schaltegger and Wagner, 2002).
In order to link performance to objectives, performance measures should meet expectations of the stakeholders by understanding what services are provided and to whom. The process of performance management will start by setting primary objectives (to meet the needs of the organisation and the stakeholders), and then secondary objectives ( the determinants that aid to achieve the primary objectives (Kloot and Martin, 2010).
The stakeholder approach is an inclusive performance measurement tool as it accounts for objective, subjective, qualitative and quantitative measures. By these measures performance is measures and managed by ensuring consistency and eliminating bias (Moullin and Bocci ( 2005).
The most important persons in the stakeholder approach are customers, suppliers, owners, community, staff, and a specific industry in which the organization is part. With reference to most writings in literature, the old saying “If you can’t measure it, don’t bother doing it. After all, nobody will know you have stopped. ” While referring to the stakeholder approach , Moullin and Bocci ( 2005: 12) assert that the stakeholders will know when the organization stops doing things that will add to the bottom line. These persons will know because they depend on the organization and its performance, and therefore in case anything goes wrong , they will assess the organizational outputs.
Jackson and Randall (2002) adds that the stakeholder approach to performance management achieves its strategic basis because it puts emphasis on long term sustainability of the corporate strategy. The authors go further to compare a profit driven performance strategy and stakeholder based strategy. They conclude that whereas a profit driven strategy will elicit business success on short term wins, the stakeholder approach will further base organizational performance on long term wins, that account for concerns of employees, customers and other stakeholders.
Performance management in relation to organisational culture and structure
The structure of the organisation has an impact on the performance measures. If a company fosters a culture that is profit driven, the measures that will be used will be related to profit making.
Brown (1996) adds that objectives form the corporate strategy the basis for performance norms. To a smaller extent, performance norms may depend on machinery, and to a bigger extend they rely of the competencies within the organisation. Employee competencies gain more relevance depending on the organisational structure and culture. This is because in most cases the dominant culture within an organisation will determine which competencies are core to organisation’s strategic execution.
In addition the organisational culture and structure will have an enormous impact on the performance evaluation process. For example, during the performance appraisal process, the organisational culture will affect which behaviours and outcomes to be rewarded. The same goes to training programmes, where the culture and structure will determine the leaner outcomes and areas for future improvement. Thus a profit orientated culture will reinforce profit driven outcomes and behaviours, and technical or professional organisational culture will reinforce technical outcomes and behaviours (Brown, 1996).
Performance management requires that the organizational objectives be linked with individual goals. In this case the performance management system would seek to reinforce those behaviours and attitudes that seek to add value to the organization (Biron, Farndale, & Paauwe, 2011). The culture of the organization plays a crucial role in aligning individual goals with that of the organization. For example a company with a life long employment culture would seek to invest in training and developing employees, continuously improve their performance and hence positively contributing to the objectives of the organization Biron, Farndale, & Paauwe, 2011).
The structure of work is related to the flow of knowledge within the organisation. Jackson and Randall (2002) assert that effective performance management usually facilitates the process of knowledge brokering. The term knowledge brokering is achoed by Hargadon and Sutton, (2000) in their article “Building an innovation factory, with reference to innovative organisations that turn use old ideas as raw materials for making good and new ideas. The authors go to much length to outline the contents of the knowledge brokering cycle, which are;
- Capturing good ideas: Knowledge brokers scavenge constantly for promising ideas, sometimes in the unlikeliest places. They see old ideas as their primary raw material
- Keeping ideas alive: To remain useful, ideas must be passed around and toyed with. Effective brokers also keep ideas alive by spreading information on who knows what within the organization
- Imagining new uses for old ideas: This is where the innovations arise, where old ideas that have been captured and remembered are plugged in to new contexts
- Putting promising concepts to the test: Testing shows whether an innovation has commercial potential. It also teaches brokers valuable lessons, even when an idea is complete flop.
Therefore organisations with flatter structures, broader spans of control, with self managed cross functional teams would stimulate creativity, autonomy and knowledge brokering that would effectively align performance management system with the overall business strategy (Nankervis and Compton, 2006).
An aspect that may related to the structure and culture of the organisation are the workplace routines. Pavlov and Bourne (2010) elevate the importance of workplace routines in ensuring an effective performance management system. Organisational routines are elevated in the performance management, as they are develop from continuous performance feedback. These routines will be will be adjusted according to the adequacy or inadequacy of the performance objectives Linking individual behaviours to organisational performance- reward systems, performance appraisals, motivation (Pavlov and Bourne, 2010).
Some causes of negative perceptions towards performance management
The first cause is with reference to the wrong owners. The general perception about performance management , is that it is solemnly the role of the HR professionals, yet the HR professionals have to prove themselves time and again that they are credible business partners in organisations. In addition, as for one of the administrative function of the Human resources department, performance management is regarded as a necessary evil practice that requires too much paperwork. This perception is elevated if performance management is regarded as a management function rather than as a leadership function. Otherwise if it is viewed with the confines of the later function, line managers and senior managers would see the relevance of the performance management role (in addition to their roles as both managers and leaders with in the organizational structures) to the achievement of the organizational strategy. In addition Biron, Farndale, & Paauwe (2011) insinuate that If senior managers play a big role in stressing the importance of performance as a key competency of the HR function and as a key aspect to organizational functioning, such efforts will lead to the success of the performance Management system. Hence the HR function would have sought help through the commitment of both line managers and senior managers in the implementation of performance management policies
Secondly, another cause of negative perception are the wrong measures. Hassan (2005) refers to wrong measures in instances where managers may invest their efforts in improving aspects that have no or little effect on the bottom-line. In some other cases, managers just do not use the right measures where important aspects are just ignored. Wrong measures are in some cases referred to as false alarms, where as failing to use the right measures is referred to as performance gaps. The organization should therefore thrive towards aligning employees’ actions “to translate accountability systems into day-to-day actions while reducing the possible conflict” (Hassan, 2005, 9).
Thirdly wrong judgments resulting from leniency, due to lack of scales could be cause of negative perceptions towards performance management. Wrong judgments are a result of ill-trained raters. Those raters would compromise the success and the credibility of the performance management system. On the other hand, competent raters would give constructive feedback and at the same time identify and reinforce those behaviours and attitudes that are crucial for the accomplishment of the organizational strategy (Biron, Farndale, & Paauwe, 2011). Communication is a vital aspect, where employees are educated on how the scale ratings are linked with the overall organizational objectives. In this case employees will know the behaviours expected of them (Biron, Farndale, & Paauwe, 2011: 1295).
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