What is Performance Management? - Meaning, Concept, Objectives, Aims

Everything you need to know about performance management.

Performance Management is creating systems, processes and practices that manage and leverage performance of individuals, teams, work units and consequently of the whole organization in a continuous and sustainable manner. ‘Managing’ performance is about planning performance.

Performance Management helps in displaying figures for key performance indicators so that employees can track individual and project performance relative to corporate goals and strategies.

Some companies use established management methodologies with their Performance Management systems, such as – balanced scorecard or Six Sigma. Management of performance is important for a good employee and clarification of expectations and performance feedback is also important for applying the principles of performance management.

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Performance management systems can also be used as an integrating process, which meshes various human resource management activities with the business objectives of the organisation.

Learn about the meaning, definition, concept, evolution, aims and objectives of performance management.

What is Performance Management: Meaning, Definition, Concept Put Forward by Various Authors and Management Thinkers

What is Performance Management – Meaning

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While effective performance management is incredibly difficult, it is also critical to an organization’s survival and prosperity. Systematically addressing these critical success factors will ensure consistency and success. In any organization, employees seek to understand the organization’s parameters for those constructs which define productive/unproductive behavior.

These constructs will naturally guide evaluations of their own and other’s behavior. Constructs are likely to be similar across members of the same cultural community because of their shared experiences and talk. The communication culture of an organization is a major determinant of how effective performance is defined in the organization.

The concept of “fit” is being widely used in theorising and understanding HRM and management of performance or PMS. Two kinds of fit, widely discussed in HR literature are horizontal (internal) fit which talks about the coherence and consistency in HRM practices and interventions, and vertical (strategic) fit that relates to the relationship and alignment of business strategies and HRM strategies.

High job embeddedness plays a positive role in employee performance (e.g.- providing additional resources to the employee) when the quality of leader-member exchange is high, but high job embedded-ness plays a negative role (e.g., making the employees feel stuck) when the quality of leader-member exchange is low.

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At the individual and aggregated data levels, employee conscientiousness, justice, and organizational identification were positively related to employee in-role performance, extra-role performance toward customers, and extra role performance toward the organization.

Support from an adult individual’s family members and friends contributed to his or her creativity at work and (2) that this support made a contribution to creativity over and above that made by support from people inside the workplace who were not family or friends. Since task performance refers to the specific accomplishment of tasks directly related to the job, it is easier to observe and the supervisor can rely less on abstract categorizations of job performance.

In contrast, contextual performance is quite abstract and less well-defined than is task performance. This, together with the fact that contextual performance usually involves behaviors not directly related to the job itself, makes supervisors rely heavily on global and general categorization as a basis to assess the contextual performance of their subordinates.

Its essentials are stated in:

(i) Performance planning—setting objectives and developing plans to achieve it.

(ii) Coaching—day-to-day feedback and developmental activities aimed at enhancement of performance plan; and

(iii) Performance evaluation—overall evaluation of the performance for the specific review.

The main purpose of performance management is to improve the performance of all employees across the whole organization. Employee development is a key to performance management.

What is Performance Management – Concept and Definition Provided by Various Authors and Management Thinkers

Performance management is to utilize the human resources in a most optimal manner so that targets can be achieved very effectively and efficiently. For this purpose managing performance of employees as a whole is very important. Performance management takes care of this function. Performance management maintains, develops and motivates the people at work to give better results.

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In the present competitive situation the organisation that gives better results can survive, stabilize, grow and excel in the performance. It helps a lot in achieving the objectives of HRM. Performance management includes activities to ensure that goals are consistently being met in an effective and efficient manner. Performance management can focus on performance of the organisation, a department, processes to build a product or service, employees, etc.

This concept has been defined by various authors as follows:

(a) Performance management system includes the following actions-

(i) Develop clear job descriptions.

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(ii) Select appropriate people with an appropriate selection process.

(iii) Negotiate requirements and accomplishment-based performance standards, outcomes, and measures.

(iv) Provide effective orientation, education, and training.

(v) Provide on-going coaching and feedback.

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(vi) Conduct quarterly performance development discussions.

(vii) Design effective compensation and recognition systems that reward people for their contributions.

(viii) Provide promotional/career development opportunities for staff.

(ix) Assist with exit interviews to understand WHY valued employees leave the organisation.

(b) Performance management is the larger process of defining what employees should be doing, on-going communication during the year, linking of individual performance to organisational needs, and the evaluating of appraising of performance.

(c) Performance Management involves enabling people to perform their work to the best of their ability, meeting and perhaps exceeding targets and standards. For successful performance management, a culture of collective and individual responsibility for the continuing improvement of business processes needs to be established, and individual skills and contributions need to be encouraged and nurtured.

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Where organisations are concerned, performance management is usually known as company performance and is monitored through business appraisal.

(d) Performance Management – A framework that identifies opportunities for performance improvement through use of performance measures such as – standards and indicators.

(e) Performance Measurement- A process of assessing the achievement of pre-determined goals and objectives through the measurement of the following types of indicators- inputs, processes of delivery of activities and services outputs, and outcomes.

(f) Performance Management – Using a set of tools and approaches to measure, improve, monitor and sustain the key indicators of a business.

(g) Performance Management – The process of quantifying, measuring, correcting and reporting system service levels.

(h) Performance Management – An empirically based approach to evaluating operational, clinical and financial segments of a provider. It is a programme evaluation methodology to measuring results by benchmarking internal statistics against those of empirically based standards.

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(i) Performance Management System (PMS) is – The heart of any “people management” process in organisation. Organisations exist to perform. If people do not perform organisations don’t survive. If people perform at their peak level organisation can compete and create waves. (T.V.S) Rao.

(j) Armstrong and Baron (1998) defined it as – “A strategic and integrated approach to increasing the effectiveness of organisations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors”.

(k) Performance Management is – ‘The development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organisation which supports and encourages their achievement’ (Lockett).

(l) ‘Performance Management is managing the business’ (Mohrman and Mohrman).

(m) Performance Management is – The process of ‘Directing and supporting employees to work as effectively and efficiently as possible in line with the needs of the organisation’ (Walters).

(n) Performance Management is – The processes of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves your organisation.

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The PM approach is used most often in the workplace but applies wherever people interact — schools, churches, community meetings, sports teams, health setting, governmental agencies, and even political settings. PM principles are needed wherever in the world people interact with their environments to produce desired effects. Cultures are different but the laws of behaviour are the same worldwide.

What is Performance Management – As a System

Performance management is a system through which the management can keep a check on the performance of their employees. They can also keep a track of whether the activities and output which the employees are producing are congruent with the organization’s goals. Performance management is central to gaining competitive advantage.

It comprises three phases, namely, defining performance, measuring performance, and giving feedback of their performance. It is important for the managers to keep in mind that for managing the performance, they need to manage the people well.

History is replete with examples of poor performance management. It has been evidenced that organizations cannot excel unless they focus on actions rather than results, define the long-term and short-term goals, rigidly apply a single doctrinaire approach, involve the use of jargon, and install suitable support measures. The goals and targets of successful performance management are very specific and quantifiable, easy to understand, and comprise continuous and on-going activities concerned with the results.

Performance is a process. Performance management is an on-going activity and the intention is continuous improvement for marching towards organizational excellence. The performance management process includes people orientation, quality of work life, benchmarking, measurement and monitoring, and use of techniques and tools.

It is implied that the process leads to a healthy organizational environment and employee satisfaction. Drivers of the performance management process are people, quality, measuring and monitoring, goals, targets and benchmark, and techniques and tools.

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Organisations are set up to achieve certain objectives. Achievement of goals or targets depends upon the performance of individual employees. The objectives can be fulfilled when the tasks are assigned to the employees and they perform the tasks. Otherwise these cannot be fulfilled. Now the question arises how far the work has been done as per the planning.

The responsibility, accountability and performance standards have been met or not. Hence it is quite necessary to understand as to what extent employees have been successful at their jobs for achievement of their goals. This information will be available when the performances of employees have been evaluated at the end of the year. If it is not done then the management will not come to know the exact position about the targets achieved. They will be in the dark and there will be chances of planning failure.

The planning is done in the beginning of performance management process. The performance appraisal is an important stage in this process. It shows as per planning of objectives, performance standards and behaviour the communication, counselling, coaching, motivation and feedback have been given or not.

Finally to see what is the impact of these planning and action on the performance of the employees. The performance standards regarding quality, quantity, cost and behaviour have been achieved or not. So it becomes necessary to carry-out the performance appraisal of everyone for smooth working of the organisation. Thus performance appraisal forms an important part of HRM. This necessitates the study of the topic of performance appraisal.

A Performance Management System (PMS) includes the following actions:

a. Develop clear job descriptions (JDs).

b. Select appropriate people with an appropriate selection process.

c. Negotiate requirements and accomplishment-based performance standards, outcomes and measures.

d. Provide effective orientation, education and training.

e. Provide on-going coaching and feedback.

f. Conduct quarterly performance development discussions.

g. Design effective compensation and recognition systems that reward people for their contributions.

h. Provide promotional/career development opportunities for staff.

i. Assist with exit interviews to understand WHY valued employees leave the organization.

What is Performance Management – Objectives

Performance management is the area of business intelligence involved with monitoring and managing an organizations performance, according to key performance indicators such as – revenue, return on investment, overhead, and operational costs. Components of Performance Management include all the practices, technologies, methodologies and metrics used to gather and apply relevant information.

Performance Management helps in displaying figures for key performance indicators so that employees can track individual and project performance relative to corporate goals and strategies. Some companies use established management methodologies with their Performance Management systems, such as – balanced scorecard or Six Sigma. Management of performance is important for a good employee and clarification of expectations and performance feedback is also important for applying the principles of performance management.

Performance management is an enduring, incessant process of communicating and expounding job responsibilities, main concerns and performance expectations in order to ensure mutual understanding between supervisor and employee. It is a belief which assesses and encourages employee development through a style of management which provides frequent feedback and cultivates teamwork.

It stresses communication and focuses on adding value to the organization by endorsing improved job performance and encouraging skill development.

Performance Management involves clarifying the job duties, defining performance standards, and recording, evaluating and discussing performance with each employee. It starts with determining major duties and ends with discussing performance. It should be clearly understood that HRD mechanism has its roots in the performance management system and that it aids performance management by providing data and is not an end in itself.

The objectives of Performance Management can be met if the process is followed religiously. The prime objectives are to clarify mission, goals, responsibilities, priorities and expectations, discover and resolve performance problems, recognize quality performance and to present a base for administrative assessment such as – promotions, succession and strategic planning.

Performance management should be considered a process, not an event. Good management practices like continual coaching, feedback and communication are integral to its success. Ensuring a mutual understanding of work responsibilities, priorities and performance expectations is required. The major duties and responsibilities of the specific job should be defined and communicated as the first step in the process. Performance standard and Professional development should be an important component of the plan.

Apart from the above the time frame of the formal evaluation period should be long enough to allow for full performance and to establish a history such that evaluations are fair and meaningful. Holding performance discussions, at least annually for correcting poor performance and reinforce good performance is a must. The key to success lies in helping employees develop skills and abilities for improved performance and providing necessary information, resources and opportunity to allow accomplishment of key results.

What is Performance Management – Definition Provided by Armstrong and Baron

Performance management, the concept developed during 1990s, is the process of planning performance, appraising performance, giving its feedback, and counselling an employee to improve his performance.

Thus, performance management involves different activities planning performance, that is, what an employee is expected to achieve with a set of given resources and within a time frame, appraisal of whether the expected result has been achieved or not, and then giving feedback to the employee concerned about where he lacks and its reasons, and counselling him how he can improve his performance.

Armstrong and Baron have defined performance management as follows:

“Performance management is a process that contributes to the effective management of individuals and teams to achieve high levels of organizational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved.”

There are many people who think that performance management (some call it performance development) is a new name given to well-established term ‘performance appraisal’ and, therefore, there is no difference between the two. The very basis of this thinking is that in many companies where performance management system has been adopted in place of performance appraisal, old practices of performance appraisal have been retained.

Therefore, these companies have not been able to reap the results of performance management. This is just like replacing personnel management by human resource management. There is a need for changing mental set along with the change in the system. If there is no change in mental set, changing the nomenclature of a system is merely avoiding reality.

Therefore, two systems performance management and performance appraisal should be seen in different perspectives which are as follows:

1. Performance management is more comprehensive than performance appraisal, though latter is the key ingredient of the former. Besides performance appraisal, performance management involves performance planning and providing feedback and counselling to employees to improve their performance.

2. In performance management, the entire activities are linked to organizational objectives and strategies to achieve these objectives. Because of such a linkage, the focus is on ‘why to appraise’ rather than the usual approach of ‘what and how to appraise’ of performance appraisal.

Many research evidences suggest that the companies that have some sort of performance management systems have achieved overall better financial performance than those that have not.

What is Performance Management – With Aims

Performance management is the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities. Performance management is a whole work system that begins when a job is defined as needed. It ends when an employee leaves the organization.

The evolution of the concept of performance management as a new Human Resource Management model reflects a change of emphasis in organizations away from command-and-control toward a facilitation model of leadership.

This change has been accompanied by recognition of the importance to the employee and the institution of relating work performance to the strategic or long-term and overarching mission of the organization as a whole. Employees’ goals and objectives are derived from their departments, which in turn support the mission and goals of the organization.

The performance management process provides an opportunity for the employee and performance manager to discuss development goals and jointly create a plan for achieving those goals. Development plans should contribute to organizational goals and the professional growth of the employee.

The planning process must also involve consideration of the emerging organizational environment. For most managers, this changing environment offers many new challenges and opportunities.

Performance managers and their employees are increasingly being asked to become generalists who step outside of traditional narrowly- defined job descriptions in support of team objectives and goals. These changes are resulting in the development of new approaches to human resource management.

The performance management framework underscores the vital role of education, training and development in the envisioned future organization. In this organization, continuous learning is a prerequisite to successful job performance and organizational effectiveness.

Employees must be able to learn and facilitate others to learn, developing effective technical and people skills in order to assume new responsibilities, and keep pace with and anticipate the changing nature of work and management practices.

The realities of the contemporary workplace will continue to challenge existing paradigms and should be considered in managing the performance of employees in a dynamic working environment.

The aim of performance management is to establish a culture in which individuals and groups take responsibility for the continuous improvement of business processes, and of their own skills and contributions. Performance management systems can also be used as an integrating process, which meshes various human resource management activities with the business objectives of the organisation.

The specific aims of performance management are to:

i. Achieve sustainable improvements in the organisational performance;

ii. Enable individuals to develop their abilities, increase their job satisfaction and achieve their full potential to their own benefit and that of the organisation as a whole;

iii. Develop constructive and open relationships between individuals and their managers in a process of continuing dialogue, which is linked to the work actually being done throughout the year;

iv. Provide a framework for the agreement of objectives as expressed in targets and standards of performance, so that mutual understanding of these objectives and the role both managers and individuals have to play in achieving them, is increased;

v. Provide for the accurate and objective measurement and assessment of performance in relation to agreed targets and standards, so that individuals receive feedback from managers on how well they are doing;

vi. On the basis of this assessment, to enable individuals with their managers to: agree improvement plans and methods of implementing them, and jointly review training and development needs and agree how they should be satisfied;

vii. Provide an opportunity for individuals to express their aspirations and concerns about their work;

viii. Provide a basis for rewarding people in relation to their contribution by financial and/or non-financial means —the former consisting of performance related pay, and the latter including recognition of achievement and opportunities to take on more responsibility or enhance knowledge and skills.