The Foundations of Performance Management

The Foundations of Performance ManagementPerformance Management DefinedA systematic process for improving organizational performance by developing the performance of individuals and teamsMeans of getting better results by understanding and managing performance within an agreed framework of planned goals, standards and competency requirementsBriscoe and Claus (2008)PM is the system through which organizations set work goals, determine performance standards, assign and evaluate work, provide performance feedback, determine training ad development needs and distribute rewards

PMIt is much more than appraising individualsIt contributes to the achievement of culture change and it is integrated with other key HR activities especially human capital management, talent management, learning and development and reward management

Talent Managementis a set of integrated organizational HR processes designed to attract, develop, motivate, and retain productive, engaged employees. The goal of talent managementis to create a high-performance, sustainable organization that meets its strategic and operational goals and objectives.4Short HistoryKoontz (1971) says that the first known example of performance appraisal took pace during the Wei Dynasty (221-65 AD)Emperor employed an imperial rater whose task was to evaluate the performance of the official familyIn the 16th century Ignatius Loyola established a system for formal rating of the members of the Jesuit Society 5Short HistoryFirst formal monitoring system was the work of Fredrick Taylor and his followers before WWIRating of officers in the US armed forces introduced in 1920s and this spread to UKMerit rating then came to US and UK in 1950s and 1960sMBO came in 1960s and 1970sA revised form of resulted oriented performance appraisal emerged in 1970s and still existsThe term PM first used in 1970s and recognized in late 1980sMerit RatingProcess of assessing how well someone was regarded in terms of personal traits such as judgment or integrity and qualities such as leadership or cooperativenessIt involved quantification of judgments against each factorW.D Scott an American introduced rating of the abilities of workers in industry prior to WWI Merit RatingScott scale was modified and used to rate efficiency of US army officersSupplanted seniority system of promotion and initiated an era of promotion on basis of meritPerceived success led to adoption by British armyThen came the Graphic Rating ScaleKey criteria for rating people at workMerit rating now sometimes called PM

Attacks on Merit Rating and Performance AppraisalMerit rating still exists in different guisesDouglas McGregor criticized these in his famous article An uneasy look at performance appraisalThe emphasis should be shifted from appraisal to analysis. This implies a more positive approach. No longer is the subordinate being examined by his superior so that his weaknesses may be determined; rather he is examining himself, in order to define not only his weaknesses but also his strengths and potentials He becomes an active agent, not a passive object. He is no longer a pawn in a chess game called management development.

McGregorThe main factor in the management of individual performance should be the analysis of the behaviour required to achieve agreed results, not the assessment of personality.Management by ObjectivesBased on the writings of Peter Drucker and Douglas McGregor.The term management by objectives was first coined by Peter Drucker (1955) What the business enterprise needs is a principle of management that will give full scope to individual strength and responsibility and at the same time give common direction of vision and effort, establish teamwork and harmonize the goals of the individual with the common weal. The only principle that can do this is management by objectives and self-control.Drucker emphasized that an effective management must direct the vision and efforts of all managers towards a common goalThis would ensure that individual and corporate objectives are integrated and would also make it possible for managers to control their own performance:Self-control means stronger motivation: a desire to do the best rather than just enough to get by. It means higher performance goals and broader vision.McGregors (1960) contribution arose from his Theory Y concept. He wrote: The central principle that derives from Theory Y is that of integration: the creation of conditions such that the members of the organization can achieve their own goals best by directing their efforts towards the success of the organization.The Management by Objectives SystemManagement by objectives as described by John HumbleMBO is a continuous process of:reviewing critically and restating the companys strategic and tactical plans;clarifying with each manager the key results and performance standards he must achieve, and gaining his contribution and commitment to these, individually and as a team member;agreeing with each manager a job improvement plan that makes a measurable and realistic contribution to the unit and company plans for better performance;providing conditions (an organization structure and management information) in which it is possible to achieve the key results and improvement plan;using systematic performance review to measure and discuss progress towards results;developing management training plans to build on strengths, to help managers to overcome their weaknesses and to get them to accept responsibility for self-development;strengthening the motivation of managers by effective selection, salary and succession plans.Management by objectives was adopted enthusiastically by many companies in the 1960s and1970s. But it became discredited by the 1990s why?Criticisms of Management by Objectives

One of the first and most formidable attacks on management by objectives was made in the Harvard Business Review by Levinson (1970). His criticisms were:Every organization is a social system, a network of interpersonal relationships. A person doing an excellent job by objective standards of measurement may fail miserably as a partner, superior, subordinate or colleague.The greater the emphasis on measurement and quantification, the more likely it is that the subtle, non-measurable elements of the task will be sacrificed. Quality of performance frequently loses out to quantification.It (management by objectives) leaves out the individuals personal needs and objectives, bearing in mind that the most powerful driving force for individuals comprises their needs, wishes and personal objectives.R H Schaffer on Management by Objectives

In many MBO programmes, as lists of goals get longer and thicker, the focus is diffused, bulk is confused with quality, and energy is spent on the mechanics rather than the results. A manager challenged on the performance of his group can safely point to the packet of papers and assert: My managers have spent many hours developing their goals for the year.Comparison of Management by Objectives and Performance Management by Fowler

Fowler in 1990 criticized the MBO because:It was not right for all organizations it required a highly structured, orderly and logical approach that did not fit the opportunistic world of the entrepreneurOnly limited recognition was given to the importance of defining the organizations corporate goals and values the emphasis was on the role of the individual managerLine managers perceived it as a centrally imposed administrative taskIt became a formal once-a-year exercise bearing little relationship to managers day-today activitiesThere was an overemphasis on quantifiable objectives to the detriment of important qualitative factorsPerformance ManagementThe concept of performance management incorporates some of the notions and approaches of management by objectives and performance appraisal but it includes a number of significantly different features Early daysThe earliest reference to performance management in the literature was made by Warren(1972) On the basis of his research in a manufacturing company he defined the features of performance management as followsFeatures of Performance Management as defined by Malcolm Warren in 1972Expectations a large group of employees preferably all must be told clearly, objectively and in their own language what is specifically expected of themSkill a large group of employees must have the technical knowledge and skill to carry out the tasksFeedback workers must be told in clear terms, without threats, how they are doing in terms of expectationsResources employees must have the time, money and equipment necessary to perform the expected tasks at optimal levelReinforcement employees must be positively reinforced for desired performancePMAnother early use of the term performance management was made by Beer and Ruh (1976)Their thesis was that: performance is best developed through practical challenges and experiences on the job with guidance and feedback from superiors.Features of this SystemThe features of this system that distinguished it from other appraisal schemes were asfollows:emphasis on both development and evaluation;use of a profile defining the individuals strengths and development needs;integration of the results achieved with the means by which they have been achieved;separation of development review from salary reviewPerformance management as described by Plachy and Plachy in 1988Performance management is communication: a manager and an employee arrive together at an understanding of what work is to be accomplished, how it will be accomplished, how work is progressing toward desired results, and finally, after effort is expended to accomplish the work, whether the performance has achieved the agreed-upon plan. The process recycles when the manager and employee begin planning what work is to be accomplished for the next performance period.Performance management is an umbrella term that includes performance planning, performance review, and performance appraisal. Major work plans and appraisals are generally made annually. Performance review occurs whenever a manager and an employee confirm, adjust, or correct their understanding of work performance during routine work contacts.Fowler (1990)Management has always been about getting things done, and good managers are concerned to get the right things done well.That, in essence, is performance management the organization of work to achieve the best possible results. From this simple viewpoint, performance management is not a system or technique, it is the totality of the day-to-day activities of all managers.Institute of Personnel Management (1992): definition of a performancemanagement systemIt communicates a vision of its objectives to all its employeesIt sets departmental and individual performance targets that are related to wider objectivesIt conducts a formal review of progress towards these targetsIt uses the review process to identify training, development and rewardoutcomesIt evaluates the whole process in order to improve effectivenessIt expresses performance targets in terms of measurable outputs,accountabilities and training/learning targetsIt uses formal appraisal procedures as ways of communicating performance requirements that are set on a regular basisIt links performance requirements to pay, especially for senior managers