Performance Management – Meaning, Features, Need and Cycle

Need for Performance Management

Employers are moving to performance management for three main reasons—total quality, appraisal issues, and strategic planning.

1. Total Quality
More managers are adopting the total quality management (TQM) philosophy advocated by management gurus like W. Edwards Deming. Deming argued that an employee’s performance is more a function of things like training, communication, and supervision than of his or her own motivation. Performance appraisals tend to focus more on problems—what’s the employee doing wrong? Deming said that is the wrong approach. Consistent with Deming’s philosophy, performance management puts the focus on continuous collegial feedback, and (when necessary) on changing things like training, incentives, and procedures.

2. Appraisal Issues
Traditional performance appraisals are often tense and counterproductive. Indeed, there is an obvious flaw in appraising employees once or twice per year: if things need improving, why wait 6 months to do something about it?

3. Strategic Planning
Researchers studied 1,800 large companies. About 90% had strategic plans with strategic goals. However, only about one in eight achieved their strategic goals. Briefly, many managers formulate strategic plans, and then drop the ball? They do so by not communicating their strategies to employees, by not assigning each employee clear goals and responsibilities, and by not monitoring actual progress.
Performance management aims to avoid that. Employees get goals that stem from the company’s strategy. Then, performance management’s continuous performance reviews align the employee’s or team’s performance with those strategic goals.

The Performance Management Cycle

Performance management should be an ongoing, interactive process designed to enhance employee capability and facilitate productivity. The performance management cycle is illustrated in the following figure:


There is no one way to manage performance. Whatever system is adopted needs to be congruent with the culture and principles that pervade the organisation. However, most systems of performance management have several parts:

1. Defining Performance
It is desirable to carefully define performance so that it supports the organisation’s strategic goals. Setting clear goals for individual employees is a critical component of performance management.

2. Appraisal Process
It is important to conceptualise an appraisal process that will be steady across the organisation and consistent with the culture of the organisation. There are many ways of appraising employee performance, and the system adopted has to be one that will work in the context of the particular organisation involved.

3. Measuring Performance
Measuring performance does not need to be narrowly conceived but can bring together multiple types of performance measured various ways. The key is to measure often and use the information for midcourse corrections.

4. Feedback and Coaching
To improve performance, employees need information (feedback) about their performance, along with guidance in reaching ; next goal.

Difference between Performance Appraisal Systems and Performance Management Systems

Performance Appraisal Systems Performance Management Systems
Focus is on performance appraisal and generation of ratings Focus is on performance management.
Emphasis is on relative evaluation of individuals Emphasis is on performance improvements of individual officer and his department or team performance
Annual exercise-though normally periodic evaluations are made Continuous process with quarterly or periodic performance review discussions
Emphasis is on rating and evaluation Emphasis is on performance planning, analysis, review, development and improvements
Rewards and recognition of good performance is an important component Performance rewarding may or may not be an integral partDefining and setting performance standards is an integral part
Designed and monitored by the personnel/administration department Designed by the personnel/HR department but could be monitored by the respective departments themselves
Ownership is mostly with the administration/personnel department Ownership is with line managers, personnel/administration facilities its implementation
KPAs and KRAs are used for bringing in objectivity KPAs, or KPAs are used as planning mechanisms
Development needs are identified at the end of the year on the basis of the appraisal of competency gaps Developmental needs are identified in the beginning of the year on the basis of the competency requirements for the coming year
 There are review mechanisms to ensure objectivity in ratings There are review mechanisms essentially to bring performance improvements
It is a system with deadlines, meetings, input and output and a format. It is a system with deadline, meeting, input, output and a format.

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