Performance management is a process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational 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. It is also a strategy which relates to every activity of the organisation set in the context of its human resource policies, culture, style and communications systems.
The nature of the strategy depends on the organisational context and can vary from organisation to organisation (Armstrong and Baron, 2004). In other words performance management should be: * Strategic – it is about broad issues and long-term goals. * Integrated – it should link various aspects of the business, people management, individuals & teams. Performance management should incorporate: * Performance improvement – throughout the organisation, in respect of individual, team & organisational effectiveness. * Development – unless there is continuous development of individuals and teams, performance will not improve. Managing behaviour – ensuring that individuals are encouraged to behave in a way that allows and fosters better working relationships. At its best, performance management is a tool to ensure that managers manage effectively – as part of which they ensure that the people or teams they manage: * know and understand what is expected of them * have the skills and ability to deliver on these expectations * are supported by the organisation in developing the capacity to meet these expectations * are given feedback on their performance * have the opportunity to discuss and contribute to individual and team aims and objectives.
Therefore, performance management is about: * Ensuring that managers themselves are aware of the impact of their own behaviour on the people they manage and are encouraged to identify and exhibit positive behaviours * Establishing a culture in which individuals and groups take responsibility for the continuous improvement of business processes and of their own skills, behaviour and contributions. * Sharing expectations – managers can clarify what they expect individual and teams to do; likewise individuals and teams can communicate their expectations of how they should be managed and what they need to do their jobs. Interrelationships and improving the quality of relationships, between managers and individuals, between managers and teams, between members of teams and so on, and is therefore a joint process. * Planning – defining expectations expressed as objectives and in business plans. * Measurement – in the words of the old dictum, ‘If you can’t measure it, you can’t manage it’. It should apply to all employees, not just managers, and to teams as much as individuals. It is a continuous process, not a one-off event. It is holistic and should pervade every aspect of running an organisation. 2. OVERALL PURPOSE AND AIMS OF PERFORMANCE MANAGEMENT
The following are the overall purposes and aims of performance management: * Contribute to the achievement of high performance by the organisation and its people. ‘High performance’ means reaching and exceeding stretching targets for the delivery of productivity, quality, customer service, growth, profits and shareholder value. * Make the good better: share understanding about what is to be achieved; develop the capacity of people to achieve it; and provide the support and guidance people need to deliver high performance and achieve their full potential to the benefit of themselves and the organisation. Deal with under-performers by providing the means for people to improve their performance or make better use of their abilities. 3. HISTORY OF PERFORMANCE MANAGEMENT First formal monitoring systems evolved out of the work of Fredrick Taylor and his followers before World War I. In the 1920s, rating for officers in the US armed services was introduced and this spread to the UK. Then came ‘Merit Rating’ during the 1950s and 1960s in the US which was renamed ‘performance appraisal’. In the 1960s and 1970s, ‘management by objectives’ came and went.
A revised form of results-oriented performance appraisal emerged in the 1970s and still exists today. The term ‘performance management’ was first used by in the 1970s by Beer and Ruh (1976). In 1992, the Institute of Personnel Management (UK) did a research and defined the term ‘performance management’ as: “A strategy which relates to every activity of the organisation set in the context of its human resources policies, culture, style and communication systems. The nature of the strategy depends on the organisational context and can vary from organisation to organisation. 4. PERFORMANCE MANAGEMENT & DISCRETIONARY BEHAVIOUR Performance management is concerned with the encouragement of positive discretionary behaviour. Discretionary behaviour: the choices that people make about how they carry out their work and the amount of effort, care, innovation and productive behaviour they display. It is the difference between people just doing a job and people doing a great job. (Purcell) The experience of success seen in the performance outcomes helps reinforce positive attitude. 5. PERFORMANCE MANAGEMENT AND HUMAN CAPITAL DEVELOPMENT
The goal of Performance management is to achieve human capital advantage. Human capital advantage results from employing people with competitively valuable knowledge and skills. It means developing the organisation’s intellectual capital – ‘the accumulated stock of knowledge, skills and abilities that individuals possess which the firm has to build up over time as identifiable expertise. To achieve this, performance management has to be integrated with the key HR processes of resourcing, HRD and knowledge management.
