PRESENTED BY : MR. SEM SHAIKH
THE M.S. UNIVERSITY OF BARODA
FACULTY OF COMMERCE
DEPARTMENT OF COMMERCE & BUSINESS MANAGEMENT
MASTER OF COMMERCE
HISTORY OF PERFORMANCE MANAGEMENT
The concept of performance management then lay fallow for some
years, but began to emerge in the USA in the mid-1980s as a new
approach to managing performance. However, one of the first books
exclusively devoted to performance managements was not published
until 1987(Plachy 1987). In the UK the first published reference to
performance management was made at a meeting of the Institute of
Personnel Management (IPM) Compensation Forum in 1987 by Don
Beattie, then personnel director, ICL, who described how it was used as
‘an essential contribution to a massive & urgent change programme in
the organisation’ and had become a part of the fabric of the business.
Full recognition of the existence of performance management was
provided by the research project conducted by the Institute of
Personnel Management (1992).
WHAT IS PERFORMANCE MANAGEMENT ?
There are few comprehensive definitions of Performance Management. HM Treasury describe Performance Management
as “Managing the Performance of an organisation or individual”. Whilst this is not a precise definition grounded in
literature it demonstrates the breadth of performance management and hence the difficulties in defining its scope,
activities and practices. It demonstrates that performance management is concerned with the management of performance
throughout the organisation and as a result is a multidisciplinary activity.
Further, in their Glossary of Performance Terms the Improvement Development Agency further suggest
“it involves you understanding and acting on performance issues at each level of your organization, from
individuals, teams and directorates, through to the organization itself. As well as involving performance
measurement, systems and processes, performance management is about managing people and ‘the way
people within an organisation operate and work together’. Issues such as leadership, decision making,
involving others, motivation, encouraging innovation, and risk taking are just as important to bring about
DEFINITIONS OF PERFORMANCE MANAGEMENT
Performance management is a process for establishing shared understanding about what is to be achieved, and an approach to
managing and developing people in a way which increases the probability that it will be achieved in the short and longer term.
American Compensation Association (1996):-
An effective performance management system aligns individual performance with the organisation’s mission, vision and objectives.
Armstrong & Murlis (1994):-
Performance management is a means of getting better result from the organization, teams and individuals within and agreed
framework of planned goals, objectives and standards.
Lockett (1992) :-
The essence of performance management is the development of individuals with the competence and commitment, working towards
the achievement of shared meaningful objectives within an organization which supports and encourages their achievement.
Hendry, Bardley and Perkins (1997) :-
A systematic approach to improving individuals and team performance in order to achieve organizational goals.
IDS (1997) :-
A clear focus on how each employee can contribute to the overall success of the organization lies at the heart of performance
IRS Management Review (1996) :-
Performance management is a way of translating corporate goals in to achievable objectives that cascade down throughout the
organization to produce optimum results.
AIMS OF PERFORMANCE MANAGEMENT
The Basic Aims :-
Two simple propositions provide the foundation upon which performance
management is built :-
(1)When people (individuals & teams) know and understand what is
expected of them, and have taken part in forming these expectations,
they will use their best endeavours to meet them.
(2) The capacity to meet expectations depends on the levels of capability
that can be achieved by individuals and teams, the levels of support they
are given by management , and the processes, systems, and resources made
available to them by the organization.
Detailed Aims :-
In more details, the aims of performance management are two :-
(1) Help to achieve sustainable improvements in organizational
(2) Act as a lever for change in developing a more performance oriented
(3) Increase the motivation and commitment of employees.
(4) Enable individuals to develop their abilities, increase their job
satisfaction and achieve their full potential to their own benefit and that of
the organization as a whole.
(5) Enhance the development of the team cohesion and performance.
(6) Provide opportunities for individuals to express their aspirations and
expectations about their work.
Aims Suggested by other Commentators :-
The American Compensation Association (1996) states that
organizations rely on performance management to :-
(1) Document job responsibilities.
(2) Help define performance expectations.
(3) Provide a framework for supervisors and employees to communicate
with each other.
(4) Provide ongoing opportunities for supervisors to coach and
encourage personal development.
(5) Align individuals performance expectations with organizational goals.
PRINCIPLES OF PERFORMANCE MANAGEMENT
The principles of performance management have been well summarized by IRS (1996) as follows:-
It translate corporate goals into individuals, teams, department and divisional goals.
It help to clarify corporate goals.
It is a continuous and evolutionary process, in which performance improves over time.
It relies on consensus and cooperation rather than control on coercion.
It encourages self-management of individual performance.
It requires a management style that is open and honest and encourages to two-way communication between
superiors and subordinates.
It requires continuous feedback.
Performance management should operate in accordance with the following ethical principles as defined by
Winstanely and Stuart- Smith (1996) :-
o Respect for the individuals – people should be treated as ‘ends in themselves’ and not merely as ‘means to other
o Mutual respect- the parties involved in performance management processes should respect each other’s need
o Procedural fairness- the procedures incorporated in performance management should be operated fairly to
limit the adverse effect on individuals;
o Transparency- people affected by decisions emerging from the performance management process should have
the opportunity to scrutinize the basis upon which decisions were made.
CONCERNS OF PERFORMANCE MANAGEMENT
Performance management is basically concerned with performance improvement in order to achieve organizational,
team and individual effectiveness. Organizations, as stated by Lawson (1995), have ‘to get the right things done
Secondly, performance management is concerned with employee development. Performance improvement is not
achievable unless there are effective processes of the continuous development. This addresses the core competences
of the organisation and the capabilities of individuals and teams. Performance management should really be called
performance and development management.
Thirdly, Performance management is concerned with satisfying the needs and expectations of all organization’s
stakeholders- owners, management, employees, customers, suppliers and the general public. In particular, employees
are treated as a partners in the enterprise whose interests are respected and who have a voice on a matters that
concerns them, whose opinions are sought and listened to. Performance management should respect the needs of
individuals and teams as well as those of the organization, recognizing that they will not always coincide.
Finally, performance management is concerned with communication and involvement. It creates climate in which a
continuing dialogue between managers and the members of their teams takes place to define expectations and shared
information on the organization’s mission, values and objectives. This establishes mutual understanding of what is to
be achieved and framework for managing and developing people to ensure that it will be achieved. Performance
management can contribute to the development of the high- involvement organization by getting teams and
individuals to participate in defining their objectives and the means to achieve them.
SCOPE OF PERFORMANCE MANAGEMENT
Performance management is about managing the organization. It is a natural process
of management, not a system or a technique (Fowler, 1990). It is a also about managing
within the context of the business (its internal & external environment). This will affect
how it is developed, what is sets out to do and how it operates. The context is very
important, and Jones (1995) goes as far as to say ‘manage context, not performance’.
Performance management concerns everyone in the business- not just managers. It
rejects the cultural assumptions that only managers are accountable for the
performance of their teams and replaces it with the belief that responsibility is shared
between managers and team members. In a sense, managers should regard the people
who report to them as a customers for the managerial contribution and services they
can provide. Managers and their teams are jointly accountable for results and are
jointly involved in agreeing what they need to do and how they need to do it, in
monitoring performance & in taking action.
BENEFITS OF PERFORMANCE MANAGEMENT
The benefits to the organisation, managers and individuals of well- conceived and well-run performance
management processes are summarised below:
For the Organisation :
Align corporate, individual and team objectives.
Underpin core values.
Improve training and development process.
Help to develop a learning organisation
For Managers :
Provide the basis for clarifying performance and behaviour expectations.
Afford a framework for reviewing performance and competence levels.
Improve team and individual performance.
Support leadership, motivating and teambuilding processes.
Provide the basis for helping underperformers.
May be used to develop or coach individuals.
For Individuals :
Greater clarity of roles and objectives.
Encouragement and support to perform well.
The provision of guidance and help in developing abilities and performance.
Opportunities to spend ‘quality time’ with their managers.
Opportunities to contribute to the formulation of objectives and plans and to improvements in the way
work is managed and carried out.
An objective and fair basis for assessing performance.
If you can’t define performance, you can’t measure or manage it. It has been pointed out by Bates &
Holton (1995) that ‘Performance is a multi-dimensional construct, the measurement of which varies,
depending on a variety of factors.’ They also state that it is important to determine whether the
measurement objectives is to assess performance outcomes or behaviour.
There are of course different views on what performance is. It can be regarded as simply the record of
outcomes achieved. On an individual basis, it is a record of a person’s accomplishments. Kane (1996)
argue that performance ‘is something that the person leaves behind and that exists apart from the
purpose’. Bernadin, Kane, Ross, Spina and Johnson (1995) are concerned that-
Performance should be defined as the outcomes of work because they provide the strongest linkage to the
strategic goals of the organisation, customer satisfaction, and economic contributions.
The Oxford English Dictionary defines performance as the ‘accomplishment, execution, carrying out,
working out of anything ordered or undertaken’. This refers to outputs/ outcomes, but also states that
performance is about doing the work, as well as being about the results achieved. Performance could
therefore be regarded as behaviour- the way in which organisations, teams and individuals get work
done. Campbell (1990) believes that ‘performance is behaviour they can be contaminated by systems
FACTORS AFFECTING PERFORMANCE
Personal factors- the individual’s skill, competence, motivation and
Leadership factors- the quality of encouragement, guidance and
support provided by managers and team leaders.
Team factors- the quality of support provided by colleagues.
Systems factors- the system of work and facilities provided by the
Contextual factors- internal and external environmental pressures and
MEANING OF PERFORMANCE MANAGEMENT SYSTEM
Performance management system (PMS) is the heart of any “people
management processes’’ in organization. Organizations exist to perform. If
properly designed and implemented it can change the course of growth and
pace of impact of organizations. If people do not perform organizations don't
survive. If people perform at their peak level organization can compete and
create waves. In the past organizations as well as the HR function have
wasted a lot of time by wrongly focusing on performance appraisals rather
than performance management.
Effective performance management requires:
Identifying the parameters of performance and stating them very clearly.
Setting performance standards.
Planning in participative ways where appropriate, performance of all constituents.
Identifying competencies and competency gaps that contribute/hinder to performance.
Planning performance development activities.
systematically deciding and communicating what needs to be done (aims, objectives, priorities and
a plan for ensuring that it happens (improvement, action or service plans).
some means of assessing if this has been achieved (performance measures).
CONTRIBUTION OF PERFORMANCE MANAGEMENT SYSTEM
(1) Motivation to perform is increased : Receiving feedback about one’s performance increases the
motivation for future performance . Knowledge about how one is doing & recognition about one’s
past success provide the fuel for future accomplishments.
(2) Self-esteem is increased : Receiving feedback about one’s performance fulfils a basic human
need to be recognized & valued at work. This in turn is likely to increase employee’s self-esteem.
(3) Managers gain insight about subordinates : Direct supervisors & other managers in charge of
the appraisal gain new insights into the person being appraised. Also, supervisors gain a better
understanding of each individual’s contribution to the organization.
(4) The definitions of job & criteria are clarified : The job of the person being appraised may be
clarified and defined more clearly. In other words, employees gain a better understanding of the
behaviours and results required of their specific position.
(5) Self-insight & development are enhanced : The participants in the system are likely to develop a
better understanding of themselves and of the kind of development activities that are of value to
them as they progress through the organization.
DISADVANTAGES/ DANGERS OF POORLY IMPLEMENTED PM SYSTEM
(1) Increased turnover : If the process is not seen as fair, employees
may become upset and leave the organization. They can leave
physically or with draw psychologically.
(2) Use of misleading information : If a standardized system is not in
place, there are multiple opportunities for fabricating information
about an employee’s performance.
(3) Lowered self-esteem : Self-esteem may be lowered if feedback is
provided in an inappropriate and inaccurate way. This in turn can
create employee resentment.
(4) Wasted time and money : Performance management systems cost money and
quite a bit of time. These resources are wasted when systems are poorly designed
(5) Damaged relationships : As a consequence of a deficit system, the relationship
among the individuals involved may be damaged, often permanently.
(6) Decreased motivation to perform : Motivation may be lowered for many reasons
including the feeling that superior performance is not translated into meaningful
tangible or intangible rewards.
(7) Employee burnout & job dissatisfaction : When the performance assessment
instrument is not seen as valid and the system is not perceived as fair, employees are
likely to feel increased levels of job burnout & job dissatisfaction.
(8) Increased risk of litigation : Expensive lawsuits may be filed by individuals who
feel they have been appraised unfairly.
CHARACTERISTICS OF AN IDEAL PM SYSTEM
(1) Strategic congruence: The system should be congruent with the unit and
organisation’s strategy. In other words, individual goals must be aligned with unit and
(2) Thoroughness : The system should be thorough regarding four elements :all
employees should be evaluated, all major job responsibilities should be evaluated, the
evaluation should include performance spanning the entire review period, not just the
few weeks or months before the review and feedback should be given on positive
performance aspects as well as those that are in need of improvement.
(3) Practicality: Systems that are too expensive, time consuming and convoluted will
obviously not be effective. Good, easy-to- use systems are available for managers to help
them make decisions.
(4) Specificity : A good system should be specific: it should provide detailed and
concrete guidance to employees about what is expected of them an how they can
meet these expectations.
(5) Identification of effective & ineffective performance : The performance
management system should provide information that allows for the identification of
effective and in effective performance.
(6) Reliability : A good system should include measures of performance that are
consistent and free of error. For example, if two supervisors provided ratings of the
same employee and performance dimensions, rating should be similar.
(7) Validity : The measures of performance should also be valid. In this context,
validity refers to the fact that the measures include all relevant performance facets
and do not include irrelevant performance facets.
DIFFERENT TECHNIQUES FOR PERFORMANCE REVIEW
No. Technique Key Idea Advantages Disadvantages
1. Ranking Method
Ranking employees from best to
worst on a particular trait,
choosing highest then lowest,
until all ranked
3. Cost effective.
4. Simple & easy to use.
1. Less objective.
2. Morale problems. who are
not rated at or near the top
of the list.
3. Suitable for small
2. Graphic Rating
A scale that lists a number of
traits & a range of performance
for each, the employee is then
rated by identifying the best
score that best describes his or
her performance for each trait.
2. Easily Constructed.
3. Easy to use.
4.Reduce the personal
1. Rating may be subjective.
2. Each characteristics is
equally important in
evaluation of the employee’s
3. Critical Incident
Keeping a record of
uncommonly good or
undesirable examples of
employee’s work related
behaviour & reviewing it with
the employee at predetermined
1. Easy & economic to
develop & administer.
2. Based on direct
3. It is time tested &
provides more face time.
1. Time consuming &
laborious to summarize &
analyze the data.
2.Difficult to convince
people to share their critical
incidents through a survey.
4. Narrative Essays
Evaluator writes an explanation
about employee’s strength &
weakness points, previous
performance, positional &
suggestion for his or her
improvement at the end of
1. Report actually shows
2. Can cover all factors.
3. Examples are given.
4. Provides feedback.
1. Time consuming.
2. Supervisor may write a
3. Effective writers are very
difficult to find.
5. Management by
Employees are evaluated
how well they accomplished
a specific set of objectives
that have been determined
to critical in the successful
completion of job.
1. Easy to implement & measure.
2. Employee motivated as he is aware
of expected roles & accountability.
3. Facilitates employee counseling &
1. Difficult to employees agree on goals.
2. Misses intangibles like honesty, integrity,
3. Time consuming, complicated, lengthy &
BARS combines elements
from critical incident &
graphic rating scale
approach. The supervisors
rates employee’s according
items on a numerical scale.
1. Job behavior describe employee
performance in a better way.
2. More objective.
3. More acceptances due to
participation of managers &
1. Scale independence may not be valid/reliable.
2. Behaviors are activity oriented rather than
3.Very time consuming for generating BARS.
4. Each job require creating separate BARS
Employees are evaluated
over a period of time; say
one or three days, by
observing their behaviors
across a series of selected
exercises or work samples.
1. Concepts are simple.
2. Highly flexible methodology.
3. Helps in selection & promotion
decisions and for diagnosing
employee development needs.
4. Exercise is hard to fake.
1. Expensive & difficult to manage.
2. Requires a large staff.
3. Requires a great deal of time.
4. Only a limited no. of people can be processed
at a time.
8. 360 Degree
It relies on the input of an
suppliers and/or spouses.
1. Excellent employee development
2. Accurate, reliable & credible
3. Legally more defensible
4. More objective being multi-rate
1. Time consuming & very costly.
2. Sensitive to organization & national culture.
3. May damage self-esteem of employees if the
feedback is brutal.
4.Difficult to implement in cross-functional
5.Prone to political & social games played by
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