The document outlines the concept, objectives, and importance of performance management within organizations, emphasizing the impact of individual and team performance on overall organizational success. It discusses the evolution from traditional performance appraisals to integrated performance management systems that align employee contributions with organizational goals. Key factors affecting performance management include organizational culture, employee motivation, and effective communication.

1. PERFORMANCE MANAGEMENT
Concept & Objectives
Prerequisites
Dimensions of Performance management
Factors affecting performance management
Performance management & Performance appraisal
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2. Concept
 Labour – a Factor of production-Scientific
management perspective – productivity of each worker
could be measured accurately
 Performance means outcomes achieved, or
accomplishments of work- the actual contribution of
an individual or team to the organisation’s strategic
goals, like stakeholder satisfaction, clean image and
economic sustainability.
 Performance includes both behaviours and results.
 Performance is about optimally realising one’s
potential.
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3. Performance Framework
 Potential for a role is the input and the performance is
the output of the same process.
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Employee
Potential
Task related
activities
Employee
Performance

4. Changing role of human resources and the importance
of their performance
Value addition and value creation
Sources of Competitive advantage-
training (Russel. et. al. 1985), selection (Terpestra &
Rozell, 1993), appraisals (Borman, 1991), and
compensation (Milkovich, 1992) –
Performance of organisation- productivity, turnover,
absenteeism, innovation, quality of products /services
HR an asset to the organisation
Integration of HR policies and practices
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5. Importance of performance
 Performance of an organisation is ensured by the
performance of individuals and teams in the
organisation.
 P=f (abilities, willingness)
 Organisational culture, values and managerial
behaviour also exert a major impact on the
achievement of excellence on the individual, team, and
organisational performance.
 Thus, PM emerges as a major element in the field of
HR management.
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6. HR PRACTICES
QUALITY OF
PRODUCTS/
SERVICES
CUSTOMER
SATISFACTION
PRODUCTIVITY
ORGANISATIONAL
PERFORMANCE
EMPLOYEE
SATISFACTION
EMPLOYEE
PERFORMANC
E
HR CLIMATE
EMPLOYEE
DEVELOPMENT
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7. Need for managing performance
 Extraordinary Performance from an ordinary employee
can be possible by effectively and systematically
managing performance.
 Extraordinary performance has to be planned,
monitored and reinforced.
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8.  Historically, organisations defined strategy and
objectives, and the measurement of employee and
organisational performance as completely separate
processes.
 An integrated performance management system is a
key component of the emerging requirement to tie the
strategy and the organisational processes to Human
resources processes.
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9. Meaning & Definition
 The term was first used by Beer and Ruh in the year
1976.
 Performance management is an ongoing dynamic
process that articulates organisational vision and
objectives, installs performance criteria in light of
these objectives, and continuously reviews internal
procedures to integrate them with organisational
philosophy and culture.
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10. Definitions
 Armstrong & Baron define performance
management as “ a strategic and integrated approach
to delivering sustained success to organisations by
improving performance of the people who work in
them and by developing the capabilities of teams and
individual contributors.“
 Strategic- long term organisational goals and in the
context of external environment
 Integrated – four dimensions: vertical, functional,
human resource, goals.
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11. Definitions....
 Performance management is the process through
which managers ensure that employee’s activities and
outputs contribute to organisational goals. –Louis R
Gomez & David B Mejia
 Performance management may be defined as a
planned and systematic approach to managing the
performance of individuals ensuring their personal
development and contribution towards organisational
goals. – Ronnie Malcom.
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12. OBJECTIVES OF PERFORMANCE
MANAGEMENT
 Strategic objectives:
Formulate strategy, determining the
objectives of the organisation
Manage the implementation of
strategies
Challenging assumptions- ensuring the
content is still valid
Sustain excellence in performance by
motivating employees to setting goals
that align with organisational
strategies.
Monitoring whether the expected
performance results are achieved or
not
Ensuring that the organisation is
complying with the minimum legal,
environmental requirements.
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13. Communication Objectives
 :
 Communicate the
direction of organisation
so that the strategic goals
are achieved by
individuals
 Communicate with
external stakeholders
 Provide feedback to
employees on their
performance
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14. MOTIVATIONAL OBJECTIVES
 Evaluate and reward behaviour;
motivate them to take actions
and make decisions which are
consistent with organisational
objectives and strategies.
 Encourage improvement and
learning at all levels across the
organisation.
 Assess current management
potential for the purpose of
succession planning.
 Empower employees to set
their own performance criteria
so that achieving these
objectives becomes their
mission.
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15. PREREQUISITES (CRITERIA) OF PERFORMANCE
MANAGEMENT
 Organisational philosophies
 Attitudes and skills of those responsible for its
implementation
 Acceptance, commitment and ownership of
managers and employees
 Endorsement of the notions of ‘procedural
fairness’ (process equity)and ‘distributive justice’
(association with rewards & recognition)
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16. PREREQUISITES (CRITERIA) OF PERFORMANCE
MANAGEMENT Contd.....
 Commitment and involvement of top management
 Adequate compensation package
 Access to resources, tools and skills to employees to do
their job
 Empowerment of managers for need based planning
 Familiarity of managers and employees with target
setting and achievement monitoring
 Establishing an effective communication system
 Developing a culture of accountability and openness
 Strong financial support in the organisation
 Decentralisation
 Customer’s pressure and quality assurance.
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17. DIMENSIONS OF PERFORMANCE MANAGEMENT
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18. FACTORS AFFECTING
PERFORMANCE MANAGEMENT
 Process
 People management capability
 Motivation
 Measurement and rewards
 Role of HR professionals – demonstrate expertise, draw
upon relevant theory and research evidence, influence
through leaders within the organisation to focus energy on
the aspects of performance management.
 Learning organisation
 Culture and clarity of purpose.
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19. PERFORMANCE MANAGEMENT & PERFORMANCE
APPRAISAL
 Late 18th century- Industrial revolution- division of
labour- scientific management perspective- annual
performance appraisals of workers.
 Sole purpose of appraisal was to assess the productivity
of each worker retrospectively with a view to find ways
of improving individual performance.
 It was primarily a judgemental process where human
aspects were not considered.
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 Hawthorne’s experiments brought in a change in the
approach, which established that the relationship
between fellow workers played a significant role at work
and only way to increase their productivity was to
motivate them at work.
 Now the focus shifted to predominantly assessing the
personality traits of workers and examining how
workers could be motivated to do better. But the
approach was still judgmental in nature.
 As a result in 1950s the merit rating became the
dominant way of assessing individual performance.

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 Soon Merit rating approach was critised by McGregor
(1957) as being too focussed on the personality trait of the
individual instead of analysing his behaviour and
backward looking instead of forward looking.
 Napier and Latham (1986) felt that ‘situation’ in which the
individual performed was not considered.
 Gradually, it was felt that individual performance could be
improved by skilfully manoeuvring both external factors
and the internal factors of an employee.
 External factors -organisational structure and internal
factors- psychological well being of the employee.

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 MBO approach proposed by Peter Drucker gained
popularity where the employee would set his own
objectives at the commencement of the appraisal period
and to review the progress at the end of the appraisal
period.
 The negative effects of both merit rating and the MBO
approaches frustrated the managers and there was
renewed interest in revising the appraisal process.
 Concept of Performance management slowly evolved
and gained increased attention. Training and
development was linked to the performance
appraisal process.

23. Performance appraisal Performance management
1. Performance appraisals
are reviews of employee
performance over time
2. Top down assessment
3. Annual reviews
4. Use of ratings
5. Massive system
6. Focuses on quantitative
objectives
7. Complex paper work
8. Owned by HR managers
9. Retrospective
1. Identifying, measuring,
managing, and developing the
performance of employees
2. Joint process through dialogue.
3. Continuous process
4. Ratings are less used
5. Flexible process
6. Focuses on values and
behaviour also
7. Documentation is minimum
8. Owned by line managers
9. Future orientation
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