User:MGMT90018 2015S2 PERFORMANCEMANAGEMENT/sandbox

Performance management (PM) has been defined as "a systematic process for improving organisational performance by developing the performance of individuals and teams." This definition has been widely used as it highlights the crucial link between the performance of an organisation's human resources and the achievement of an organisation's goals. It is also a key factor for change in Organisation Development (OD) as it is linked to specific behaviours that are being introduced and reinforced for the continuous success of the organisation.

History of Performance Management
The discipline of performance management is informed by a number of approaches to both management and Organisational Behaviour studies.

In the 1800’s F W Taylor proposed that optimal performance would result from a rigid work design that outlined specific tasks and targets with pre defined financial rewards. Here, motivation to complete tasks and achieve targets was assumed to be driven by the financial reward.

The Human Relations School of thought highlighted that managing performance has many intricacies and to ignore the social nature of the working environment and its impact on performance would be negligent. The Hawthorne Experiments conducted in the 1920’s demonstrated the power that belonging to a group and group norms can have on level of performance. Monetary rewards were found to be less important than feeling like a valued member of a group when measuring worker productivity. This finding highlighted that work teams, team culture and managers are integral in motivating employees and their subsequent performance.

Management by Objectives (MBO) was a popular style of management in the 1960s and 1970’s and has had a significant impact on performance management as we know it today. MBO is a style of management that transmits the objectives of the organisation to the individual employee.

In early 1990s, 360-degree feedback was used in organisations for feedback and evaluations. This method of evaluation mostly focuses on different perspectives of an employee's competencies, including skills, abilities, personality traits and critical thinking skills.

Types of Performance Management
The purpose of performance management is to measure the actual performance of a person or group. Performance measurement, or performance appraisal is a process of evaluating an employee's work performance by measurement, comparing with previously established standards, documenting the results, and communicating the results to the employee. A performance management system (PMS) combines the processes and activities involved in performance appraisals.

Performance management system involves the simple structure of performance appraisal and incorporates the quality management along with the organizational policies, procedures, and resources that support the evaluation process. Hence there are various types of performance management. The commonly used methods to manage performance in recent years including : Total quality management (TQM) is to make quality a way of totally focusing the organization on the competitive discipline of serving the customer. TQM works when people use basic statistical tools and behavioral techniques to count or to collect data in order to analyze and solve problems. It is seen as an important source of variance affecting performance both indirectly and interactively.
 * Total quality management
 * Performance appraisal (Performance review)

Most modern organizations rely upon some form of performance appraisal system to provide employees with feedback about their performance and to help the organization make decisions about such things as pay increases and promotions Pay motivates people. It is important in the retention of high-performing employees. Reward systems are used to influence employees' activities. Organisations should monitor and recognize corporate progress toward strategic objectives and investment in attending strategic goals that are in the company's best long-term interest.
 * Reward systems
 * Management control systems

Management control systems (MCS) are the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities. MCS is also an integrated technique to motivate employee behavior and to evaluate performance.
 * Balanced scorecard

Balanced scorecard is a management system that can motivate breakthrough improvements by presenting the managers with different perspectives from which to choose measures. See 360-degree feedback and previous History of Performance Management section.
 * 360-degree feedback

Role of Performance Management in Organisations
Performance management practices drive decisions about performance, remuneration, promotions, disciplinary procedures, terminations, transfers and development needs within an organisation. Performance management systems provide a framework within which employees and managers operate, and through which actual and desired performance can accurately evaluated.

Performance management systems can be based on a consideration of behaviours (i.e. how work is completed), results (i.e. outcomes produced), or both. For example, Management by Objectives (MBO) can be part of a performance management system based on measuring results. There are other types of performance management systems that place an emphasis on processes and not results (e.g. competencies and skills-based systems). Holistically, performance management systems and practices may incorporate job design, recruitment and selection, training and development, disciplinary procedures and counselling, career planning, compensation and benefits and performance appraisals.

Performance management provides important information necessary for decision making and other Human Resource Management (HRM) and development activities, such as information on the developmental needs of employees. Performance management systems are useful in helping organisations to determine whether training resources are being used effectively and efficiently. Performance management systems also inform decisions about:
 * rewards and the allocation of resources, (i.e. by linking performance to rewards),
 * succession planning, (i.e. by using past performance as a predictor of future performance),
 * staffing strategies, (i.e. performance management systems allow organisations to create talent inventories and identify talent gaps that are targeted with subsequent recruiting efforts)

Benefits of Performance Management in Organisations
Performance management is implemented in a process and is not a once off event. A fundamental benefit of performance management is performance improvement. Firstly, PM improves team and individual employee performance, then, secondly, PM influences the organisation as a whole to improve organisational performance and results. When the employer and the employees both approach performance management as a two-way process that is based in mutual trust and commitment, the process is effective. One way for performance management to be effective is to have the organisations values and objectives, strategic goals and the context in which they operate in set out in a mission statement. This creates performance objectives and makes it possible for the individual to be judged against the expected standards and enables the organisation to achieve results based on the performance of the employee .

Effective performance management can also have a number of other benefits:
 * Delivering effective performance; people adding value to the organisation through maximising their effectiveness, being focused on the right things, and efficiency by carrying out roles in the best way

Once the right performance management behaviours are cemented, they can become self-perpetuating. By extension, these behaviours can lead to positive outcomes for the organisation when implemented effectively. The successful implementation of performance management systems requires a holistic approach that considers how such systems fit into the larger talent management landscape of the specific organisation, and by aligning the strategy with this bigger picture.
 * Providing a framework for clearly identified organisational objectives
 * Provide training and development, this nurtures confidence and improves motivation, allowing for an engaged workforce
 * Improve customer retention through not just monitoring the set KPI's, but by improving the performance of the organisation and the employees within

Consequences of Performance Management
Despite the advantages that performance management has in organisations, there are also several consequences. Determining the relationship between the individual’s performance and the organisation’s results can be fraught with difficulties. Stemming from this are two issues, firstly, the effect on the organisation and employee moral can be detrimental if performance management is not used correctly. Secondly, the type of performance management used can also be seen as in conflict with the organisations culture and system. There are other consequences that can arise from this overarching issue and they can be seen as either having an effect on the organisation or the employee.

Employee
Often managers and employees can see performance management as a burden, and it’s costs, such as being bureaucratic, cumbersome and time consuming, outweigh the benefits. Occasionally the process can become a ‘check box’ exercise, carried out to no benefit to either the employer or the employee. There is also the misconception that performance management involves only the receiving of negative feedback, resulting in the process often being distressing or uncomfortable.

Creation of an individualistic and selfish way of working

PM creates an individualistic way for employees of an organisation to think and act. Employees are pressured into acting in a way that will reflect positively on their personal performance management outcomes, which is not in the best interests of the organisation. Arguments against this criticism include the notion that generally improving individual performance across the company will drive an aggregate improvement of the organisation.

Erosion of collaborative organisational culture

Performance management can centre around comparing employee performance against one another. Thus a key consequence of performance management is that it can be a hinderance to organisations seeking a collaborative and team-oriented work environments.

Bias

Errors can also be made based on the managers perception of the employee. As performance management outcomes are used to evaluate individual's performance and consequently lead to decisions on advancement and remuneration, inputs can often be biased and dishonest in an attempt to aid personal advancement within the company. This occurs when the manager holds either positive or negative bias towards the employee and marks them according to this bias.

Negative Focus

The inherent nature of performance management also seeks out and focuses on the negative aspects of an individual's performance. Seeking out what is currently not working and the downfalls in performance. As a consequence this can lead to decreases in employee morale and increased stress for employees, which has a negative flow on effect to the performance of the individual, and thus the performance of the company. Professor Kacmar, a management professor at the University of Alabama, suggests that successful and functional organisations have performance management systems that focus on people's success stories, not their shortcomings.

Organisational
If the performance management is not carried out appropriately legal issues can result. As performance management can be used for disciplinary actions and promotion decisions, incorrect use of them can result in legal action against the organisation from the employee. Performance management can be detrimental to quality improvement, as a structured system can adversely affect quality performance. Negative outcomes can occur when goals are over challenging to the extent of affecting ethics.

Significant Critical Studies
A significant study exploring the effectiveness of performance management was undertaken and published by the Harvard Business Review. This issue published the work and results of a study completed by Herbert Meyer, Emanuel Kay and John French Jr. This study tested the effectiveness of traditional performance management at the company General Electric. It involved initial observations and surveys, and a series of modifications to processes and further observation.

The researchers found from interviewees that, despite a good deal of experience with traditional performance management programs very few employees could actually recall examples of constructive action taken, or significant improvement that was achieved from these programs.

The researchers conducted further studies and the conclusions they arrived at are summarised below:
 * Criticism has a negative effect on achievement of goals
 * Praise has little effect one way or another
 * Performance improves most when specific goals are established
 * Defensiveness resulting from critical appraisal produces inferior performance
 * Mutual goal setting, not criticism, improves performance
 * Interviews designed primarily to improve ones performance should not at the same time weigh their salary or promotion in the balance
 * Participation by the employee in goal-setting procedure helps produce favourable results

The researchers and their studies are very critical of traditional performance management systems for improving job performance. They suggest switching to some form of work-planning-and-review with a greater focus on goal setting and planning.

Goals of Performance Management in Organisations
The overarching goal of a performance management system is to ensure that individual and department performance will contribute to achieving the specific goals of the organization. This is achieved by aligning individual performance, department performance and organization performance, in accordance with the vision and mission of the organization ;.

In achieving this overarching goal, performance management will achieve a culmination of sub-objectives. Although these sub-objectives of performance management will vary in accordance with the requirements of the specific organization, the following list outlines the generic sub-objectives of performance management.


 * Inform strategic decisions around planning, promotion and performance rewards.
 * Encouraging open communication between managers, supervisors and employees.
 * Career advancement of employees through feedback and coaching.
 * Improved skills and knowledge of employees.
 * Increased employee motivation, engagement and empowerment. ; ;.
 * Improved competitive advantage

Organisational Culture
Organisational culture determines what is important to an organisation; it also defines the relevance of performance management to an organisation. Studies have shown that the effectiveness of performance management in an organisation depends on the organisation's culture. The managers' demand for performance information increases when the organisational culture supports performance management. Many studies have shown that organisational Culture is the preliminary requirement of effective performance management. Different types of organisation cultures has different impact on performance management hence leading to different level of effectiveness.

A study has shown that the effectiveness of performance management can be affected at three levels of an organisation's culture. The first level represents the artifacts that are visible products of an organisation's culture, i.e. their practices. The second level consists of the espoused and documented norms of the organisation. The third level is the values and beliefs which provide a deeper understanding of an organisation's culture.

Practices
Managers are more likely to use performance management when they are equipped with formalised procedures and when the managers are provided with the authority to act on the information gathered from performance management. Autonomy in decision making and support in learning process have reported to encourage managers to use performance management for organisational development.

The importance of clear and distinctive evaluation benchmarks are positively related to the validity of performance management. Unstandardized benchmarking and ambiguous performance definitions compromise the accuracy of the performance management. The development of standardised benchmarking, particularly for key definitions like performance indicators can increase to the overall effectiveness of performance management.

Supportive infrastructures such as administrative process for measurement and tracking of performance management, resources available for documentation and codification are important for the implementation and sustainability of an effective performance management.

Norms
The norms of an organisation provide guidance of how managers and employees interpret performance management. In a more competitive environment, managers and employees may be less likely to view performance management as a developmental tool therefore performance management may not provide the desired result for organisation.

By nature, an organisation is a social environment and the critical factors such as interpersonal relationships have a profound influence on performance management.

Social context has distinct implications on the effectiveness on a rating approach in performance management through unquantifiable judgment. The nature and amount of interaction between the rater and ratee affects the performance dimensions as the rater has additional information. These interactions affect on the neutrality of a performance management process. The social context of rating in performance management can make it difficult to provide negative ratings or feedback. Furthermore, employees may be reluctant to use negative ratings or feedback as a form of motivation to improve performance. Hence supervisors may tend to give relatively higher ratings in general. This creates an unstandardised performance management with a cluster at the high end of the rating results.

There are methods that can reduce the negative impact of social context on performance management. Holding raters accountable for their ratings can lead to performance management results being more consistent and accurate as raters are reminded that accurate ratings are desired. Informal feedback sessions after a poor performance episode is another effective method that can lead to positive outcomes. For effective performance management to occur, study shows that a non-threatening social environment in an organisation that facilitates ongoing communication and feedback among employees is beneficial.

Values
Some found that managers in organisations with predominantly flexible values use performance management to focus on organisational development, to support strategic decision making and legitimise strategic decision making, more frequently than managers in organisations with predominantly control values. Organisations with predominantly control values exercise tighter control of operations and often adopt a stricter structure that restricts flow of information. Organisations with predominantly flexible values exercise informal control and encourage multiple communication channels for free flow of information.

Symbolic performance management occurs when an organisation explicitly states the desired purpose to use performance management but fails to put in place the necessary mechanisms to enable organisation members to learn. Organisations can adopt performance management but to facilitate the use of information, there must be essential supportive mechanisms or integration with other key systems in the organisation.

Research has supported the importance of aligning the three levels of an organisation's culture for successful implementation of performance management to generate effective results. A study of the Turkish health sector indicates that performance management can only be successful with supportive processes in the organisation's systems and structures, its underlying values and the methods management used to reinforces the results of performance management. A study of local German government managers found that performance management is not only a function of improving data quality and reporting format, its targets must be linked to the organisation's goals and values for it to be effective. Others also stated that the organisational learning mechanism such as performance management yield productive results when they are embedded in an appropriate normative system of shared organisational values and beliefs.

Cultural Dimensions
National culture is defined as the values, beliefs and assumptions learned in early childhood that distinguishes one group of people from another. Culture is identified to be software of the mind as national culture is embedded deeply in everyday life and is relatively impervious to change. Several studies have conceptualised the differences in cultures amongst nations as well as have

studied the relationship between cultural differences to differences in management practices. National cultures vary just like a variety of management practices, including strategic decision making, leadership style , and human resource management are all differed by national culture.

National culture is a central organising principle of employees understanding of work, their approach to it, and the way in which they expect to be treated. National culture implies that one way of acting or one set of outcomes is preferable to another. Methods of performance management that reinforce national cultural values are more likely to yield positive results, self-efficacy and high performance because performance management practices are consistent with existing behavioral expectations and routines that transcend the workplace.

A correctly executed performance management aligns between key characteristics of national culture of an organisation and its internal strategy, structure, systems, and practices. For managers, the understanding of and adaptation to national culture is essential for performance management implementation.

Hofstede identified work-related dimensions along which national cultures vary: power distance, uncertainty avoidance, individualism, masculinity, and long-term orientation.

Power Distance
In organisations, power distance influences the amount of formal hierarchy, the degree of centralization, and the amount of participation in decision making. Companies in high power distance countries, such as those in East Asia and Latin Europe, tend to be more centralized and have less employee participation in management process.

Employees in high power distance cultures are likely to view an integrated form of performance management with fear, distrust and disrespect because participation is not consistent with the national culture. Integrative methods of performance management tend to be relatively positively received in the U.S. but not in Mexico. On the other hand, more authoritarian performance management executions were preferred in Mexico but not in the U.S. . Management practices such as teamwork appraisal in performance management would not be effective in high power distance cultures because employees from different levels in the organization are not comfortable interacting face-to-face in a group.

Uncertainty Avoidance
Uncertainty avoidance is an organisation's tolerance for uncertainty and ambiguity. It reflects the extent to which members of a group attempt to cope with anxiety by minimizing uncertainty. Uncertainty avoidance is manifested by the clarity of plans, policies and procedures in management practices as organisations with high uncertainty avoidance rely on clear procedures, well-known strategies and well-understood rules that helps employees reduce uncertainty and cope with unknown situations. Managers from the high uncertainty avoidance countries are more likely to see the organisation as an authority structure than others.

Managers from a higher uncertainty avoidance culture compared to those from lower uncertainty avoidance countries, tended to respond more forcefully and extremely to environmental uncertainty and threat, and were more likely to respond to such threats with major organisation redesigns and large-scale training programs. Uncertainty was perceived as a crisis more among these managers than others therefore their performance management methods tended to have strict structures with clear definitions to reduce uncertainty.

Individualism vs. Collectivism
In organisations, individualism is presented as autonomy, individual responsibility for results, and individual-level rewards. Collective management practices emphasise work unit solidarity and team-based rewards.

A study comparing the U.S., Hong Kong and China found that individual result based performance management led to improving self-efficacy and higher performance in the U.S organisations which are more individualistic. Performance management that focuses on group achievement led to improving self-efficacy and better development for Chinese organisations which are more collectivistic.

Masculinity vs. Femininity
In organisations this dimension is reflected in merit-based opportunities for high earnings, recognition, advancement and rewards, on the other hand, more feminine management practices emphasise the quality of interpersonal relations and quality of working life issues

The reward based performance management among the U.S. companies is indicative of the efficacy of congruence between management practices and a masculine national culture. Therefore, in masculine countries merit-based performance management methods will be better executed than less merit-based performance management practices.

Long Term Orientation vs. Short Term Orientation
Long term oriented cultures are characterised by patience, perseverance, respect for one's elders and ancestors, and a sense of obedience and duty toward the greater good. Performance management of a long term oriented organisation focuses on the long term achievements and is consistent with a long-term supportive administrative system rather than aiming for short term goals.