PERFORMANCE MANAGEMENT
____________________
A Written Output Presented
To The Graduate School Faculty of
San Pedro College, Davao City
_______________________
In Partial Fulfillment
of the Requirements for the Course
HUMAN RESOURCE MANAGEMENT
by
MICHAEL PHILIP F. CERVANTES, RN
ABIGAIL L. ALAS, RN
MAY 2017
OBJECTIVES
At the end of this written report, the students will be able to:
1. Define Performance management as a human resources management tool.
2. Explain the three perspectives of Performance Management System.
3. Analyze the different Performance Management Approaches.
4. Differentiate the models used in Performance Management Approaches.
5. Distinguish the different Performance Measurement System.
6. Apply the principles in Rewarding Performance.
INTRODUCTION
Performance Management is a critical human resources management tool. The
use of this tool has extended beyond industrialized organizations to non-government
organizations, government systems, academic institutions and the like.
It has been said that what gets measured gets done, what gets managed gets
done better and what gets rewarded gets done sooner, and this may well summarize
the principles of performance management system. Performance should be managed,
measured and rewarded.
Performance management is a system that impacts and affects everyone in the
organization. It helps the organization achieve business results and maintain its desired
culture.
Within the context of human resources management, it is used to support other
HR systems, such as training and development, career development, succession
planning, leadership development, selection, staffing, placement, compensation and
reward management.
I. THEORETICAL BASES
A. Performance Management: A Strategic and Integrated Management Process
Despite a wealth of research materials on the subject, there is no consensus on
one ideal performance management system (PMS). However, it has been pointed out
that any performance management system should reflect the unique requirements of an
organization. To better understand performance management, three perspectives on
performance management system have been advanced with the objective of putting into
context the practice and system of managing individual and organizational performance
and linking these two levels of performance.
Three Perspectives
1. Performance management as a system for managing organizational performance
2. Performance management as a system for managing employee performance
3. Performance management as a system for integrating the management of
organizational and employee performance
Performance Management at the Organizational Level
The focus is on determination of the organizations strategy, and the
implementation of that strategy through the organizations structure, technology,
business systems and procedure.
Employees are not the primary focus, although they will be affected by changes
in technology, structure, and operating systems. This is normally done by setting
corporate policy and resource aims and guidelines, specifying a detailed set of plans,
budgets, objectives, targets and standards of performance and regularly and
systematically reviewing the performance of all services (Rogers, 1990).
` From an organizational perspective as presented by Bredrup (1995), it includes
the following activities: (1) performance planning, (2) performance improvement, and (3)
performance review. Performance planning includes activities such as formulating the
organizations vision and strategy and defining what is meant by performance.
Performance improvement takes a process perspective, that is including such activities
as business process re-engineering and continuous process improvement,
benchmarking, and total quality improvement. Performance review embraces
performance measurement and evaluation.
Employee Performance Management
The focus is on engaging employees on planning their goals, managing their
performance, reviewing their progress, and developing themselves. It emphasizes the
contributions of employees and their behaviors or competencies. In the end, employees
who meet their targets and demonstrate exemplary behaviors are rewarded.
Schneier, Beatty & Baird (1986) identified the following elements in this
perspective: planning, managing and appraising (reviewing, rewarding and developing)
Planning involves establishing performance targets, identifying job
behaviors, and identifying performance measures
Managing involves monitoring behavior and objectives, reinforcing desired
behaviors and objectives attainment, and redirecting inappropriate
behavior.
Appraising involves formal meeting of employee and manager,
performance plan document, focus on future and employees development
and replanning, and new objective establishment.
Integrated Performance Management System
It supports a companys or organizations overall business goals by linking the
work of each individual employee or manager to the overall mission of the work unit. It is
about directing and supporting employees to work as effectively and efficiently as
possible in line with the needs of the organization (Costello,1994 as cited by Williams,
1998).
In this perspective, performance management aligns the organizations strategic
direction with individual performance. Performance management can be viewed as a
tool used to create and sustain a workplace environment where both an organization
and its employees succeed in fulfilling business objectives.
Based on the foregoing, performance management is both strategic and
integrative. It is strategic because it pushes the realization of the strategic goals of the
organization as it encompasses the larger and broader issues and concerns of the
organizations life. It is also in the context that performance management is integrative
because it aligns and links the organizations strategic direction with individual
performance
In other words, it ensures the fulfillment of organizational outcomes and
individual goals by linking other systems in support of the overall direction of the
organization. Data generated from PMS can be utilized for the other HR systems either
as basis for program development or for evaluation. This essential links PMS with other
HR systems.
In reality, it is the third perspective that concretizes the entire principles and
processes of performance management. This will be evident in the discussion on the
different approaches to performance management.
II. PERFORMANCE MANAGEMENT APPROACHES
Performance management is better understood in terms of the approaches
used by the organizations. The fundamental principle prevalent in these
approaches is that corporate strategic goals provide the starting point for
business and departmental goals, followed by agreement on performance and
developmental goals, leading to the drawing up of performance plans between
individuals and supervisors, with continuous monitoring and feedback supported
by formal reviews. The use of the approaches depends on the unique
requirement of the organization. The approaches may be used independently or
in combination.
Individual or team performance must be capable of being linked in an
understandable manner to organizational performance, and there are various
approaches to doing this. They include the mixed model, balance scorecard,
European foundation for quality management (EFQM) excellence, performance
prism and investors in people.
A. Mixed Model or Total Performance Management Approach
A performance management system that combines planning, management, and
appraisal of both performance results and competency behaviors is called a mixed
model of performance management or a total performance management approach.
Mixed models assess and reward both performance and competence; what employees
actually did and how they did it. Mixed models are particularly appropriate when
organizations are in uncertain and rapidly changing environments, where results are not
under employee control; for qualitative/ process service jobs, where there are no
measurable outcomes of performance; and for jobs intended for development of future
performance (Spencer & Spencer, 1993). In this model as in the others, the overall
strategic plan is cascaded down so that, ultimately, there is a clear path connecting
each employees job to that plan. Thus, it links the organizations objectives with
employee goals and achievements. As such, performance management is and must be
shared responsibility of employees and managers.
This approach can be divided into four key areas:
1. Planning Performance
Planning means setting performance expectations and goals for teams
and individuals to channel their efforts toward achieving organizational objectives
2. Performance Monitoring and Coaching
Plans should be monitored continually. Monitoring well means consistently
measuring performance and providing ongoing feedback to employees and
teams on their progress toward reaching their goals. Monitoring performance
includes giving and receiving feedback, coaching counseling, motivating, self-
monitoring, day-to-day planning, and monitoring training and development
activities.
3. Performance Evaluation and Development Discussion
Every now and then, organizations find it useful to document employee
performance and this is done by using a performance evaluation form. Within the
context of formal performance evaluation requirements, rating means evaluating
employee or team performance against the standard s in an employees
performance plan and assigning a summary rating record. The rating record is
assigned according to procedures included in the organizations performance
management system. It is based on work performed during an entire appraisal
period.
Performance Evaluation includes:
Formal review of performance
Performance measurement
Formal team feedback sessions, individual self-review and peer group and
upward appraisal
Fig. 1. Performance Management Process
B. The Balanced Scorecard
The balance scorecard was originally proposed as an approach to performance
measurement by combining traditional financial measures with non-financial
measures to provide managers with richer and more relevant information about
organizational performance, particularly with regard to key strategic goals
(Kaplan & Norton, 1992).
Aims to:
1. Enable organizations to manage strategy by linking corporate objectives,
initiatives, measures and targets at all levels in the organization
2. Achieve a balanced set of performance measures and targets that allow
managers to track progress in key areas.
Fig. 2 Balanced Score Card
C. European Foundation for Quality Management (EFQM) Excellence Model
The EFQM excellence model is a comprehensive organizational
development and improvement framework used for assessing strengths
and areas for improvement across the spectrum of an organizations
activity. The model is comprised of nine criteria five enablers and four
results. It is based on the principle that the five key enablers of excellence
are leadership, policy and strategy, people, partnerships and resources,
and processes.
D. Performance Prism
The performance prism is a stakeholder centric framework for
performance measurement and management. The model was developed
by the Center for Business Performance at Cranfield School of
Management, in conjunction with Accenture. It evolved from the balanced
scorecard, but unlike the scorecard, it acknowledges the full range of
stakeholders that an organization has. Principally, these are investors,
customers, and intermediaries, employees, suppliers, regulators and
communities.
III. Measuring Performance
Measurement is a focal point of performance management. Peter Drucker
said, You cant manage what you dont measure. Robert Kaplan, the
balance scorecard guru, stated further, What is measured becomes visible,
what is rewarded gets done. Measurements are utilized to define how an
organization is measuring up to shareholder and stakeholder expectations;
tell how the organization is doing in the competitive game and enable the
linking of past, present and future outcomes into an integrated whole.
A. The Need for Performance Measurement
To improve performance, you need to know the current performance.
Measurement provides the basis for generating and giving feedback, and thus can build
the platform for further success, or identity where things are going less well so that
corrective action can be taken.
A performance measurement system fulfills the following purposes (Bredrup, 1995):
Decision Support Ideally, measurement should indicate where to act, perhaps
how to act and hopefully monitor the effect of the action. Decisions should be
based on knowledge and measurement plays an important role in providing
information.
Monitor effect of strategic plans Implementation of strategic plans has to be
monitored to be able to make the necessary corrections to ensure achievement
of long-term goals. Indicators have to be chosen to monitor consequences and
achievement.
Performance evaluation Evaluation is required for a number of reasons, such
as tracking improvement potentials, setting new yardstick, satisfying requirement
from stakeholders, distributing incentives, etc.
Diagnosis A company needs indicators with a diagnostic purpose. If business
achievements are decreasing, the performance measurement systems should be
able to give some warnings in advance and provide input to a search for reasons.
However, it is difficult to isolate the cause and effect relationship.
Management of a continuous improvement process A continuous improvement
process often provides stepwise blue savings like released capacity, reduced
future costs, or increased value for the customer. Measurement is important to
justify further investments and effort in the process, to manage the process and
ensure consistency with strategy, and to transform improvements into business
achievements.
Motivation measuring progress is necessary to justify further effort in the
improvement process. Resistance against change is considerable in most
organizations and lacking progress is enough ammunition to kill a project or a
process.
Comparison Evaluation of performance and performance planning depends on
a reference to identify performance gaps. Comparative benchmarking enables
the organization to identify these gaps.
Record development Documentation of development could be demanded by
stakeholders, like customers, authorities, and alliance partners or used actively
as marketing tool. Measurement to monitor and record suppliers performance to
given input to their improvement processes could result in productivity
improvement.
Performance measurement will significantly ensure equitable treatment of employees
based on performance.
Performance measurement asks the questions, What is achieved? and How is it
achieved? In other words, performance management measures contribution (what is
achieved) and competencies (how it is achieved). Contributions (real and tangible
results) are seen in terms of outputs and outcomes, which may come in the form of
programs, systems, revenues, target numbers and improvements in turn around time.
B. Performance Measurement System
As stated earlier, an important aspect of performance management is measuring
performance. Measures of performance are defined as the tools for evaluating
whether an organizations goals and objectives are being achieved or not. These
measures are focused on different aspects of organizational activities, and to
provide the user of the measures with concentrated information, the
measurement tools and standards. In the concrete, what is really measured is
the performance of individuals in the organization. Individual goals aligned with
the organizations direction, when measured, give us a sense of the overall
performance of the organization.
Over a period of time, the performance management systems have evolve from
the usual annual confidential rating to trait appraisal, behavioral measurements, goal-
driven (management-by-objectives) appraisal, behaviorally-anchored rating scale
(BARS), and the latest trend in appraisal being, the 360-degree feedback
1. Management by Objectives
Performance management systems utilizing management by objectives
strategies entail the setting of mutually agreed upon, observable, measurable
objectives and goals between employees and their bosses.
2. Behaviorally Anchored Rating Scales (BARS)
Behaviorally anchored rating scales are descriptions provided on appraisal
forms and surveys which describe a precise level of performance. BARS were
developed with the hope of improving rater accuracy by providing job-related
behavioral anchors and altering the format of rating scales.
3. Quantitatively Measurable Performance Criteria
Quantitatively measurable performance criteria are thought to be objective,
reducing conflict between the employee and the appraiser by restricting the
focus of the appraisal to items that can be measured by number or quantity.
4. 360-degree Feedback
Multiple-rater and 360 and 360 degree feedback became increasingly talked
about in the 1990s, and more recently have been widely used. It consists of
performance data generated and analyzed from a number of sources: the
employees immediate supervisor(s); peers, and direct reports, suppliers, and
internal and external customers.
IV. REWARDING PERFORMANCE
Rewarding means recognizing employees, individually and as a members of
teams, for their performance, and acknowledging their competencies and
contributions to realizing the organizations strategic goals.
