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Contents
- Effectiveness of Performance Management Systems......................................................................
- Literature Review............................................................................................................................
- Types of Performance Management Systems..................................................................................
- The Balanced Scorecard...............................................................................................................
- Management by Objectives..........................................................................................................
- 360-Degree Feedback..................................................................................................................
- Results-Based Management (RBM)............................................................................................
- Components of an Effective Performance Management Systems...................................................
- Planning and Goal Setting............................................................................................................
- Performance Appraisal.................................................................................................................
- Feedback and Coaching...............................................................................................................
- Training and Development.........................................................................................................
- Rewards and Recognition..........................................................................................................
- Factors Influencing Effectiveness..................................................................................................
- Training......................................................................................................................................
- Top Management Support..........................................................................................................
- Employee Engagement..............................................................................................................
- Conclusion.....................................................................................................................................
- References......................................................................................................................................
Running head: PERFORMANCE MANAGEMENT SYSTEM 2 Effectiveness of Performance Management Systems Organizations across the globe seek to get the best out of their human capital. However, without proper metrics, it can be challenging to assess performance. This has pushed many organizations to adopt performance management systems. The systems have emerged as essential element in the survival of an organization making a performance management system (PMS) a useful tool that human resource managers can use to monitor and track the performance of employees, which is critical because employees are one of the most valuable assets in any organization. It is always important to ensure their performance meets the expected standards. Besides, the insights gained from a PMS are used in the organization to make informed decisions on diverse issues such as promotion and demotion. PMS can also be used as a productivity improvement tool for employees, which would support the organization to achieve its goals as organizations globally are under immense pressure to improve their employee’s performance and control their costs to remain competitive. Performance management has magnificent impact on an organization. The purpose of this research paper is to evaluate the effectiveness of a performance management system based on existing literature. A performance management system is a set of tools or a methodical process that is used to track and monitor the performance of employees (Masoumi et al., 2022). It is often made of a combination of methodologies and technologies that help to ensure that employees are contribution to the organization’s strategic objectives. One of the primary reasons that organizations employ a performance management system is to have a systematic feedback mechanism. The system gives an organization the formal channel they need to make employees aware of the critical importance of their contribution to the organization. It also sends the
Employee performance management is about ensuring the objectives of the organization are aligned with the agreed measures, competency, skills, and other development plans that are important to the organization. According to Dachner et al. (2021), performance management is a system effort designed to monitor and improve the performance of employees through the continuous establishment of anticipated outcomes, goal setting, and standards, as well as reporting. The organizational goals of performance management inform the form and type of performance management system they implement. The performance management system provides the organization with the tools to plan, appraise, and monitor the productivity of their employees, from which they can be challenged or rewarded as a tool for motivation. Performance management systems have become a top priority for both private and public entities across the globe. Employers are now able to track constantly how their employees are performing. These systems also give them a better chance of monitoring productivity against predefined standards in addition to assessing weaknesses and areas that need further development and training. According to Dangol (2021), if these systems are used well, they give employees an opportunity to highlight areas that need improvement. They also provide a platform to be part of the process of developing strategies to enhance the organization's position. Modika et al. (2023) explored the effectiveness of PMS in a local municipality in South Africa. They examined the effectiveness of PMS as a tool for effective service delivery. The outcomes of the study showed that the municipality implemented performance management system as a mere compliance with regulatory framework without looking at the needs of the municipality. This is an example of a case study of failed implementation of PMS. Without proper alignment with the objectives of the organization, management performance systems are likely to be ineffective. Modika et al. (2023) also noted that it is critical for an organization to
have adequate capacity to implement the performance management system. Capacity includes recruiting qualified persons or training the management well enough to implement the system. Types of Performance Management Systems There are multiple types of performance management systems that can help an organization manage its employees and have the best talent to drive the business forward. The choice of PMS should be informed by the type of organization and its objectives. The chosen system should help the organization define, measure, and achieve its strategy. The Balanced Scorecard One of the most widely used performance management systems is the balanced scorecard (BSC). BSC has been termed as one of the best PMS available (Assish, 2018). The BSC combines the financial, people, customer, and internal process perspectives of an organization, thus helping them to understand and achieve the objectives of the organization. To use the balanced scorecard, managers begin by defining the objectives or high-level goals, outlining what the organization is seeking to accomplish. The four perspectives should be used to break down the objectives. Key performance indicators are then defined once objectives are in place. This help to understand if the organization is achieving its strategic objectives. Another critical component of BSC is the key action programs that must be developed to achieve the objectives of the organization. A review of existing literature reveals that BSC helps to align different divisions and departments in the organization (Assish, 2018). This happens because BSC helps the organization link departmental objectives to the broader goals of the organization. It helps to see how projects and measures relate to other measures that assess organizational performance. It also emerges that BSC requires a structured reporting process. BSC requires the organization to
they believe they have performed over a specific period and the second is that the employee is appraised by a superior, most often the supervisor, who has direct interaction with the employee and has knowledge of their performance. The third component is the evaluation or appraisal by subordinates. The fourth component is the appraisal by peers. Mangers align behavior and goals and culture of the organization using insights from the process. Results-Based Management (RBM) Result-based management focus on defining outcomes that the organization and individual employee desire. This approach also utilizes performance information to enhance the effectiveness of an organization (Pratolo et al., 2020). The RBM emphasize the importance of setting clear performance targets and ensuring progress is continuously measures against predetermined targets. There is also a significant emphasis on using data to make informed decisions. This is a common approach, particularly in public institutions and nonprofit organizations. In these kinds of entities, accountability and the ability to demonstrate their impact is critical to their existence. Components of an Effective Performance Management Systems An effective PMS has certain components that ensure it achieves its purpose. These components outline how the users will achieve the desired outcomes. Planning and Goal Setting Establishing clear expectations is critical. Critical to the success of a performance management system. This process requires the managers to choose their objectives and define the success metrics. Like in any other process in the organization, setting goals provides direction and keeps the team focused. One commonly used approach for setting clear
expectations is using the SMART goal framework. Using this approach ensures the set goals are specific and reflect the needs of the organization. The SMART goal framework also ensures that goals are achieved within the required timeline (Murphy, 2020) as the planning phase is all about determining what is needed, allocating the resources to achieve that, and measuring what has been achieved within a specific time. Performance Appraisal At the center of any PMS is performance appraisal. Growth and prosperity of an organization and its employees require continuous appraisal. Appraisal helps the human resources manager determine whether an employee is productive. It also helps to to determine if they are a liability to the organization (Dangol, 2021). On the other hand, the outcomes of an appraisal can help the employee determine if their career is on the right track. This is an essential aspect of human resource management. Feedback and Coaching Feedback and coaching play a critical role in enhancing the performance of employees and their career development within the organization. Employees get information about their performance through continuous feedback. Feedback also helps employees to identify their strengths and the areas that need improvement, therefore serving as a mechanism for continuous improvement (Kurdi & Alshurideh, 2020). Furthermore, constructive feedback creates a culture of continuous engagement. Managers can recognize the achievements of their employees and provide them with guidance for growth. Coaching is one way through which skilled and experienced employees pass knowledge to their subordinates. It is a platform for providing personalized support. Personalized support is effective because it focuses on specific aspirations and needs. Coaching is also a skill
PMS provides a platform for peers and supervisors to recognize and acknowledge achievement of individual employee as such can be a significant source of motivation. Factors Influencing Effectiveness Training Existing literature has provided several approaches that link human resource management practices with performance. These approaches have been categorized as either configurational, universalist, or contingent. According to Assish (2018), the universalist approach is highly effective because it recognizes the existence of human resources management practices. This increases the success rate of organizations that choose to adopt the universalist approach. However, the success of the contingent approach depends on how well it is aligned with the strategic approach of the organization. Since the 1990s, performance training has gathered significant momentum. It is a form of training that makes provision for the improvement of aptitudes and abilities, which directly affect the performance of a team or individual employees. Past studies have shown that providing relevant training is critical to the success of PMS (Islam et al., 2020). It is said to improve employee flexibility, innovation, and productivity by strengthening their existing skills and giving them new and relevant skills. Top Management Support The approval and support of top management have been cited as a significant factor in the success of a PMS. The management must show their commitment that they want the PMS to be successful. Assish (2018) holds that the commitment of top executives leads to improved performance. For PMS to be successfully implemented, organizations must have the active support of senior executives. In the absence of this commitment, there is significant potential that employees will give little priority to a system that disrupts the status quo. The development and
implementation of an effective PMS is itself a notable organizational change intervention whose associated adjustments in management practices and activities can be disruptive. The support and commitment of senior executives can ease the process and ensure the process is given the attention it requires across all levels of the organization. Employee Engagement The target of a performance management system is the employee. Therefore, their engagement and buy-in in the process are critical to the success of PMS. Employee engagement encompasses almost every aspect of human resource management. From a theoretical standpoint, employee engagement has been closely linked to employee performance, and this is why the topic has attracted significant attention. Engagement employees in decisions that affect their working environment makes them conscious about individual and collective goals of the organization and consequently improves their performance. Literature on employee engagement has also suggested that low job satisfaction and employee engagement can be a source of many other challenges, such as high employee turnover and absenteeism (Dangol, 2021). Conclusion Performance management systems emerged to become a critical aspect in today’s highly competitive operating landscape. It has become increasingly critical for employers to get optimal returns for their investment in employees. To understand the productivity of employees, employers use PMS. In this paper, we have looked at the various types of PMS, the components of PMS, and the factors that affect the effectiveness of PMS. From the literature search, a PMS must be designed and implemented well to meet the needs of the organization. It must also receive the significant support of employees from al levels.
Pratolo, S., Mukti, A. H., & Anwar, M. (2020). Result-based Management and Public Organizational Performance: Determinant and It Impact to University. Journal of Accounting and Investment , 21 (3), 580-601. Van Waeyenberg, T., Peccei, R., & Decramer, A. (2022). Performance management and teacher performance: the role of affective organizational commitment and exhaustion. The International Journal of Human Resource Management , 33 (4), 623-646.
