vPerformance has been a fundamental focus for managers for decades. However, with the increasingly competitive era of the “Liberalisation, Privatisation, and Globalisation (LPG) Model,” the focus is shifting to competitive advantage, which is becoming critical for any business today. The emphasis on competitive advantage has forced organisations to re-evaluate and revise their strategies, developing new and exceptional approaches to improve employee performance (Jain and Gautam, 2014, p 28). Organisation performance management systems seem to offer a perfect solution to the respected case. Practically with the PLG Model, all other resources are almost equally available to competitors. Human resources are the only facet creating the difference and can position an organisation over others if effectively managed (Jain and Gautam, 2014, p 29). Best practice to performance management systems ensures that employees understand what is expected of them and guarantee the strategic planners and line managers that the HR behaviours are aligned with the company goals (Gautam and Jain, 2015). Implementation of an ideal PM system encompasses setting clear objectives and goals for the employees aligned with the company goals, alongside establishing the motivation mechanisms. The organisation must also have in place effective communication and feedback mechanisms and performance review structures. The present paper explores the organisations’ consideration when implementing best practice performance management (PM) systems and potential contentions. The researcher aims to establish performance management systems and best practices that drive organisational performance and potential challenges faced in their implementation.
Implementing Best Practice Performance Management Systems
Performance management is a fundamental HR management function grouped under core functions performed by managers, business leaders, and HR professionals. HR management continues to attract more attention due to the increased adoption of performance management systems despite being deserted in the traditional management matrix. Business leaders provide direction based on the “what” aspect of PM, the human resource department manages the “how” aspect, while the managers manage the “doing.” As a process, performance management incorporates aspects linked to strategy, managing, planning, human resources, and legal factors (Bae, 2006, p 23). An effective performance management system’s key is to establish the business’s soft and hard elements and integrate the best practice in every aspect. A robust performance management system’s fundamental belief is that it enhances employees’ performance and growth and gives the company a competitive edge over competitors (Striteska, 2012, p 1103).
A strong PM system that incorporates best practices can also help develop a sustainable organisation and create a strong employer brand (Gautam and Jain, 2015). Performance management is not merely the art of assessing employees’ performance as many perceive it. The PM is a system and not merely a task. Effective PM encompasses a set of integrated and interrelated management practices designed to assist an organisation to achieve two primary objectives: maximising employee potential and ensuring employee satisfaction (Striteska, 2012, p 1108). There are best practice approaches that the organisation must always have in mind when implementing a performance management system. The practices cuts across performance planning, ongoing feedback, and communication, incorporating employee input, performance evaluation and review alongside line management involvement and fairness and ethical behaviours, and managers’ training and development.
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At the start of every PM implementation cycle, it is paramount to review the performance expectations, employee expected behaviour, and outcomes anticipated in the forthcoming rating cycle. A review of behaviour is essential as it reflects how employees get tasks accomplished, how individuals communicate, support teams, and mentor others (Gautam and Jain, 2015, p 72). There are instances where an employee may attain exceptional outcomes but is extremely challenging to work with, exhibits maladaptive behaviours, and maybe unhelpful to others at work. Such behaviours can be disruptive; therefore, behaviour is an essential consideration in most work scenarios. On the one hand, some employees may be extremely considerate, interpersonally effective, and helpful to others at work but fail to achieve intended outcomes (Qamar and Asif, 2016).
Behavioural and outcome expectations must be linked to the company’s corporate objectives and strategic direction. Research shows that PM systems can drive employees to engage behaviours and attain outcomes that facilitate organisational goals (Striteska, 2012, p 1104). For instance, if improved customer service is crucial to the company’s future success, incorporating customer service linked expectations and compensations in the PM systems help communicate its significance and promote behaviours and outcomes related to the area. Likewise, if effective working with strategic partners is established as a fundamental organisational value, the PM systems must hold employees responsible for effective partnership (Striteska, 2012, p 1106).
However, in some cases, establishing direct correlations between high-levels and, to some extent, lofty company goals and what an employee can attain in their job roles may prove challenging. Remedying this kind of dilemma calls for the company goals to be deciphered and cascaded into more refined objectives and expectations at the team, department, unit, and individual levels. Achieving such goals will require serious consultations and meetings (DeNisi, and Murphy, 2017, p 421). The top management must first create division goals and expectations aligned with the company goals. The middle-level or the line managers develop unit goals and expectations aligned to the division gaols and so on until the company goals are spread down to individual-levels. Even though it may be a challenging and time-consuming process to cascade gaols down to some jobs such as support and maintenance, the company can still achieve the same by developing a hierarchy of goals, where every level support goals directly linked to the next level (DeNisi, and Murphy, 2017, p 423). This facilitates working towards the company’s strategic direction and key priorities.
Ongoing Feedback and Communication
Best practice in performance management system implementation also requires effective communication and feedback mechanism in place. At the performance planning stage, both behavioural and outcome expectations are set. However, these two key areas’ performance must be deliberated and feedback communicated on an ongoing basis in the entire rating period. Besides communicating feedback in case of outstanding or unproductive performance is observed, ongoing feedback concerning day-to-day contributions and accomplishments is also essential (Kremer, Villamor, and Aguinis, 2019, p 65). However, a study shows that this is not achieved to the extent it should be in many organisations since managers do not possess the requisite competencies and skills to provide feedback. Researchers argue that managers, in many cases, fail to provide feedback as they do not understand how to present it productively in a manner that minimises employee defensiveness (Kremer, Villamor and Aguinis, 2019, p 70).
Effective feedback process during a performance management system implementation requires a two-way communication process and mutual responsibility of both managers and the workforce, not just the management alone. As such, training of managers and the workers concerning their roles in the performance management feedback process is critical in this case. The managers must be trained on how to provide feedback in a candid, constructive, and timely manner. On the one hand, the employees must be educated on their responsibility to seek feedback, understand their performance, and react appropriately to the feedback communicated (Ukko, Hildén, Saunila and Tikkamäki, 2017, p 17). Developing an effective, continuous conversation between the company managers and the workforce is possibly the single most critical determinant of the performance management system’s capability to achieve the company goal from a training and development standpoint.
Besides, the feedback must be provided in close propinquity to the performance outcome to realise its value. For instance, feedback received five months after an event may not help the employee. The managers should not wait for the end-of-year review to provide feedback on employee performance. In fact, the study shows that performance levels tend to be higher in organisations or departments where employees receive ongoing feedback than those that rely only on end-of-year review sessions (Ukko, Hildén, Saunila and Tikkamäki, 2017, p 18).
Employee input is another element for best practice in performance management system implementation. The approach has been applied effectively by many firms and has proven successful in driving up performance. In some situations, employee input asks workers to provide self-ratings based on their performance standards. The employees’ self-ratings are then compared with those of the managers and deliberated upon. However, experienced practitioners and researchers argue that the approach can translate into an increased defensiveness, bad feelings, and disagreements between the managers and the employees if the managers’ ratings are far less comparing the employees’ self-ratings (Ukko, Hildén, Saunila and Tikkamäki, 2017, p 11). However, experts have an alternative approach to collecting employee input from discouraging any form of squabble. Such include asking the employees to prepare statements concerning their key outcomes and most meritorious achievements at the end of the performance rating session ratings (Ukko, Hildén, Saunila and Tikkamäki, 2017, p 12).
Employee input has several positive outcomes in a performance management system, which qualifies it as the best practices. First, the approach enhances ownership and acceptance as employees feel involved in the decision process. It also helps the managers to reflect on the performance outcomes and how they were attained. The employee-generated achievements can be incorporated in the company’s formal appraisal, reducing the managers’ work-load, mainly writing requirements (Cunningham, 2017, p 4). The managers using review and deliberate on the accomplishments with employees before they form part of the appraisal. This practice reduces the disconnect between the management and the employees when considering contributions to the organisation. The accomplishments can also be retained to act as input for promotion and remuneration decisions. Employee accomplishment is an effective predictor of how they will perform in higher ranks (Cunningham, 2017, p 5); hence, it is essential for promotion and compensation decisions.
Performance evaluation for an organisation’s PM system incorporates behavioural and expected outcome evaluations.
Many organisations are today adopting competency-based models as a basis for performance management systems. Competency-based models articulate the abilities, skills, knowledge, and other characteristics considered instrumental for attaining the expected organisational results. The advantage of adopting competency-based models for performance management is that it incorporates a full array of elements linked to success, including leadership, technical, and interpersonal factors. A competent model communicates what is essential for the company and lays a foundation for developing integrated HR systems, including staffing, succession planning, training, promotions, and most importantly, performance management (Cunningham, 2017, p 4).
For performance management best practice, experienced practitioners and experts approve that competencies must be defined based on the importance of the task behaviours and the associated outcome expectations. Defining competencies based on behavioural factors offers a solid basis for determining employees who perform as expected and those who are less effective. The definition of competencies should also reflect different complexities and difficulties associated with the employee job at different organisational levels ((Aguinis, 2009, p 12). Best practice for performance management demands that the leadership articulate how expectations change according to job levels, such as entry, experienced, and manager levels, and what constitutes less effectiveness at every level (Cunningham, 2017, p 12). The advantage of defining competencies based on behavioural performance standards is that it helps the employee understand their roles’ expected outcomes. It also established a uniform standard that management can use for employee evaluation, increasing transparency, consistency, and fairness (Cunningham, 2017, p 7) and ethical behaviours in people management.
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Employees’ Perception of Fairness and Ethical Behaviour
Study shows that employees’ perception of the performance management system as fair and transparent increase the motivation to perform better to achieve the expectations. Perceived fairness of the management systems also eliminates adverse outcomes, including unfavourable ratings. Experts support the adoption of performance standards as it is challenging to standardise evaluations from different managers without a unifying scale (Gruman and Saks, 2011, p 124). If a scale is adopted, such as whether an employee meets the outcome expectations without articulating precisely what is expected, some line managers may undoubtedly expect more from others, resulting in an unfair performance management system. For instance, employees in the same jobs and levels may be assessed using different standards, creating unfairness. Scales that rate employees from ineffective to highly effective experience similar drawbacks (Gruman and Saks, 2011, p 125). Performance standards’ integration to direct ratings is regarded as the best practice in developing and implementing effective performance management systems.
As discussed in the previous section, many organisations rely on competency models alongside behavioural standards for performance management. However, best practices for performance management also require evaluating employee’s results/outcomes as part of the process. Some employees may be assessed on sales or production outcomes, others on specific facets of customer satisfaction or successful development and implementation of a new system or program. However, almost every organisation is faced with the challenge of how to measure and evaluate various employees’ performance outcomes (Cunningham, 2017, p 10). Because of the inherence challenge in measuring outcomes, some organisations move from evaluating outcomes to gathering information on the employees’ most meritorious achievement and the influence of these contributions on the overall company goals (Aguinis, 2009, p 12). However, experts advocate for a numerical rating where employees are identified or ranked as top, middle, and bottom performance scenarios where performance information is considered vital for decision-making (Cunningham, 2017, p 11). A five to seven rating scale is sufficient to provide adequate rating points to distinguish the employee performance. In case a rating scale is adopted, the points must be sufficiently defined and should be applied uniformly and in a fairway.
Line Management Involvement in PM Systems Implementation
The line manager’s role, sometimes referred to as front-line management or direct managers, is critical in implementing and ratifying human resources policies. Best practice to performance management demands that the top executives ensure that line managers have the requisite competencies needed to execute PM and equally have the right attitude towards the company’s performance management approaches (Gruman and Saks, 2011, p 130). With the emergence of human resource management as the next evolution of people management, researchers have stated that personnel management tasks have increased for management over the past couple of years. Line managers are considered essential to an organisation realising its strategic objectives, effective personnel management alongside their performance (Raffoni, Visani, Bartolini, Silvi, 2018). As such, it is eminent that line managers are becoming more involved with implementing human resource policies and processes, including performance management. Table 1 below shows a study conducted on 176 participants (line managers), outlining the managers’ level of responsibilities for different performance management facets.
Table 1: Levels of Responsibilities of Line Managers on Different Human Resource Activities
Source: (Van-Waeyenberg and Decramer, 2018).
As outlined in table 1, line managers’ roles in performance management systems incorporate designing performance appraisal, executing the appraisal process, evaluating performance and conducting performance review and counselling, and communicating feedback on employee performance. Research shows that employees with engaging and effective line managers value them significantly and that development focus and prompt feedback communication mechanism is the fundamental reason they are viewed as good line managers. Best practice for the performance management system, as discussed earlier, requires managers to engage with the employees, set goals, and give clear direction and explanations to the employees to help them understand what is expected of them. The line manager must also develop their teams by incorporating the employee input and should be accessible and available when needed by the employees. The line manager must also have a clear performance focus, including high expectations from the employees and encouraging them to believe they can achieve the goals (Van-Waeyenberg and Decramer, 2018, p 3097). Poor performance must be tackled promptly and skilfully in a manner that does not prompt employees’ defensiveness.
Most importantly, encourage ongoing feedback and effective communication at every cycle of performance management. However, researchers have reported that some line managers tend to regard performance management as just a bureaucratic duty; and, therefore, may consider the practice a waste of time. Some also lack the necessary skills and competencies required to effectively review employee performance, provide feedback, and link the performance management goals to the company objectives (Van-Waeyenberg and Decramer, 2018, p 3097). Therefore, as discussed in the next section, managers’ training and development is key to successful implementation and effective operation of performance management systems.
Training and Development of Managers and Employees
Managers need the training to understand and feel motivated to adopt the performance management system effectively. The effectiveness of any performance management system demands that organisational stakeholders be motivated to embrace it properly. Research on different management programs indicates that effective system implementation relies significantly on management commitment and motivation to adopt the system. The stronger the dedication and motivation, the higher the potential for the system’s success. Training of top, middle, and lower-level managers on the proposed performance management system enables them to follow all the system’s parameters themselves (Raffoni, Visani, Bartolini and Silvi, 2018, p 62), developing expectations for their direct reports, and incorporating performance management as fundamental components of their evaluations.
Best practice for performance management system implementation requires that the system’s adoption starts at the top, getting the executive managers’ commitment to consider performance management a primacy for the organisation. Training also helps to create a strong performance management culture across different organisation levels. Some organisations already have a strong PM culture. However, in others, it may be paramount to train the executive team on the crucial roles that PM systems can plan in the company’s effectiveness and persuade them about the importance of their part in leading the implementation effort (Raffoni, Visani, Bartolini and Silvi, 2018, p 62)
One way to achieve this is to pilot the new performance management system with a higher executive management level, making them understand every bit of the program from the onset. The strategy helps to gain the executive’s support, critical individuals in the PM system implementation. In cases where there is no pre-established strong PM culture to start with, management support can quickly establish such a culture over time. Therefore, top management’s understanding of the PM system is essential (Raffoni, Visani, Bartolini, and Silvi, 2018, p 64). Since a PM system’s success depends significantly on the efficacy with which employees and managers adopt the program, it is also indispensable to get each organisational member devoted to the new system/programs by involving strategic people in the program design and implementation process (Raffoni, Visani, Bartolini, and Silvi, 2018, p 63).
The team should comprise people representing critical districts in the organisation, different geographic settings, and primary business functions. The design and training team is led by a human resource representative or a consultant experienced in the performance management system design and implementation. They guide the organisation in the successful design and implementation of the proposed system. The design, training, and development teams must be effective communicators, team players, effective problem solvers, and satisfactorily well-informed about the organisational functioning to provide practical advice to the management concerning what can work and what cannot (Gruman and Saks, 2011, p 125). The design team plays a crucial role during this training and development process by:
- Providing Input Representing Their Constituency
The program design and development leaders work through different performance management options with their team. They may require to meet with employees and managers in their respective areas to assess the distinctive local preferences or requirements (Gruman and Saks, 2011, p 125). The design team makes recommendations or provides input concerning the system’s structure and features based on their specific needs.
- Disseminate Information About The PM System
The design team should also maintain constant dissemination of information about the system, keeping their constituents informed regarding the program development progress. As decisions are deliberated upon at different levels, the design teams should participate in an interactive process of distributing information and collecting feedback from various organisation levels (Gruman and Saks, 2011, p 125). Such an interactive process is critical in ensuring that the final performance management system is sensitive to the business goals and supports the organisation’s performance culture and its various units.
- Devise Strategies To Get Others On Board
The employees are more likely to get concerned about adopting a new performance management system and how it will affect them. Likewise, the executives may also be worried about how the new system will impact performance at different organisation levels. In such a case, the program design and development team must communicate the system’s value to the employees and the management, its benefits, and how the challenges and anxieties are addressed (Gruman and Saks, 2011, p 126). Extensive training and even other opinion leaders’ involvement in commenting or training the organisation stakeholder about the system is necessary.
- Engage Others To Contribute To And Try-Out The System
The design team also acts as a link between the performance management team and the respective organisational units during the system development and implementation process. Basically, a PM system development incorporates various review and focus groups alongside pilot testing before the organisation-wide rollout. It is essential to engage other employees and the management in the multiple activities and processes to communicate more about the system. The process ensures that the system meets the company’s needs and encourages everyone to assume their share of duties in the implementation process effectively (Gruman and Saks, 2011, p 126).
There are various training platforms to be adopted during the training and development of managers. Such may include structured PM classroom training sessions or briefing. Web-based and job aids training format can also be used. However, most experts advocate for classroom training sessions or briefings. Study shows that employees are attending structured MP training sessions or briefings signal that performance management is valued in the organisation. Classroom training is adopted when the content requires interactive discussion or hands-on practice, not easily attained by other formats (Aguinis, 2009, p 16). Experts have established that the most suitable classroom training format is when managers and employees are trained in effective feedback communication. It enables managers and their employees to practice, understand, and grow contented with their parts in the feedback communication and development process. Since classroom training requires attendance and is costly, it is most adopted when the expected value is significant, such as in feedback training (Aguinis, 2009, p 17).
Job aids training can be adopted for ongoing training. Performance management aides can be reviewed according to the employee’s pace. Such may entail developing a list of managers’ critical roles in the PM process and completing the activities. The disadvantage of PM aids is that they are only effective for managers experienced in executing performance management. Web-based training platform can also be adopted, mainly where flexibility is of concern. It allows employees and managers to complete the program at their pace (Aguinis, 2009, p 22). However, its most significant disadvantage is that employees and managers can easily ignore it.
Contentions of Performance Management Systems and Potential Solutions/Best Practice
As discussed in the previous sections, performance management’s fundamental objective is to develop and enhance performance effectiveness within the organisation. However, sometimes things might not go as expected, and the desired effectiveness in the employees’ performance may not be realised. Potential contentions of performance management that may derail its implementation include biases in performance appraisal, exploitation of other members, and the psychological contract.
Performance appraisal biases may arise when managers compare employees’ performance to their co-workers instead of using the company standards. When ranking is based on the comparison, it is automatic that someone must come first or last even if they exceed the organisation’s expectations. The problem is not the employee but the organisation standards set. The best and most ethical approach is to appraise employee performance according to the company standards (Andreeva, Vanhala, Sergeeva, Ritala and Kianto, 2017, p 210). Concerns for exploitation and psychological contract is another eminent contention of performance management. For example, an employee in a similar job and level may be assessed using different standards; hence compensated differently, creating unfairness. The best practice requires that a uniform performance appraisal scale be applied across the same job to create similar measurement standards (Andreeva et al., 2017, p 213).
The study also shows that performance management systems are less formalised in the many entrepreneurial human resource configurations and tend to be exploratory, compared to corporative HR configurations, which are typically exploitative. Less formalisation of performance management eminent in small businesses may encourage flexibility and improvisation. However, research shows that they can as well hinder transparency, fairness, and the development of feedback. The findings conform to exploitation and exploration theories, with their extension to HR leadership and management (Medcof and Song, 2013, 2912). The best practice is to have a formalised performance management system where appraisal standards are set and applied equally across the job level.
This paper has discussed organisations’ considerations when implementing best practice performance management (PM) systems and potential contentions of the system. The researcher aimed to establish performance management systems and best practices that drive organisational performance and potential challenges faced in their implementation. According to this study’s findings, a performance management system, which encompasses employee development and performance appraisal, has an immeasurable potential for managing and improving employee performance. Effective PM enhances the performance and growth of employees and giving the company a competitive edge over competitors. However, its success requires adopting best practices, such as feedback communication and performance planning, as discussed in the paper. PM is also faced with various contention such as bias and exploitation, as discussed in this study. Such conflicts may derail performance. The management must emphasize best practices, such as adopting a uniform scale for performance appraisal to ensure fairness and maintain employee motivation to perform.
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