Examine Importance Of Performance Management Systems Business Essay

The report aims to examine importance of Performance Management system in itself whose concept has been elaborated, explained and the details of the purposes of performance management which are strategic purpose, developmental purpose, administrative purposes have been explained in depth and the processes included in the system have been referred to in the report. Moving on to explaining the criteria for measuring performance have been discussed which are strategic congruence, validity, reliability, acceptability, and specificity. The mentioned criteria have been found important for implementation even in contemporary business organisations. The next part of the report mentions about the implementation of the performance management system in detail has been ventured into and later the sources of information used to adequately evaluate the performance of sales assistance in the selected business which is Telstra tele-sales and outbound sales sector moving onto examination of fairness of evaluation of performance management is undertaken in this section of the report. Concluding with the importance of the performance management system and the implementation of the same in every organisation seeking progress and success in any said sector and the significance of purposes of performance management have been discussed with the recommendations like Telstra can devise training programs even for the employees who are below expectation level. The recruiting process can be more stringent to not let employees who do not fit the company to be hired as it would reduce cost to the company. The company can evaluate the customer’s needs from time to time with constant feedback from the consumers and also with surveys. If the team members after reporting the underperformers can increase the motivation levels of co-workers and seek ways to train them it will reduce the work of managers while evaluation. Bench marking needs to be done with other competitive organisations in the market on a constant basis. Key performance indicators need to be introduced within the system for evaluation of the employee performance.

Introduction

Purpose of the report: The report is intended to report the discussion at a conference where performance management covering the areas of strategy, development and administration have been focused upon. The core aim of the commentary is to suggest innovative ideas to improve the performance management system linking employee activities with the organisational goals. The analysis aspires to discuss general purposes of performance management and effective system to be adopted in contemporary business organisations.

Scope: The information in the report ranges from examining the concept of performance management and the importance of the same in any organisation while attempting to closely observe various functions and elaborate the stages such as recruiting, induction, training and development. The report would also discuss about performance management stages like reviews of employees. Both for and against arguments of a performance management system in contemporary business organisations in Australia have been talked about in the description.

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Background: The credentials of the report would be the observations of a Human Resource Manager after attending a conference where performance management covering the areas of strategy, development and administration has been discussed. Suggestions for improving the performance management system linking employee activities with the organisational goals have been devised in the commentary. Situations being constant that many firms are forming strategies to manage worker’s performance in Australia.

Limitations: The report is constrained to consider that analysis of current situation n Australia reveals that many firms are forming strategies to manage worker’s performance and that the improvement in performance management system should link employee activities with the organisational goals. Also that only three general purposes of performance management and criteria for effective performance management systems which can be adopted in contemporary business organisations have been conversed.

2. Performance Management System

According to Jong & Hartog (2007), Performance Management is a process that enables an organisation to evaluate and continuously improve individual, subsidiary unit and corporate performance, against clearly defined, pre-set goals and targets. There is a very important link between performance management strategies applied to individuals or units which contribute to the organisation be it for global profitability. This linkage is also important as an individual’s performance is evaluated according to expectations of appropriate outcomes and behavior that contribute to organizational goal attainment. Wilson (1995) advocates that, any concern would need to devise an effective system for managing the performance of its global operations that assists strategic cohesion and competitiveness but it is also important to keep in mind not to impose onerous methods for the same invading the local receptiveness. Examining performance and ensuring adherence to agreed standards are key elements of an organisation’s managerial control system.

Success of a company depends very much on all the stages and needs to be reflected and reiterated in every stage ranging from job analysis to gaining best results from one’s performance which will indirectly contribute to the company’s performance. Schroeder & Ahmad (2002) identifies that, job analysis is the initial stage were in description of the job is devised and published for potential candidates be it internal or external recruitment directing to the stage of hiring the correct person for the job. Basing the process on standards set by the company and the essentials sort for in the new employee were in a panel is usually involved to make the process a success and to scrutinize details of the progression and to make sure the hiring adds value to the team and company. Selection is a very important stage of staffing as it emulates the company requirements, norms and major credentials of the job which need to be sort after in the candidate which should potentially appreciate triumph of the concern. Induction would be the first impression of the employee on the company standards were in the new joinee would be given an overview of the concern, introduced to the team members after elucidating the achievements and the expectations from the employee. Burke (1998) says that, training and employee development is a stage which can be revisited when required for the employee. Most of the companies seek for candidates with apt knowledge of the job not needing any formal training into the details of the same. But every company would have its own approach and panache of getting the job done. The employee would be taken through these details if required in the beginning of the association with the company. This stage is revisited for promotion purposes by the employee and made a mandate in many cases as one would need in depth expertise of a job when heading it. Employee development happens only if the training strategies are updated time to time and matched up with the market customary and clientele requisites. Performance planning would be the most important stage of the performance management system as the company would have to plan the same well in advance keeping their vision as the base and devising a system to well suits the business needs, organisational culture and job of the employee. Soltani (2003) argues that, the merit increase was highly distorted because market forces in the business had a greater impact on salary increase than merit.

3. Purposes of Performance Management

There are three kinds of purposes of performance management which can be described as below:

Strategic Purpose: Strategies are implemented through defining the results, behaviors and, to some extent, employee characteristics that are necessary for carrying out any particular strategy. The next measure would be to develop measurement and feedback systems that will exploit the extent to which employees exhibit the characteristics, engage in the behaviors and construct the outcome. To achieve this strategic purpose, the system should be elastic because when goals and strategies change, the results, behaviors and employee individuality usually need to change accordingly. Studies have revealed that to achieve their strategic purpose, effective performance management systems display five characteristics which would be

Association of employee performance with organizational aims.

Transparent enunciation of the preferred work culture.

Apparent requirement of the results and proficiency which would be the way the results are to be achieved.

Management behavior and methods that encourage unrestricted effort

Developmental Purpose: A next purpose of performance management is to develop employees who are efficient at their work. If the members of staff are not performing efficiently, performance management seeks to develop their performance. The comments given during performance evaluation process usually isolate the employee’s short falls. But the advantage of performance management that it not only identifies the short falls but also the causes of the issue for example a talent deficit, a motivational hitch or any hindrance holding the employee from being efficient. Managers are frequently uncomfortable dealing with their performance issues. These confrontations are quite necessary but eventually risk the work relations in the group. If the manager gives high ratings to employees ignoring the flaws in them the relations within the team are saved but the sole purpose of devised performance management is not fulfilled.

Administrative Purpose: The information stimulated from performance management is most often used for promotion, wage increase, salary management, devising retention and termination processes and most important being an individual’s performance recognition. It is observed that in Australia many companies use information from performance appraisal for career development, prospective promotion standing and also for training programs to be planned for individuals. Surprisingly many evaluators are not comfortable going through the process of performance appraisal and end up rating both the performers and non performers either high or equally which would make the performance appraisal information absolutely worthless.

The sole purposes of performance management system are to link employee activities with the firm’s strategic aspirations, provide apt and helpful information for making organizational resolutions about workforce and to give the feedback to them resulting in their career development. An important tread in performance management is to devise the means by which performance can be evaluated and measured.

3. Criteria of effective Performance Management:

The criteria for effective performance management systems which can be adopted in contemporary business organisations even though many have differed view of the criteria the most important once can be listed and categorised as strategic congruence, validity, reliability, acceptability and specificity. The criteria can be explained as under.

Strategic Congruence: It is the level to which the performance management system extracts job performance that is matching with the organisation’s aims, strategy and culture. For example if a company accentuates innovation, then the company’s performance management system would assess how well are the employee’s are being innovative with the products and services. This criterion emphasizes that the company’s performance management system provides training and assistance to the employees for them to contribute to the organisation’s achievements which in turn indicates that the system needs to be bendable enough to be able to dynamically change with the company’s changing strategic posture. The system, known as a balanced scorecard, is a way of developing strategic congruence. It is one way organisations can link their long-term strategy to short-term actions and provide a means for the organisation to continuously improve and learn which can be achieved by having a spotlight on number of departments of the organisation, such as financial, internal business processes, learning and growth and translating the vision. The balance scorecard is one way of signaling to the member of staff what the organisation’s aims are for customers and shareholders. Every employee performance can be associated with the overall strategy by connected in three activities which are communicating and educating, setting goals and linking rewards to performance measures.

Validity: This is the level to which the performance measure assesses all the relevant and only the relevant portions of performance. It is also known as ‘content validity’. For this particular performance measure to be valid and fruitful for best results it should not be lacking or grimy. A performance measure would not yield the necessary results if it does not consider all the aspects of performance. For instance a performance measure system devised at a manufacturing unit considering only quantity produced by the employees and ignoring the quality aspect of the produce.

A grimy measure evaluates inappropriate aspects of performance or aspects that not related to the job. The performance measure should look for ways to reduce the grimy parts but it is not possible to completely eliminate the short falls. Validity is concerned with increasing the overlap between actual job and performance and measure of job performance. For instance quantity of produce would be high if the machinery being used is in good condition. Even if a particular employee is quite experienced in the field if the machinery provided for the job is not in best working conditions the produce would not be on par with the other workers. Thus, to use the numbers alone would be to use a measure that is strongly affected by things beyond the control of the individual employee.

Reliability: It related to stability of the performance measure. An important type of reliability is inter-rater reliability: the stability among the individuals who evaluate a employee’s performance. A performance measure has inter-rater reliability if two individuals give the same or at least close to being same assessments of a person’s job performance. Another type of reliability is internal consistency reliability. This relates to the extent to which a number of points measuring a particular parameter of performance, like quality, correlate with each other. Studies reveal that most individual supervisory measures of job performance exhibit low reliability. With some measures, the extent to which all the items rated are internally consistent is important. Additionally, the measure should be reliable over a period of time. A measure that results in drastically different ratings depending on the time at which the measures are taken lacks test-retest reliability. For instance if an employee’s performance is being evaluated, employee’s performance needs to be measured over a period of time but not only for a month.

Acceptability: It relates to the extent to which a performance measure is considered to be useful and reasonable or adequate by those use it. Many very elaborate performance measures are extremely valid and reliable but they consume so much of the evaluator’s time that they decline to use it and also the employee being evaluated do not accept it. This measure is affected by the extent to which employee believes the performance management system being reasonable.

Specificity: This measure is the extent to which the performance measure gives particular guidance to employees about the organisation’s expectations and the ways to meet them. This measure is appropriate to both the strategic and developmental purposes of performance management. If any measure does not specify the measure to be undertaken by the employee to help the company achieve its strategic goals, it becomes difficult for the organisation to achieve the strategic purpose. Also, if any performance management system does not point out the issues with an employee’s performance it would not be possible to rectify them.

4. Implementation of Performance Management System:

If the contemporary business organisations in Australia are taken for instance it is very much important that these organisations have a performance management system put in place for the reasons like a performance management system as a process is through which managers ensure that employee’s activities and outputs are congruent with the organisation’s goals. Performance management is vital to gain competitive advance. Performance management system has five important parts: defining performance, facilitating performance, encouraging performance, measuring performance and feeding back performance information. Implementation of performance management system would have the performance evaluated of employees and will make way for better performance of the member leading to better team performance resulting in best company performance. Performance management system will point out the short falls of any employee and will help the management devise ways to train the employee on those lines for an improved performance, on the other side if the employee is a wrong person in the right job it would help the management terminate the services of the employee saving finances of the organisation were in a much more talented and a right person for the right job can be inducted. On the other hand there are few short falls of placing a performance management system in contemporary business organisations like if the scorecard system is adopted and is not yielding the correct information the appraisal part of the performance management system would not give the expected results and also if any employee is entrusted more responsibility than what one can perform the performance management system would not capitulate the anticipated results. Another short fall of the system would be the evaluators either giving same or equal ratings to all the employees or not giving an unbiased rating to all the employees by favoring one or few employees ignoring the other performers.

5. Evaluation of performance:

Sources of performance information used to adequately evaluate the performance of sales assistance in a business like Telstra’s tele-sales or outbound sales sector of telephone connections can be examined in the following manner. The sector of sales is one where constant and continuous performance is required and needed for the employee to be rated well and also for the organisation to make profits and stay in the business while being able to keep up with the competitors. The sources of performance information for the outbound sales sector would be the volume of sales being first, followed by sources like the quantity of the sale item, revenue generation for the organisation, the call volumes made to the customer for the purpose of sales, the amount spent on the transportation which depends on the customer’s location, follow up on the order of customers, customer satisfaction on the sale, also the parameters like balanced scorecard and key performer indicators would also play a major role in the performance evaluation.

In the process of evaluating performance every evaluator would have to consider all the above mentioned sources for best results. Along the above mentioned evaluator points the process put in place for an organisation dealing with outbound sales would also consider the specificity, reliability and acceptability parameters of any performance management system while evaluating the performance of any employee. In such organisations an employee is entrusted with responsibility to sell the products to customers by approaching them over the phone, making a feasible contact and prospectively making a sale with least follow ups possible, least amount of time spent, while giving customer satisfaction, less amount spent on the point of sale in the means of transportation, making a profit to the organisation. While the employee is being analyzed for the performance the employee’s above mentioned tactics are measured and rated accordingly on the lines of performance for the purpose of either appraisal or normal performance evaluation and the employee who has constantly performed well on the above mentioned lines is awarded on a regular basis to keep the spirits up and to motivate the employee and also give motivation to the employee who seek to make a mark in the sector of the organisation. Such employees who are lacking in the skills required for the job are given ample training before the job and also if found to be requiring training in the performance cycle and are evaluated on a regular basis for improvement and excellence in their performance. Rating systems are followed by the evaluators and also peer feedback is followed. Concept of 360 degree feedback is also followed by few organisations. Testa (2002) represents that, with manifold opinions, the 360 degree process can also produce ambiguous and conflicting feedback, so employees may require guidance to interpret the results. Another concern is that peers may provide inflated rather than accurate opinion to avoid conflicts. The problem of inflated ratings may be amplified in companies that let employees choose the people who will evaluate them. In spite of these short falls 360 degree feedback has gained substantial popularity. But for the organisation being considered above for evaluation of sales performance the above mentioned method of taking feedback would work well being a contemporary business organisation. A performance management system would be a success if the company has employees working for one cause and one goal. If the recruiting stage is monitored and completed keeping the goals and essentials of the organisation hiring candidates who are aligned with expectations of the entity and are highly motivated for the same cause as is the organisation. Even if the firm has employees dispersed all around the world belonging to various cultural backgrounds the system would be a triumph. The recruiting department would look for the qualities in alignment to their business requirements in the candidates to be hired. According to Mejia (2000), a successful candidate should be a contributing factor to the existing motivated work force whose qualities are well aligned with the aspirations mentioned in the business statement of the organisation. Also if the part of performance management and vital stage of appraisal, training and development are well planned in accordance with the business requirements keeping customer needs in mind it would be a success. Binsted (1980) suggests that, Training and development is an important stage in the performance management as all the employees who are performers yet need some training to improve on the blind spots identified by the managers at the time of review are closed upon with adequate and appropriately designed training programs. Well educated and skilled panel of professionals are required to be formed as a team to devise up to date training programs which are well synchronized with current customer needs helping the employees needing the training to close the gaps and be able to perform better. Also the managers can contribute to the employees who are lacking the job knowhow performing poorly on one of the essentials of the organisation need to be taken for a face-to-face action plan and brought back to team to overview their performance and kept a track for improvement. If found that there are any employees who are wrong people in the wrong job the managers are expected to take necessary action to solve the situation.

6. Fairness of Performance Management:

The reasonability of any performance management would rely on the purposes of performance management being followed and satisfied. All the three purposes which are Strategic purpose, Developmental purpose, administrative purpose are important for a performance management system to be a success and to be adopted by the organisation. Strategies are implemented through defining the results, behaviors and, to some extent, employee characteristics that are necessary for carrying out any particular strategy. The next measure would be to develop measurement and feedback systems that will exploit the extent to which employees exhibit the characteristics, engage in the behaviors and construct the outcome. Purpose of performance management is to develop employees who are efficient at their work. If the members of staff are not performing efficiently, performance management seeks to develop their performance. The comments given during performance evaluation process usually isolate the employee’s short falls. But the advantage of performance management that it not only identifies the short falls but also the causes of the issue for example a talent deficit, a motivational hitch or any hindrance holding the employee from being efficient. Level to which the performance management system extracts job performance that is matching with the organisation’s aims, strategy and culture. For example if a company accentuates innovation, then the company’s performance management system would assess how well are the employee’s are being innovative with the products and services. This criterion emphasizes that the company’s performance management system provides training and assistance to the employees for them to contribute to the organisation’s achievements which in turn indicates that the system needs to be bendable enough to be able to dynamically change with the company’s changing strategic posture. The system, known as a balanced scorecard, is a way of developing strategic congruence.

Recommendation:

Telstra can devise training programs even for the employees who are below expectation level.

The recruiting process can be more stringent to not let employees who do not fit the company to be hired as it would reduce cost to the company.

The company can evaluate the customer’s needs from time to time with constant feedback from the consumers and also with surveys.

If the team members after reporting the underperformers can increase the motivation levels of co-workers and seek ways to train them it will reduce the work of managers while evaluation.

Bench marking needs to be done with other competitive organisations in the market on a constant basis.

Key performance indicators need to be introduced within the system for evaluation of the employee performance.

Conclusion:

In finale of the report the author would like to add that the purposes of performance management are very important for the success of system adopted in any given organisation. The practices followed in one organisation would define the limitations of the success and also determine the progress of the company. If organisations adapt such a performance management system they should be keen on religiously putting it into practice and reaping the results of the same. Every stage of the system is equally important. Further to these observations we can also conclude that managers in the organisation have a standard procedure to deal with issues pertaining to non performers in the system who are increasing cost to the company and also the cataloguing done at performance review stage is not a conventional one but dynamic and in line with the constitution of the company.