Introduction to Performance Management Systems

Performance Management | Featured

Once an organisation has defined their corporate objectives, as well as a specific set of KPIs, its managers should establish a performance management system to drive their employees towards strategic goals.

Performance management systems allow organisations to establish a working environment that maximises employee performance. With an emphasis on leadership and development, effective performance management models empower employees to achieve the organisation’s objectives. [1]

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Objectives of Performance Management Systems

1. Primary Objective

According to Qvartz (2016), an effective performance management system’s main objective should be to drive individual performance towards organisational goals. This may be achieved by identifying clear answers to the following questions:
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• What are employees responsible for?
• Why should employees be motivated to achieve organisational goals?
• How has their performance improved over a specific period of time?
• How may employees develop their competencies and/or increase their productivity? [2]

2. Additional Objectives

Dr. Herman Aguinis (2005) elaborates on an effective performance management system’s additional objectives. He states that an effective performance management system may be used to:
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• Assess all employees and supervisors;
• Evaluate all major job responsibilities, which include behaviours and results;
• Measure performance across an extended timeline, as performance evaluations should be conducted throughout a specified time period; and
• Provide feedback for both positive and negative performance aspects. [3]

​In addition, Aguinis highlights that performance management systems may facilitate the following activities:
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• Allow managers to establish and achieve corporate objectives;
• Collect relevant information for administrative activities that are related to employees (e.g. employee promotion, retention and/or termination);
• Provide employees with feedback, which are based on their managers’ expectations;
• Develop and execute training initiatives for employees; and
• Obtain information to ensure that human resources are effectively allocated. [4]

Purpose of Performance Management Systems

According to Aguinis (2005), effective management systems may maximise corporate productivity through the following ways:


1. Align Performance Management Systems With Corporate Objectives

In order to design a performance management system that is aligned with an organisation’s specific needs, managers must determine what objectives their systems must fulfil. For example, performance management systems may support resource allocation, as well as employee administration and development.
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Recent studies also warn against creating a performance management system that attempts to achieve too many objectives, as these systems would lack focus and depth. [5]


2. Align Corporate Strategies with Employee Behaviour

In order to build effective performance management systems, Aguinis also encourages managers to connect employees’ tasks and objectives to an organisation’s mission and goals. Furthermore, effective performance management systems would enable managers to clarify job requirements and expectations, which would allow employees to understand the tasks and outcomes that they would need to fulfil.

This would enable managers to monitor their employees’ progression towards a specified set of objectives, and would achieve an accurate assessment of their division’s overall performance. As a result, their organisation would remain competitive in their industry. [6]
 

3. Feedback and Development

Once managers have aligned an organisation’s primary objectives with their employees’ individual goals, they may use their performance management system to identify effective behaviours that enable their employees to achieve corporate objectives.
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Managers may use performance management systems to identify potential areas of improvement, and they may provide their employees with feedback to maximise their productivity. Such feedback allows employees to identify ways to maximise their key competencies, or identify factors that may cause underperformance. In addition, managerial feedback may also be used to create remedial strategies to address dips in their division’s productivity. [7]
 

4. Workforce Planning

Performance management systems may allow organisations to enhance their workforce planning initiatives. Managers may use findings from their organisations’ performance management systems to establish corporate objectives, invest resources into profitable activities, and establish frameworks to predict and address environmental trends.

Performance management systems may also allow managers to predict and address organisational trends by establishing “talent inventories”. In his study, Aguinis explains that an organisation’s talent inventory includes information on its human capital, such as its employees’ competencies, tasks and experiences. This information may be used to facilitate learning and development within the organisation. They may also be used to conduct performance evaluations, which may measure improvements in employee productivity after these developmental initiatives.

Effective performance management systems would also provide unbiased information about employee performance. This information may be used to aid administrative decisions, such as employee promotion, retention and termination. Effective management systems also ensure that rewards are fairly distributed, which would foster trust between supervisors and their employees. [8]
 

5. Documentation

Performance management systems may produce information that contributes to an organisation’s administrative purposes, such as the verification of selection criteria.

In Aguinis’s study, he explains how administrative staff may be instructed to take quantifiable assessments of their skills, and that their scores should be compared with results from an organisation’s performance management system. If the new administrative assessment produces similar scores to those from an organisation’s performance management system, managers may choose to assess future applicants with similar tests.

Effective performance management systems would allow organisations to align their corporate activities with laws that protect their employees’ interests, as they would enable managers to conduct structured performance evaluations, and document employee feedback. This may allow managers to avoid or mitigate legal action against their organisation. [9]
 

6. Employee Feedback and Relationships

Effective performance management systems would allow managers to conduct accurate assessments of their employees’ performance. As such, they would be able to deliver relevant feedback to improve their division’s productivity. Managers may also incentivise employees by recognising and rewarding exceptional performers.

In order to effectively implement data from their performance management systems, Aguinis encourages managers to develop productive relationships with their employees. By doing so, managers would receive insights about their employees’ personalities, as well as individual or organisational factors that would affect their performance.

Furthermore, effective performance management systems may also allow employees to develop insights about their strengths and weaknesses, and productive activities that would promote their standing within the organisation. [10]
 
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7. Drive Organisational Change

An effective performance management system would facilitate organisational change, as it enables an organisation to align their culture with their strategic objectives.
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Performance management systems, which facilitate employee training and development, would equip employees with relevant skills to execute corporate initiatives. In addition, employees would be rewarded for achieving their targets, and would receive insights and incentives to improve their performance. [11]

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references

[1] Manchester Metropolitan University Department of Human Resources. (n.d.) Performance Management: An introduction. Manchester, England: Manchester Metropolitan University. pp.2
[2] QVARTZ. (2016). Performance Management. Oslo, Norway: Qvartz. pp.6
[3] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.16-18
[4] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.13-15
[5] Pulakos, E.D. (2004). Performance Management. VA, USA: SHRM Foundation. pp.2-3
[6] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.3
[7] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.13
[8] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.14
[9] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.14
[10] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.4-6
[11] Aguinis, H. (2005). Performance Management. Edinburgh, Great Britain: Edinburgh Business School, Heriot-Watt University. pp.4-6