For any business, to success, it has to have a way that it tracks its performance. This can only be achieved through performance management system. Performance management system involves the tracking of the various sector of performance in a business organization. It involves tracking the sales numbers, the marketing leads, the employee performances, social media engagements, the targets, the promotions, among many other business aspects. Performance management is actually the only way a business can compare where it is and where it wants to go. This can only be done by using a well-structured performance management system, it’s a system which enables the managers to be able to track all that which is important to the growth and the success of their business. A system which is able to help the managers and their employees to agree on expectations, goals, career, and objectives, and how all these must align to the business goals, mission, and vision. Essentially, performance management begins by aligning the objectives and goals through which each of the employees' performance are measured. Also, a performance management system involves development and learning by the employees to improve performance. In a way, performance management aims at motivating the workers through pushing for improving their skills, competencies, development, and outcomes.
Over the past decade, there has been concern over the dissatisfaction with the kind of performance management employed by the companies. This is because it doesn't reflect the change in the work environment. Most of the approaches used to fail to address the issues at hand because of today things parts of performance management – the setting of goals, reviews, among many others – have proven to be expensive. This has forced more companies to set aside huge chunks of funds towards performance management. Most of the big companies, however, have continuously spent these huge chunks to ensure proper performance management because of the fact that they agree to the studies that individual performance at the workplace has a significant influence on the company’s success and growth. Some of such companies include Toyota, General Motor Company, Coca-Cola, Apple Inc., Microsoft, among others. These companies have even gone ahead to modernize their Human resource departments with an aim of improving the performance management systems. These Huma Resource managements have been tasked to have competent, skillful, well-behaved employees who are able to perform in alignment with the companies’ objectives and expectations.
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The most important purposes of the performance management are to help the employees reach their full potential by developing and growing at their workplace. LAWLER III (2003) indicates that performance management process is a sure way of assisting the employees to become the best of them-selves. Essentially, performance management assists in enabling the employees to align their efforts towards achieving the organization goals, remove possible barriers at their workplace, and equip them with the best skill sets that steer them toward performing at their level best. Also, and the most important, performance management help the employees align their works, goals, and performance to correspond and mirror those of their place of work and ensure that they work at their highest potential. Finally, performance management is a significant tool to every organization management on decision making. Whenever a decision is made, the management resort to reviewing the performance levels of the employees.
To completely understand performance management system, it is paramount to comprehend its components. The components of performance management system range from the expectations both from the management and those of employees. Understanding the components of performance management are important for particular reasons. Firstly, it is only fair that the employees are made aware of what is expected of them; these must be included in the performance management or human resource guidelines. Secondly, it helps to make the employees aware of what is expected of them; this enables them to understand their responsibility and what actions to take. Thirdly, the employees must also be made aware of how their performance will be standardized and measured and it is only through performance management that they are able to comprehend such. As such performance measurement system must be included in the performance management system. This helps to remove any form of biases and help to create a good rapport between the employees and the management team. Understanding the performance management components also remove the thought of performance appraisal. It is obvious that on many occasions people confuse performance management and appraisal. It must be understood that performance management is much broader than performance appraisal; in fact, it encompasses performance appraisal.
Armstrong and Taylor (2014) provide some of the components of performance management system. Some of these components include performance planning. Armstrong and Taylor (20140 say that performance planning is important for some particular reasons. Performance planning, according to Armstrong and Taylor, involve setting the employee’s goals in alignment with those of the organization. It essentially means to set the objectives straight.
Ongoing Performance communication is another component of performance management system. Armstrong and Taylor (2014) indicate that ongoing performance communication is essential because it acts as a link to other performance management stakeholders and parts –the managers, the goals, the training and learning, and feedback. As such, Armstrong and Taylor (2014) advise that it is important that any organization that wants to achieve its potential through performance management system to consider including performance communication. The duo indicates that it is performance management can only be successful if the organization promotes a culture of communication on performance management between the employees, the employees and the managers, employees and the supervisors, and employees and the clients. The employees can share information about the performance goals, the coaching, training, among many others.
Employee development, learning, and training is the other essential component of performance management system. According to Armstrong and Taylor (20140, no organization cannot meet its target with employees who does not have the required set of kills in order to achieve the organization’s goals. It is, therefore, critical that once the goals have been set, the employees must be trained to have the skills that would make them work effectively toward achieving their targets and meeting the organization expectations. The company must be ready to invest heavily towards developing and training its employees; this has since been adopted by some of the leading companies in the world.
Feedback and coaching is another essential component of performance management system. Armstrong and Taylor (2014) say that no one would wish to work and do not get the information on how they are performing – where they have dropped and where they have improved. Armstrong and Taylor (2014) say that it is the responsibility of the performance management team, normally the human resource team, to provide feedback to the employees on how they are performing. Some of the best ways to provide feedback to the employees include giving information on where they are good, where they need to improve, and how they can personally be able to evaluate their own performance levels.
It is impossible to discuss performance management system without including reward system. Performance management goes hand in hand with the rewarding the employees. According to Osterloh and Frey (2000), reward determines the motivation of the employees to work toward meeting the organization set standards. Osterloh and Frey (2000) say that motivation is one of the greatest steering factors towards performance by any employee in any workplace. Motivation must, therefore, be one of the driving forces of creating a performance management system in the first place. The management of the organization should understand that the method they use to motivate their employees directly influence their performance level.
Osterloh and Frey (2000) describe motivation as a psychological force that has a great impact on designing the efforts level of an individual at his or her workplace. Osterloh and Frey (2000) say that motivation also determines the level of determination and persistence by an individual when he or she meets an obstacle. More motivated individuals tend to be ready and determine to achieve even in the face of an obstacle. They eventually succeed in their quest or show a high level of performance despite the obstacles. Despite the fact that some previous researchers point that there is no conclusive evidence that motivation leads to high performance at workplace, a higher number of the studies have shown a positive correlation between motivation and employee performance – higher motivation leads to higher performance levels and vise-versa.
For quite a long time now, a reward has always been confused with entirely increasing in pay or higher pay. As much as it is true that reward is majorly related to pay and benefits in form of allowances, pensions, holiday pays among many others, recent research points out that motivation can sometimes come from other sources which can as well be recorded as reward; Armstrong refers to this form of reward as ‘Total Reward System". The total reward system is essentially based on motivating the employees to perform better, and as such should be included in the performance management system. Total reward system concept helps the management to align their human resource practice with the ultimate organization goals. Armstrong (2010) says that total reward system has been proven to have a positive effect on the outcomes of the employee's performance given that it contributes towards improving productivity when implemented appropriately.
Total reward system focuses on performance-based pays, offers development of employees through training, learning, and coaching, and providing a healthy working space for the employees. In essence, the total reward system is an inclusion of both the pays and the non-pay motivation approaches. This form of reward system has been noted to be one of the best ways of retaining some of the best employees in the industry. Such reward system also helps in attracting employees with best skills and aptitudes for the job. Using total reward system to reward such employees help the company to avoid or reduce the possible loss of starting to train a new caliber of employees that can fit their standards. When it comes to total reward system, some form of pays that applies include compensation (mainly involves financial incentives), Benefits ( includes refreshers such as leave of absence, paternity and maternity leave, vacation, and sick leaves among many others), work balance (reducing overloading the employees0, recognition, and development incentives.
It is not right to completely describe performance management and reward systems without including the performance reviews. Performance review is the epitome of any performance management system, as such the most important aspect of performance management for any organization. Performance reviews finally help the performance management team and the employees to find the best performance, normally beyond the expectation or the standard. Performance reviews help the management team to be able to obtain feedback which helps towards improving the performance management system where there is a need. In the end, the performance reviews play the important role of ensuring high competence at the workplace. According to Finegold, Benson, and Hecht (2007), performance reviews, an essential part of performance management system, helps in steering motivation and job satisfaction among the employees by recognizing, celebrating, and rewarding high performance. It also helps the organization to identify any challenges so as to improve the efficiency and effectiveness of the performance management of its employees. Finegold et al. (2007) indicate that constant improvement in the performance management is paramount to the growth of the organization; essentially through encouraging better skills and ensuring competent employees.
The performance management system process normally goes through three steps within a period of six months (semi-annual). This normally begins in January. The first phase commonly involves work agreements, setting standards, development plans, and competencies evaluation. The second phase involves updating the agreements, the competencies, targets, among many others. It goes on throughout the performance management period. The third phase involves reviewing the employees’ performances, benchmarking, and rewarding.
In summary, performance management system is essential for the growth and development of any business entity and organizations. Looking back at the components and the meaning of performance management system, it is clear that performance management must have particular characteristics to be considered effective and successful. Firstly, it must have clear set goals. The goals must be specific, measurable, attainable, relevant, and time-bound – SMART ( Cascio, 2018) . Secondly, have clear set priorities and distributed work. Without clear set priorities and distributed work according to the ability and skills of the employees, the performance management system fails to steer the organization goals. Thirdly, monitors the day-to-day performance. As have been described earlier, it is important that the performance management system be continuous through providing feedback. Fourthly, be able to assess the performance of the employees and provide feedback. As have been noted performance management is not complete without performance review of the employees work – performance review. The performance review helps the management team to give feedback to the employees. Finally, link the pay to performance. A good performance management system must be able to link the performance to the pay ( Cascio, 2018) . It is only just that the organization be able to understand and link the employee pay and reward to his or her performance.
References
Armstrong, M. (2010). Armstrong's Handbook of reward management practice: Improving performance through reward : Kogan Page Publishers.
Armstrong, M., & Murlis, H. (2007). Reward management: A handbook of remuneration strategy and practice : Kogan Page Publishers.
Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice : Kogan Page Publishers.
Cascio, W. (2018). Managing human resources : McGraw-Hill Education.
Finegold, D., Benson, G. S., & Hecht, D. (2007). Corporate boards and company performance: Review of research in light of recent reforms. Corporate Governance: an international review , 15 (5), 865-878.
LAWLER III, E. E. (2003). Reward practices and performance management system effectiveness. Organizational Dynamics , 32 (4), 396-404.
