Human resource managers are responsible for ensuring that they align employees with organizational objectives to enhance productivity and profitability. In a bid to ensure that they tap into the potential that employees present, HR managers design and incorporate performance management systems. These systems are crucial since they help HR managers in establishing clear performance expectations for employees and in this way, ensure that they understand their roles. Human resource managers have the option of adopting different performance management systems depending on organizational size, objectives, and employees' competencies. An analysis of these performance management systems helps in establishing their application, benefits, and drawbacks for informed decision-making.
Importance of Performance Management Systems
Performance management systems are crucial frameworks that aid organizations to work towards the improvement of performance, while at the same time achieving employees’ wellbeing. Smith and Bititci (2017) note that performance management systems improve consistency in the selection of employees for transfers, promotion, or other actions, thus ensuring that there is a matching of skills with the right individuals. Performance appraisals which are a component of the management systems motivate employees, especially those that are outstanding. In the same way, it encourages the employees who are still struggling to remain competent to work towards improving their skills to be considered for promotion and other benefits. According to Aguinis and Burgi-Tian (2021), performance management systems are a tool for determining organizational training needs as well as the risks that would emanate from firing employees. In this case, these systems help human resource managers to evaluate employees who could still be profitable instead of firing them, thus reducing high turnover rates.
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Considerations that organizations must make when selecting the best system
There are various performance management systems that organizations could use to achieve the intended purposes. However, it important to note that not all systems would align with organizational needs, thus the need to focus on specific considerations that align with the intended purpose and objectives. One of the factors that should be considered is the ease of use, considering that organizations are keen on acquiring tools that deliver reliable and timely evaluation results. Azis and Azis (2020) note that the best performance management systems have friendly and practical user interfaces which means that organizations would not need additional training to use them.
The other factor to consider is whether a system aligns with the intended purpose or whether it will achieve the set organizational goals. This factor is important, considering that there are many performance management systems out there with each of them designed for specific metrics. According to Jaoua (2018), there is a need for human resource managers to have a list that outlines what needs to be changed in the performance management process or what needs to be introduced into the process. The other consideration would be the effectiveness and overall flexibility since there is a need to have systems that could be customized so that they serve the needs of users. In the same manner, organizations should be looking for performance management systems that are provided by excellent vendors who are in a position to render customer service whenever needed.
Types of Performance Management Systems
Organizations have the option of using singular or hybridized performance management systems depending on their size, financial capabilities, or intended purposes. Some of the most common performance management systems that are available include forced rankings, 360-degree feedback, graphic rating scales, competency-based system, behaviorally anchored rating scales, and management by objectives.
Forced Ranking
This type of performance management gauges employees based on their ability to meet organizational objectives. According to Pulakos et al. (2019), forced ranking allows for employee evaluation through peer comparison and in this way, differentiate between high and low- performing individuals. Organizations that chose this form of assessment do so to make employees rethink their stand when it comes to the achievement of organizational goals.
Organizational application of forced ranking
This system is a practical approach for companies that are making varied human resource decisions, including promotions, employee development, or suspension. The fact that the system compares employees means that it is possible to determine what course of action should be taken to achieve maximum productivity (Pulakos et al., 2019). In the same way, organizations that need to enforce their objectives could use this system to elicit action and in this way, improve employee ratings.
Benefits of forced ranking
This form of performance assessment is heralded for its ability to sieve worst-performing employees by gauging peers. For instance, it could be used in the marketing department to establish employees with high sales volume and those that have not achieved the target. In this case, the performance system ensures that there is maximum productivity among departmental teams. Thomason et al. (2019) note that forced ranking creates a chance for the hiring and promotion of only the best performing employees, thus cutting the costs that are associated with redundancies and bottlenecks in organizational processes.
Drawbacks of forced ranking
Forced ranking is considered to be one of the most controversial performance management systems mainly because it compares employees. Thomason et al.(2018) note that the main drawback associated with forced ranking is the fact that it demotivates the employees who score low. Organizations may fail to factor in the fact that they have not provided enough resources to improve the employees' productivity, meaning that the scores may not be conclusive.
360-Degree Feedback
This form of performance management system capitalizes on anonymous and confidential feedback to employees from their peers, managers, or direct reports. According to Anand et al. (2018), 8 to 12 people may be requested to fill online feedback forms that revolve around a broad range of professional competencies. Most of the time, the forms include questions that are gauged on rating scales as well as sections for comments.
Organizational application
A 360-degree feedback system should be used by companies that are keen on achieving organizational change, engage in succession planning as well as conducting training assessments. Anand et al. (2018) note that this system is considered a powerful tool by many organizations as it focuses on the improvement of actions and behaviors. The system thus helps these organizations to elicit feedback from different sources which is then incorporated to achieve organizational objectives.
Benefits of 360-degree feedback
This performance management system is preferred by most organizations since it provides the management with valuable insights to establish what is working and what is not. According to Anand et al. (2018), organizations that correctly use the data from the 360-degree feedback are in a position to help their employees to become better and more productive. In the same manner, the system helps employees to become more aware of their weaknesses and strengths and from here adopt practical strategies.
Drawbacks of 360-degree feedback
This system is not free from flaws as it is prone to subjective feedback, especially in competitive organizations that rely on feedback to promote staff. Tziner and Rabenu (2018) note that the aspect of having employees fill out the feedback forms paves the way for exaggerating skills or competencies to be considered for benefits and promotions. In the same manner, the inclusion of the anonymity clause means that information providers could alter information to make employees either look bad or too good.
Graphic Rating Scales
Graphic rating scales are where expected employees' behaviors and traits that enhance performance are listed and then employees rated against them. Tziner and Rabennu (2018) assert that the ratings which are on the scale of 0-5 are a popular choice in many organizations, considering that it revolves around observable behaviors that are hard to miss. During the rating, the appraisal team writes notes against each of the behavior to aid in the decision-making process.
Organizational application of graphic rating scales
This system could be used by all organizations that need to assess whether employees espouse core values that are requisite in achieving objectives. All organizations have sets of behaviors and traits that are associated with productivity, thus the need to determine if they are available. The system could apply to departments in a bid to evaluate if the employees therein have what it takes to achieve success.
Benefits of graphic rating scales
This system is heralded due to its simplicity in use and interpretation, considering that it focuses on observable traits. The other benefit of the scale is that it allows for standardization of results, meaning that there is a lessened likelihood for bias in the interpretation of results.
Drawbacks of graphic rating scales
This system paves the way for judgmental error in that there is no absolute measure to assess the extent to which an individual possesses a particular trait or not (Pulakos et al., 2019). For instance, if a person is a team player, one cannot assess the degree to which that person collaborates. It is either the person is a team player or not without a middle ground as espoused in this system. The other drawback with this system is the fact that it only identifies the best and worst employees meaning that it leaves out average performers.
References
Aguinis, H., & Burgi-Tian, J. (2021). Measuring performance during crises and beyond: The Performance Promoter Score. Business Horizons, 64 (1), 149-160. doi: 10.1016/j.bushor.2020.09.001
Anand, V., Bardrinath, V., Bharathi, K. S., Manjula, R., & Nallisai, E. (2018). An assessment of 360-degree performance appraisal system-a study with special reference to private banks. International journal of pure and applied mathematics, 119(7), 2717-2728.
Azis, A. M., & Azis, Y. (2020). Foundation and basic information in designing performance management systems. International Journal of Innovations in Business, 2 (4), 327-349.
Jaoua, F. (2018). Impact of strategic roles of middle managers on the relationship between successful strategy implementation and organizational performance. International Journal of Business Performance Management, 19 (4), 476-499. https://doi.org/10.1504/IJBPM.2018.095095
Pulakos, E. D., Mueller-Hanson, R., & Arad, S. (2019). The evolution of performance management: Searching for value. Annual Review of Organizational Psychology and Organizational Behavior, 6, 249-271. https://doi.org/10.1146/annurev-orgpsych-012218-015009
Smith, M., & Bititci, U. S. (2017). The interplay between performance measurement and management, employee engagement, and performance. International Journal of Operations & Production Management, 37 (9), 30-46. DOI: 10.1108/IJOPM-06-2015-0313
Thomason, S. J., Brownlee, A., Harris, A. B., & Rustogi, H. (2018). Forced distribution systems and attracting top talent. International Journal of Productivity and Performance Management, 67 (7), 1171-1191.https://doi.org/10.1108/IJPPM-06-2017-0141
Tziner, A., & Rabenu, E. (2018). Ways to improve the performance appraisal system 2 Alternative strategies for assessing and evaluating performance . Edward Elgar Publishing.
