Performance management refers to a process by which employees and managers work together in planning, monitoring, and reviewing the work objectives and the total contribution of an employee to the organization. Process management does not merely involve an annual performance review; preferably, it a continuous process that involves setting performance objectives, assessing progress, and providing ongoing feedback to ensure that employee achieves their career goals and objectives. Hence, performance management mainly consists of the creation of a work setting or environment that enables people to execute their tasks to their best ability. According to Nielsen (2013), the process of performance management starts with the definition of a needed job and ends with the exit of an employee from the organization.
Qureshi and Hassan (2013) postulate that promoting performance management practices in organizations, especially private enterprises that comprise of limited resources, has several benefits, including helping the organizations to achieve higher performance, innovation, as well as enhancing efficiency in their management of financial expenses. The area of application for performance management is slowly expanding, a factor that has encouraged researchers from diverse fields to start focusing on redefining the concept. In the traditional context, performance management aimed at the development of the responsibility and competence of the members of an organization while concentrating on guiding the members to achieve organizational goals as a team. In other words, performance management in the traditional context pertains to the process of motivating employees to increase effectiveness and efficiency in the working environment. However, the concept has been redefined to comprise such measurement items as linking organizational goals to management and performance measurement, compliance with management, and the structures, methods, strategies, and goals of performance measurement (Qureshi & Hassan, 2013).
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Qureshi and Hassan (2013) further note that the modern definition of performance management emanates from such aspects as the coordination functions of performance, organizational development strategies, satisfaction of external and internal customers, corporate values and goals, performance development and monitoring, focus on team and group performance, and the emphasis on cross-function and cross-sector appraisal among others. Moreover, Qureshi and Hassan (2013) note that the modern developments on the concept of performance management and measurement techniques are guided by four fundamental principles, including efficiency, economy, equity, and effectiveness. Hence, the idea primarily focuses on improving the level of performance of the members of an organization through the development of their capabilities as well as those of the team through an integrated and strategic system that encourages successful operations in an organization. From this perspective, the performance measurement techniques form a crucial part in the performance management process, which comprises of planning tasks, performing or bringing planned functions into action, monitoring the completed tasks, and reviewing or evaluating the finished works.
Na-Nan, Chaiprasit, and Pukkeeree (2017) note that performance management defines a manager's interaction with an employee in all the aspects of an organization, where each communication comprises of a learning occasion. Some of the critical actions of performance management include development clear job descriptions by utilizing employee recruitment plans, recruiting potential employees and selecting the most qualified candidates for the interviews, interviewing the selected candidates, selecting the best candidates, providing the chosen candidates useful orientation to the organization, providing the required on-the-job education and training, development of effective compensation plans, provision of promotional or career development opportunities, and assisting with exit interviews. Moreover, Waal, Goedegebuure, and Geradts (2011) argue that performance management is a total or holistic approach that involves engaging everyone in an organization in a continuous process that aims at improving everyone as well as their performance, therefore improving the performance of the entire organization.
Several scholars across the globe have examined the concept of performance management and its relevance to organizations in different industries. The majority of these studies have established that the practice of performance management is crucial in improving organizational performance since it plays an essential role in helping employees to boost their productivity. Waal, Goedegebuure, and Geradts (2011) conducted a study that examined the impact of performance on the performance of non-profit organizations, specifically focusing on the Trimbos Institute. The study was informed by the recent trend of organizations implementing performance management practices since several case studies and articles have demonstrated that the methods enhance organizational results. Hence, the study sought to fill existing knowledge gaps since the articles and case studies provide limited empirical evidence that illustrates the actual effects of performance management on the financial or quantitative results in organizations. The study utilized a quantitative approach, whereby the quantitative performance information of the organization was examined before and after the implementation of performance management.
The study established that the implementation of performance management presents a positive external impact on the level of customer satisfaction, which is crucial in enhancing organizational performance. Waal, Goedegebuure, and Geradts (2011) demonstrated that financial performance majorly affects the non-financial performance aspect of a firm positively, particularly customer satisfaction. Waal, Goedegebuure, and Geradts (2011) noted that performance management leads to a better commitment by the managers and the owners, improved organizational perception, and better strategic resource deployment. These factors contribute to enhanced customer loyalty and satisfaction since the performance management helps the organization to execute its tasks more effectively and efficiently. The critical limitation of the study is that other factors apart from performance management could not be ruled out in the context of influencing customer satisfaction. However, the findings of the study support the idea that managers should consider introducing performance management in their organization if they are focusing on improving their performance.
Na-Nan, Chaiprasit, and Pukkeeree (2017) also conducted a study examining performance management in high-impact and SME high-growth sectors in Thailand. The research aimed at exploring the use of performance management in SMEs, investigating the correlational effect between human resource management and performance management in the SME and high-impact sectors, and examining the performance management solutions for the SME and high-impact sectors. The study employed a sequential explanation design in conducting the research using a mixed methods approach. The research method included both a qualitative and quantitative method. The quantitative research focused on testing the hypothesis that involved quantitative data while the qualitative research aimed at supporting the comprehension and completeness of the quantitative findings that were obtained using interviews. The study established that both high-impact and SME high-growth sectors have similar results when applying performance management processes.
The processes include planning, performance prerequisites, review, evaluation, planning, and application since the two sectors require continuous support in the context of business mentoring, funding, and management training. Further, the study established that an organization realizes increased goal achievement and employee morale if the processes of employee recruitment, retirement, and retention are appropriately implemented. Na-Nan, Chaiprasit, and Pukkeeree (2017) noted that such factors enhance the critical problems of performance management as lack of explicit goal setting, lack of employee participation, ineffective communication, unfair evaluation, and incomplete application of the evaluation results in organizations. The study, therefore, emphasizes the need for all the members of an organization to participate in the implementation of performance management to minimize the problems associated with the concept. Nielsen (2013), in a study that explored performance management and managerial authority concerning public service performance established that managerial authority in the management of human resources positively enhances performance management while the decentralization of goal setting has a negative impact on performance.
Qureshi and Hassan (2013) also demonstrated that performance management practices are crucial in enhancing the overall performance of an organization in a study that examined the impact of performance on organizational performance that focused on the case of McDonald's. The research aimed at determining whether performance management is crucial in improving employee productivity, establishing whether performance management is connected to the employee training needs, and verifying whether performance management helps in increasing the profitability and the revenues of a firm. The research utilized a qualitative approach since the approach provided for a deeper understanding of the theories, in addition to helping to obtain the relevant information in understanding the concepts. Data was mainly accomplished through semi-structured interviews. The data analysis was based on the responses obtained from the interviews.
The significant findings of the study indicated that implementing the performance management system requires the commitment of all the individuals involved in the organization. The study also established that a culture of trust and effective communication are the two most crucial aspects of ensuring the success of a performance management system. Qureshi and Hassan (2013) determined that McDonald's achieves higher performance since the implementation of the performance management system. The system facilitates higher performance since it is closely linked with the employee development and training needs as well as the reward management system. These factors are crucial in enhancing employee motivation; therefore, the performance management system boosts organizational performance by motivating an employee, which further leads to higher employee productivity.
In conclusion, based on the above analysis on the concept of performance management, it is clear that the concept is crucial in enhancing the performance of organizations, especially with the growing global competition. Most of the researchers have established that the concept improves organizational performance by boosting employee productivity and enhancing customer satisfaction. However, the idea has not been adequately explored since there is limited statistical data indicating the degree to which performance management affects the performance of organizations. Hence, more research is required in the area to give a better understanding of the relevance of incorporating the concept into critical organizational functions.
References
Lin, J., & Lee, P. (2011). Performance management in public organizations: A complexity perspective. International Public Management Review, 81-96.
Na-Nan, K., Chaiprasit, K., & Pukkeeree, P. (2017). Performance management in SME high-growth sectors and high-impact sectors in Thailand: Mixed method research. International Journal of Engineering Business Management , 9 , 1847979017718451.
Nielsen, P. A. (2013). Performance management, managerial authority, and public service performance. Journal of Public Administration Research and Theory , 24 (2), 431-458.
Qureshi, A., & Hassan, M. (2013). Impact of performance management on the organizational performance: An analytical investigation of the business model of McDonald's. International Journal of Academic Research in Economics and Management Sciences , 2 (5), 54.
Waal, A., Goedegebuure, R., & Geradts, P. (2011). The impact of performance management on the results of a non ‐ profit organization. International Journal Of Productivity And Performance Management, 60(8), 778-796. doi: 10.1108/17410401111182189
