PERFORMANCE MANAGEMENT ( week 9 )

Introduction

The measurement of the performance of business and other organizations has long been of central interest to both managers and management accounting researchers.
However, management accounting has tended to restrict itself to considering only
financial performance, and to use frameworks and theories drawn primarily from the
discipline of economics

Theory on performance management

Performance management is a concept in the field of human resource management. “It is a continuous process of identifying, measuring and developing the performance of individuals and aligning performance with the strategic goals of the organization” (Aguinis, 2009).

There isn’t any generally accepted model of performance management. Often times experts have explained the concept in their own ways. However , according to Mabey has prescribed the model in the form of ‘performance management cycle’. This cycle has 5 elements which suggest how performance management system should be implemented in an organization. The elements of performance management system cycle includes:

1. Setting of objectives.
2. Measuring the performance.
3. Feedback of performance results.
4. Reward system based on performance outcomes
5. And amendments to objectives and activities (Mabey et al, 1999).

Other authors however also have a differrent concept and explanaiation of an ideal Performance management theory. One of whom is Salaman , who stated that there are two theories underlying the concept:

• The goal setting theory
• Expectancy theory

The Goal setting theory : had been proposed by Edwin Locke in the year 1968. This theory suggests that the individual goals established by an employee play an important role in motivating him for superior performance. This is because the employees keep following their goals. If these goals are not achieved, they either improve their performance or modify the goals and make them more realistic. In case the performance improves it will result in achievement of the performance management system aims (Salaman et al, 2005).

The expectancy theory : had been proposed by Victor Vroom in 1964. This theory is based on the hypothesis that individuals adjust their behavior in the organization on the basis of anticipated satisfaction of valued goals set by them. The individuals modify their behavior in such a way which is most likely to lead them to attain these goals. This theory underlies the concept of performance management as it is believed that performance is influenced by the expectations concerning future events (Salaman et al, 2005).

Key points and challenges of Performance management

In order to discuss further on Performance management , a quick look at understand what is ‘ performance appraisal ‘ and its uses. Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development.

The main purpose of appraisals is to provide constructive feedback.

Evaluation

Companies can use performance appraisals to evaluate employees on how they have performed against the goals and objectives stipulated by their managers. Appraisals are also useful for setting expectations for the upcoming year. Appraisals supports and encouragements can motivate employees to try even harder in the months ahead. Companies may also evaluate employees on their teamwork skills.

Development

Evaluating an employee’s performance is about identifying performance gaps, but the development is about filling in those gaps. For instance, if an employee needs to work on his time management skills, the employer could organize a training session for all employees who need help in organizational skills. Businesses can use performance appraisals as the basis for career development plans, including the identification of skills and training that employees would need to progress up the ranks in a corporate hierarchy.

Recognition

Companies may also use performance appraisals to recognize outstanding employees. For example,if an employee has been on a consistent high performance work rate , management mentoring program and receive pay raises. However, consistently under-performing employees may be demoted or terminated. Whenever possible, companies should provide written appraisals because formal records are important for preparing future appraisals and in legal procedures.

Employee Feedback

Appraisals can also be useful for gathering employee feedback. For example, companies sometimes ask employees if they are satisfied with their career development plans and what additional training they might need. This kind of feedback helps human resources and senior management with career planning.

CHALLENGES OF PERFORMANCE MANAGEMENT

Establishing the right metrics. The metrics should be measurable, and they need to tie into the strategic business plan of the organization. There should also be a balance between short-term and long-term metrics – especially when it comes to skill development.

  Leadership and Management commitment

The Leadership and Management challenge has a huge impact on integrating and aligning a management system to deliver a comprehensive performance management system. The commitment and understanding of leadership and management of the requirements for achieving a workable performance system is critical to performance success.

Managing poor performance

The management of poor performance is normally a reactive action, but in many cases it is delayed and therefore turns into a discussion that is difficult to make relevant. Another reason poor performance is not managed on time is the lack of valid measurements and the collection of required evidence and measurement data.

CASES INVOLVING PERFORMANCE APPRAISAL

The following cases below were reviews gotten from experiences of employees about the unfair treatment they got during their performance management reviews.

CASE 1 :

“Every three months, I’m required to come up with a list of three new goals. I am required to accomplish them by the next quarterly review. They must be tangible, actionable, challenging goals. We are reprimanded if we don’t meet them. However, there is not a single incentive to do them. My organization has not given merit-based raises for close to a decade. There is no path for growth within the company, and people who have been here for decades still make extraordinarily low salaries. It’s demoralizing and demeaning to be required to accomplish big new goals every quarter, without any hope for reward in exchange. I feel depressed and under-valued the week before and after each review.”

CASE 2 :

“In one of the organizations that I worked in, we were asked to fill out pages of answers to open ended subjective questions. We did. Only to find out later that our manager had already filled in his ratings before he left for a vacation a week before we started writing the reviews. Our painstakingly written answers and response had absolutely no purpose apart from making us feel like we were writing something up. It was the last time I wrote anything more than a single line in my reviews there.”

References

In-text reference : (Aguinis, Herman 2009 ). List of references : Aguinis, H. 2009 . 2nd Edition. Performance Management. Dorling Kindersley India Pvt. Ltd .URL : https://www.researchgate.net/publication/232523931_Performance_management_2nd_ed Accessed 23.02.2020

In-text reference: ( Gomez-Mejia, Balkin and Cardy 2016). List of references: Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. 2016. Managing Human Resources. Global Edition 8/E. Pearson. London. ISBN-10: 1292097248 • ISBN-13: 9781292097244. URL: http://ezproxy.haaga-helia.fi:2048/login?url=http://www.dawsonera.com/depp/reader/protected/external/AbstractView/S9781292097244 Accessed 23.02.2020

KPMG Professor of Accounting, The Management School, Lancaster University, Lancaster LA1 4YX, U.K. Accessed 23.02.2020

In-text reference : (Pulakos , 2004 ). List of references :Pulakos Elaine D. Performance Management. A road-map for developing, implementing and evaluating performance management systems. URL : https://www.shrm.org/hr-today/trends-and-forecasting/special-reports-and-expert-views/Documents/Performance-Management.pdf Accessed 23.02.2020