A Brief Introduction to Performance Management

Performance management is a system designed to identify the ways to achieve organizational goals through constant assessment and feedback leading to improvement of employee performance. Performance management, unlike the performance appraisal or annual evaluation process, is an ongoing assessment of employees in a manner geared to match their goals to the organizational goals. It also makes strong use of goal-setting and metrics to identify progress and areas of individual strengths.

History and Evolution of Performance Management and Appraisal

Performance management systems, in various forms, have been employed for nearly two millennia. In the third century AD, the Chinese were not only using performance appraisal systems but were critiquing each other’s biases in their evaluations of their employees (Murphy and Cleveland, 4; Evans, 3). During the Industrial Revolution of the 18th century, factory managers became aware of the importance of their employees’ performance on their production outputs (Grote and Grote, 3; Murphy and Cleveland, 4). The development of the philosophy of performance evaluation systems in America has been attributed to such researchers and philosophers as Peter Drucker and Douglas McGregor, who developed ideas of management by objectives (MBOs) and employee motivation (Evans, 4; Murphy and Cleveland, 3). Spreigel reported in 1962 that by the early 1960s more than 60% of American organizations had a performance appraisal system.The system’s popularlity stemmed from the Army’s implementation of a performance management system for its officers (Murphy and Cleveland, 3). Since then, researchers have continued to develop theories of how different performance evaluation methods can contribute to the success of the organization.

Differences between Performance Management and Performance Appraisal

Employees, as well as supervisors, are often confused by the differences between performance management systems and performance appraisals. Performance appraisals, also called performance evaluations, are tools used to measure the effectiveness of an employee; most organizations conduct performance appraisals once a year during an annual evaluation process. A performance management system, however, is much more dynamic. It can use the performance evaluation tool but also incorporates other elements into the performance management cycle.

Elements of Performance Management

Armstrong identifies the five elements of performance management as agreement (of employee, unit, and organizational goals), measurement, feedback, positive reinforcement and dialogue (3). These elements ensure that the performance management process is positive, successful and a spur to employee improvement. Key to the performance management process are continued feedback and assessment, depicted shown in the performance management cycle (Figure 1).

Figure 1. The performance management cycle (recreated from Armstrong)

There are four main elements of the planning portion of the performance management cycle: role creation and development, objective planning, assessment and development planning. The first step, role creation and development, is important because an employee must understand his or her role in the organization before the performance of that role can be fairly assessed. By first defining the employee’s goal, a supervisor can then align the employee’s objectives with the organizational goals.

In performance management, employers provide continuous appraisal through feedback and re-alignment of goals based on performance. Unlike the annual evaluation process, most performance management systems are designed to meet the changing needs of both the organization and the employee. Armstrong identifies that performance assessment can include the following:

  • discussing what the job holder has done and achieved;
  • identifying any shortfalls in achieving objectives or meeting standards;
  • establishing the reasons for any shortfalls, including changed circumstances;
  • agreeing to any changes required to objectives and work plans in response to changed circumstances;
  • agreeing to any actions required by the individual or the manager to improve performance (71-72).

The organizations that have chosen to use a performance management process have often done so because the annual evaluation process has failed to meet their appraisal needs. The constant communication loop of performance management enables organizations to meet both the goals of their organization and the development and feedback needs of their employees. In contrast, the annual evaluation process, which is retrospective in nature, provides no formal opportunity for employees to receive feedback about their performance, request development to increase their efficiency or ask for new goals during the year.

Role Creation and Development

In order for performance management to be effective, an employee must have a clear understanding of his or her organizational role and responsibilities. Armstrong says that the role profile “defines the role in terms of the key results expected, what role holders are expected to know and be able to do and how they are expected to behave in terms of behavioral competencies and upholding the organizations’ core values” (50). Defining the core competencies for each employee is one step in effective goal creation because it allows the supervisor to communicate personalized feedback.

Effective and “SMART” Goal Creation

There are many different kinds of objectives in an organization. Armstrong identifies that effective objective-setting “results in an agreement on what the role holder (employee) has to achieve” and “is an important part of the performance management processes of defining and managing expectations and forms the point of reference for performance reviews” (54). He also identifies the following types of objectives (54-56):

  1. ongoing role or work objectives: based on the job description (e.g. an outreach librarian would publish a newsletter for distribution to patrons)
  2. targets: quantifiable goals that should be met (e.g. provide support for 45 reference transactions each week)
  3. tasks/projects: specified results or product (e.g. a new subject guide to be developed in 2 weeks)
  4. behavioral expectations: outlines desirable and undesirable behaviors (e.g. excellent customer service to be provided at the circulation desk at all times)
  5. values: outlines the values of the organization
  6. performance improvement: areas that need improvement (e.g. improvement needed in database management)
  7. developmental/learning: provide specific areas to meet improvement needs

Luecke notes that effective goals are recognized as important; clear; written in specific terms; measurable and framed in time; aligned with organizational strategy; achievable but challenging; and supported by appropriate rewards (7). Armstrong provides the “SMART” mnemonic: S = specific/stretching; M = measurable; A = achievable; R = relevant; T = time framed (57). The creation of appropriate, measurable goals is key to the performance management process; they provide a framework for assessment and, without them, the performance management system would fail.

Assessment of Goal Achievement

After defining roles and setting goals, the manager and the employee must determine whether the employee had been successful during the assessment period. If the goals are “SMART,” then assessing the employee’s performance will be simple: if the employee met the specific goal within the time frame designated, then the assessment would be a positive one. The most important aspect of the assessment is the performance review.

There are many ways to conduct performance reviews. Some organizations conduct reviews at certain intervals throughout the year; others create a timeline based on the goals developed (e.g. develop a new subject guide in April; meet May 1 to discuss results). Many organizations have employees conduct a self-evaluation prior to the evaluation meeting; Aguinis identifies that “self-appraisals can reduce employees’ defensiveness during an appraisal meeting and increase employee satisfaction with the performance management system, as well as enhance perceptions of accuracy and fairness and therefore acceptance of the system” (39).

Both employees and employers have historically disliked the performance review process. Armstrong reports that most appraisals have existed in a vacuum, with little or no relation to the workplace: “employees have resented the superficial nature with which appraisals have been conducted by managers who lack the skills required, tend to be biased and are simply going through the motions” (9). In order to have a productive, positive performance review, Aguinis identifies six recommended steps (41):

  1. Identify what the employee has done well and poorly by citing specific positive and negative behaviors.
  2. Solicit feedback from your employee about these behaviors. Listen for reactions and explanations.
  3. Discuss the implications of changing, or not changing, the behaviors. Positive feedback is best, but an employee must be made aware of what will happen if any poor performance continues.
  4. Explain to the employee how skills used in past achievements can help him overcome any current performance problems.
  5. Agree on an action plan. Encourage the employee to invest in improving his performance by asking questions such as “What ideas do you have for _____?” and “What suggestions do you have for _____?”
  6. Set up a meeting to follow up and agree on the behaviors, actions, and attitudes to be evaluated.

Development Planning

After creating goals and assessing progress, the employee and employer have identified areas that can be improved; the action plan for this improvement is called development planning. This development plan ensures that employees will continue to meet the needs of the organization through the identification of their weaknesses and the opportunity to address them through workshops, classes, and other educational channels.

Benefits of Performance Management

Performance management has many benefits that the traditional annual evaluation does not. Luecke identifies three reasons “why performance management matters:”

  1. Shareholders (those with a vested interest in the organization) observe better results, because the human assets of the organization are top-notch and working in unison toward key goals.
  2. Managers are more successful, because their subordinates are doing the right things correctly.
  3. Employees experience greater job security, career advancement, and fatter paychecks, thanks to outstanding performance (xiii).

Problems with Performance Management

The performance management system is designed to benefit the organization, but like any system it may meet with resistance or be unconstructively applied. Many supervisors resist the change from a simple annual performance evaluation process or no process at all to the performance management system for many reasons: a dislike of criticizing employees; lack of skill in the appraisal process; dislike of new procedures; and mistrust of the validity of the appraisal instrument (67). Other reasons the performance management system may fail because of lack of support from the supervisors and the employees, unclear goals or lack of support for professional development.

If performed incorrectly, an unsuccessful performance management system can have negative consequences on the organization. Aguinis identifies the following dangers of a poorly executed system (9):

  1. Increased turnover
  2. Use of misleading information (if performed improperly, an employee’s performance appraisal can be incorrect)
  3. Lowered self-esteem
  4. Wasted time and money
  5. Damaged relationships
  6. Decreased motivation to perform
  7. Employee burnout and job dissatisfaction
  8. Increased risk of litigation
  9. Unjustified demands on managers’ resources
  10. Varying and unfair standards and ratings
  11. Emerging biases
  12. Unclear ratings systems

Because of these incredibly negative effects that an improperly conducted performance management system can have on an organization, the system must be implemented thoughtfully and executed consistently.

Conclusion

Performance management, unlike traditional annual evaluation, provides employees with feedback throughout the year. The system allows constant re-evaluation of goals, progress and performance. This process requires more interaction between the supervisor and supervisee and encourages the professional development of the employee to meet the organization’s changing needs. While this more dynamic evaluation process is time-consuming, the increased productivity levels resulting from performance management have proven to be valuable to many organizations.

Works Cited

  • Aguinis, Herman. Performance Management. New Jersey: Pearson Education, 2007.
  • Armstrong, Michael. Performance Management: Key Strategies and Practical Guidelines. London: Kogan and Page, 2006.
  • Evans, G. Edward. Performance Management and Appraisal: a How-to-Do-It Manual for Librarians. New York: Neal-Schuman Publishers, 2004.
  • Grote, Dick and Richard C. Grote. The Complete Guide to Performance Appraisal. New York: AMACOM Publishing, 1996.
  • Luecke, Richard. Performance Management: Measure and Improve the Effectiveness of Your Employees. Boston: Harvard Business School Publishing, 2006.
  • McGregor, Douglas. “Uneasy Look at Performance Appraisal.” Training and Development Journal. June 1972: 41-47.
  • Murphy, Kevin and Jeanette N. Cleveland. Understanding Performance Appraisal: Social, Organizational, and Goal-Based Perspectives.: New York: Sage Publications, 1995.