Principles of Performance Management
Companies want to attract and retain talented individuals. In order to do so they need to appraise (under)performance, not just hire people and hope for the best (Hunt, 2012). “Employers of choice” often have very effective performance management systems in place.
While some critique performance management systems for bringing ambiguous results at best, others argue that it can make a vital contribution to the organization in terms of enhancing individual and organizational performance (Lucas, Lupton, & Mathieson, 2006).. Whether it delivers on these promises depends on how effectively it is defined, developed and implemented (Hunt, 2012).
Definition
Appraising performance in corporations has historically mostly included addressing past results, but modern approaches adopt a strategic future-oriented focus on performance management (Lucas, Lupton, & Mathieson, 2006). Performance management is defined as “a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization” (Aguinis, 2013). The first part of the definition indicates that performance management is an ongoing process of observing and measuring behaviors of people within the organization, as well as communicating feedback, coaching, and organizing development activities. The second part states that these activities, and the performance of individuals (and teams) should be aligned with the strategic goals of the organization. Unless working towards the goals of the organization, the work is essentially useless.
Therefore, performance (the contribution of the people in the organization) should be directly linked to the strategy and goals of that organization. It is concerned with how people work, how their performance is being improved by development strategies, and how to maximize their future contribution to the company (Lucas, Lupton, & Mathieson, 2006). It is a complex task developing and implementing a performance management system which requires significant investment in terms of time and finance. While there is no universal model for performance management systems, there are some aspects which all effective systems seem to have in common. Those can be condensed to a comprehensive cycle including the following steps (Lucas, Lupton, & Mathieson, 2006):
Objective-setting
Performing and developing
Performance review
It is important to keep in mind that performance management is a continuous cycle and each performance review leads to new objective-setting.
Measurement
There are typically three different approaches to assessing and measuring performance in employees, with variation in proportion depending on organizational goals; focusing on either behaviors, results or employee traits. The “behavior approach” focuses mainly on what employees do and how it is done, the “results approach” focuses on the productivity (results), and the “traits approach” focuses on individual traits in employees (Aguinis, 2013). In order to decide which approach is most suitable, there are many situations and factors to consider. When results are not directly observable (but are perhaps in the future), or influenced by factors other than the employee’s work, it does not make sense to focus entirely on results. However, when workers and the results of their work are directly related, it can be appropriate. Likewise, if there are many ways to do …
