MGT 351 Assignment-1 Title: Discuss the Differences between Performance Management and Performance Appraisal.

Submitted by: Fahmida Shahid ID No: 1010680030 Section: 7 Submitted to: Mr. Jasim Uddin (JDN) Submission Date: 11th March, 2012.

Discuss the differences between performance management and performance appraisal. Introduction:
In the management process, one of the basic components of carrying out the process of organization is the final step, which is the evaluation method. In every institution, the evaluation process is one vital method to make such institution prosper and move towards the gateway to success. Two most commonly exercised tools in the performance of the evaluation process are the performance management and performance appraisal. By their names per se, it is quite obvious that, performance management and performance appraisal are two distinct methods of evaluation.

Definition of Performance Management:

Managing employee performance is an integral part of the work that all managers and rating officials perform throughout the year. It is as important as managing financial resources and program outcomes because employee performance or the lack thereof, has a profound effect on both the financial and program components of any organization.

It is therefore, referred as the systematic process by which an agency involves its employees, as individuals and members of a group, in improving organizational effectiveness in the accomplishment of agency mission and goals. Employee performance management includes: Planning work and setting expectations, Continually monitoring performance,

 Developing the capacity to perform, Periodically rating performance in a summary fashion and

Rewarding good performance.

The Performance Management Process On the other hand, appraising performance of the employees is critical to every organizations human resources department. Performance appraisal is conducted to gauge the net worth of all its employees. But, can organizations actually avoid carrying out appraisals and, most of all, can eventually appraisal be considered as a stand-alone process or should it rather be considered part of a more systematic and more comprehensive process? In order to provide a consistent answer to this question it is necessary to define what performance appraisal is first and then identify differences between performance management and performance appraisal.

Definition of Performance Appraisal:

According to Gillian Hibberd (2011), Performance appraisal, after dismissing people, is the task managers hate to carry out the most.

Considering that appraisals are intended to plan for the incoming future, when the economic landscape is dominated by uncertainty and likely economic hardship this task is perceived by managers as even more unpleasant and trickier.

The HR department undertakes this processes usually annually in which they procure, analyze and document facts about the performances of the employees of the organization.

Apart from being distinct in definition, performance management and performance appraisal also differ in function. Performance management is carried out to basically meet the desired goals being set, at the time the planned implementations are being performed. Performance appraisal, on the other hand, functions through the standards and policies. Such standards are created basing only on those performances and implementations being done before.

Other than that, performance management and performance appraisal differ from each other in the context of their methodology. The performance appraisal tends to be more formal and structured. Although most performance appraisal systems allow customization of key performance areas or what constitutes performance based on the employee, the system nevertheless remains rigid with laid down procedures and rating parameters binding on all employees equally. Performance management in contrast, is a comparatively more casual and flexible method of evaluating an employee's performance. Like performance appraisals, it establishes guidelines on what constitutes optimal performance, but since the application is realtime, it allows for considerable relaxation or changes to such guidelines depending on the specific job situation and circumstances of the time.

HRM Researchers have also found that, performance management remains customized for the individual employees actual work, whereas performance appraisal is usually standardized based on the employee's designation, or at best on the employees job description rather than on the employees actual work exigencies.

Another viable differentiation between performance management and performance appraisal can be based on approach. In performance management, the manager of the supervisor assumes the role of a coach or mentor whereas in performance appraisal, the supervisor acts as a judge.Some performance appraisal techniques such as Management by Objectives (MBO) allow for joint setting of targets, by the supervisor and the employee, with frequent reviews, and thereby come close to performance management. Such methods, however, still fall short of the real-time management and monitoring of targets offered by performance management.

Comparing performance appraisal vs. performance management, performance appraisal sets job standards and evaluates past performance based on such set standards whereas performance management aims at managing performance real-time to ensure performance reaches the desired levels.

Being involved with the attainment of broader and long-run goals performance management can clearly be considered strategic, in contrast to performance appraisal which is concerned only with short to mid-run goals (CIPD, 2011).

Additionally, whilst performance management is embracing a whole range of activities aiming to improve the overall organizational performance, insofar as it can definitely be considered

holistic, performance appraisal is only concerned with individuals performance and as such it represents a distinct system rather than an integrated process.

More so, while performance management is done during the implementation of the planned procedures, performance appraisal is done only after such procedures have been performed. In this light, it can be claimed that performance management evaluates what is being currently performed while performance appraisal evaluates performances of employees that has already been done.

Most importantly, performance management differs from performance appraisal in terms of their scope. Performance management typically involves the daily activities of employees and functions in a continuous manner. Performance appraisal, on the contrary, is one limited process that is highly dependent on the performances of the past.

Merits and Demerits of Performance Management and Performance Appraisal:

Performance appraisal and performance management, both lead to an increase in organizational productivity, though performance management allows for real-time changes to boost productivity.

The real-time monitoring and correcting of performance in performance management help improve employee performance much better compared to the traditional performance appraisal system.

Performance management allows for linkage of performance to both long-term and short-term corporate goals. For instance, if the organization has a short-term aim to increase margins by ten

percent during the season, such a linkage comes only in the next years performance appraisal, or the linkage might not come at all. Employees tend to receive favorable reviews and bonuses even when the organization fails to achieve such short-term goals.

Performance management that focuses on actual results and on-the-job performance promotes team work. Most performance appraisal systems focus on individual achievements and focus on results rather than methods, prompting employees to place individual goals over team goals.

Performance management helps in the successful implementation of initiatives such as Total Quality Management.

Performance management eliminates rater bias, a major shortcoming of performance appraisals. In a performance appraisal the employees future depends not just on performance, but also on the goodwill of the supervisor.

Performance management focuses on actual performance instead of memories of past performance. As such it removes from the evaluation distortions that could have either helped with performing the job better or special circumstances impeding performance.

Performance management eliminates stress arising from the impending appraisals. Performance management concentrates on the immediate and most relevant concerns, whereas performance appraisal forces looking into the past, which in many causes would remain irrelevant and force time away from pressing concerns.

The apparent advantages of performance management notwithstanding, performance appraisal also has its uses and advocates.

Performance management and performance appraisal reflect the notions of hard and soft HRM. Performance Management entails controlling the employees activity, and is a hard and top-down approach which might not go down well with highly skilled and achievementoriented employees who value autonomy. Performance appraisals allow for such autonomy, indicating a soft approach.

In conclusion it can be said that performance appraisal if could turn to be, if properly designed and managed, an effective tool of performance management. It can also be argued that, in order to improve effectiveness of the overall performance management process, having crystal clear ideas about what each tool of performance management is intended to achieve will clearly help both managers and staff to welcome and appreciate a performance management process. So that, as suggested by Armstrong and Baron, resorting to an additional specific tool and component of performance management to deal with pay would surely be beneficial to make the dialog between manager and individuals about development and growth more compelling and constructive. It is, in fact, easy to imagine on which aspect an individuals mind will focus the more during a blended discussion, managers could be speaking of growth, but individuals could be more prone to think about pay, circumstance which should be absolutely avoided.