PERFORMANCE MANAGEMENT

How would you describe "good practice" in performance management in today's work organizations? What processes, strategic planning, measurement approach, and skills would you recommend? Illustrate your answer with at least one real life case example.

Name: Ngo Kim Long ID Student: 000799080 Lecturer: Bui Phi Hung

Table of Contents
1. Introduction ...................................................................................................................... 1 2. How is the good practice in performance management system?...................................... 1 3. Performance Management Process................................................................................... 2 3.1 Prerequisites ............................................................................................................... 3 3.2 Performance Planning ................................................................................................ 3 3.3 Performance Execution .............................................................................................. 3 3.4 Performance Assessment ............................................................................................ 4 3.5 Performance review.................................................................................................... 4 3.6 Performance renewal and recontracting ..................................................................... 4 3.7 McDonalds performance process .............................................................................. 4 4. Strategic Planning............................................................................................................. 6 4.1 Definition and the importance of strategic planning .................................................. 6 4.2 How is a strong strategic planning ............................................................................. 7 4.3 McDonalds plan to win ............................................................................................. 7 5. Measurement Approach ................................................................................................... 7 5.1 Behavior approach...................................................................................................... 7 5.2 Results approach......................................................................................................... 8 5.3 Trait approach ............................................................................................................ 8 5.4 McDonalds performance measurement..................................................................... 8 6. Performance Management Skills...................................................................................... 9 6.1 Coaching..................................................................................................................... 9 6.2 Observation and documentation of performance ....................................................... 9 6.3 Giving feedback ....................................................................................................... 10 6.4 Performance review meetings .................................................................................. 10 6.5 McDonalds Advanced Operations Course .............................................................. 10 7. McDonalds Challenge in Performance Management................................................... 10 8. Conclusion...................................................................................................................... 11 References .......................................................................................................................... 12 Appendix: Case Study ........................................................................................................ 14

1. Introduction
Performance management is very important for organization to integrate organizational management and employee performance. When the organizations take advantage of this system effectively, it will become a good management tool to support and improve organization's overall business goal (Bhattacharyya, 2013). However, in fact, both a manager and an employee at very organizations have many difficulties in performance management system and it will lead to a poor implementation. This can result in serious problems that are damaging relationship between manager and employee, causing high cost and adversely effecting organizational functioning. For these reasons, how to implement good practice in performance management becomes one of the most important questions of manager in recent year (Pulakos, 2009). This study will describe "good practice" and also analysis the strategy of the McDonald's to clarify and provide some useful information for the good performance management system.

2. How is the good practice in performance management system?

According to Axson (2010), the essence of performance management is not only just about the quality of the plan but also about the strategy execution process. Nevertheless, many organizations try to pursue a perfect plan with good budget and they forget the changes of the world when they begin execution. Some changes in people's relationship with technology, the evolution of market and business model, globalization, etc. have placed great pressure on managers to adapt these complexity changes. To face of such challenges, the managers need to establish clear management system with set of criteria that fit organizational goals. A good practice in performance management must be met certain requirements which include matching the organizational capabilities and skills, controlling risk management and taking advantages of new technologies. In addition, this management system must produce a measurable change in performance in almost any situation, apply to a series of organizations and be proven in practice. Especially, the state of being capable of functioning effectively in an uncertain and complex world is one of important factors that affect to effectiveness of performance management system (Axson, 2010). Finally, these

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factors will be clarified through many steps to create a good performance management that include processes, strategic planning, measurement approach, and skills.

3. Performance Management Process

Recently, Aguinis (2012) outlined performance management is an ongoing process of maintaining organizational effectiveness. So it never ends and becomes a critical part of organizational strategy. Performance management process includes six closely related components and be shown in Figure 3.1. This model helps make clearly each of the important parts of the process. All these components play a critical role in the process, which is why the process can fail or suffer if one of these components does not perform well.

Figure 3.1 Performance Management Process Prerequisites

Performance Planning

Performance Execution Performance Assessment

Performance Review

Performance Renewal & Reconstructing

Source: Adapted from Aguinis (2012)

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3.1 Prerequisites
The first component in Figure 3.1 starts with prerequisites. There are two critical prerequisites that include the identification of organizational mission and strategic goals and the completion of job in question for the targeted positions. Once the mission and strategic goals for entire organization have been established, each department in the company helps employees have an objective compatible with the organizations overall mission and objectives (Aguinis, 2012).

3.2 Performance Planning

The performance planning, second component of the performance management process, involves the consideration between the manager and the employee of how the latter is expected to perform in terms of results and behaviors as well as development plan (Aguinis, 2012).

3.3 Performance Execution

When performance planning has been completed, it is time to execute the plan. In performance execution process, the employees and managers have some important responsibilities for achieving organizational objectives (Aguinis, 2012). Table 3.1 Responsibilities in performance execution

Employee Show commitment to gain goals Solicit performance feedback and coaching Communicate with the supervisor openly and regularly Collect and share progress toward gaining goals Prepare for actual review

Manager Observe and document employees performance Update and revise changes about the initial standards and objectives Provide regular feedback Provide provision of required resources properly Reinforce employees behaviors effectively

Source: Adapted from Aguinis (2012) Moreover, to ensure an effective performance execution system, a midterm review should be given to ensure that this system is on track (Grote, 2002).

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3.4 Performance Assessment

Performance assessment is one of important elements of a comprehensive paradigm for organizational development through effective performance management systems (Alston and Mujtaba, 2009). However most of people think that the performance assessment is simple required by the personnel department in which manager fills out appraisal employee's form. Then this information is used for giving feedback and justifying (Grote, 2002). In fact, the manager and employee take ownership in evaluating performance. Beside that other sources such as the performance information from peers or subordinates can be used to build the authenticity in the process. In addition, self-appraisals are considered as an important factor to reduce an employee's defensiveness, enhance employee satisfaction, and also increase perceptions of accuracy and fairness (Aguinis, 2012).

3.5 Performance review

The performance review meeting involves the formal evaluation between the manager and employee to reflect on past performance as the basis for planning individual revision and improvement. Furthermore, an effective meeting should also focus a discussion of goals and development plans that the employee will be expected to achieve in the future (Aguinis, 2012). In addition, the managers and employees should not avoid negative feedback in the meeting. Because it will convey the message that mediocrity is acceptable in performance and it is not fair to the top performers in company (Smither and London, 2009).

3.6 Performance renewal and recontracting

The performance renewal and recontracting is the final stage in the performance process. According to Aguinis (2012), this phase supports a manager and an employee to consider revision of the performance plan by using all information that gained from the other phases in the previous cycle. Boarder system data are used to identify needed changes in between individual performance goals and organizational strategic priorities.

3.7 McDonalds performance process

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Figure 3.2 McDonalds performance process

Source: Compiled by author "Be our customers' favorite place and way to eat and drink" is McDonald's brand mission. After McDonald's managers at all hierarchical level have identified their organizational mission, they pursue it by developing goals and strategies that would support to achieve this mission (Bhattacharyya, 2013). The mission statement at organizational level is the firm foundation to develop the strategies for departments and units (Smither and London, 2009). For this critical reason, managers not only discuss organizational goals and strategies but also explain the importance of these goals to employees (Bhattacharyya, 2013). In this case, McDonalds has linked its departmental mission with the organizational mission to identify and design individual job that how to fit the organizational mission of each employee in the company. 5|Page

Then, McDonalds has initiated an performance planning that support the organization's business goals by asking departmental managers to attend the curriculum at Hamburger University to gain knowledge, skills and abilities are required (McDonalds, 2013a). Then these managers discuss what they have learned and how it applies to agree upon goals in the performance planning stage with their subordinate and employees. In other words, McDonalds has provided a workplace that supported high performance to ensure that development of employee is a focus in performance planning stage. After organization executes this plan, they begin conducting employee performance assessment. McDonalds has used a scorecard that includes five categories: nutrition and well-being, sustainable supply chain, environmental responsibility, employee experience and community to support managers in evaluating the performance (McDonalds, 2011). In addition, these criterions are also used as an effective tool to ensure current performance of individuals and groups that fit the organizational objectives. Finally, McDonalds will conduct evaluation meeting and consider revision of the performance plan that how fit organizational strategic priorities.

4. Strategic Planning
4.1 Definition and the importance of strategic planning
Strategic planning is a management tool to support organization for identifying organization's present and building commitment to the organization's future goals within the changing environment (Aguinis, 2012). Beside a definition involves making decision is described by Bryson (2011), strategic planning is a solid platform to make important decisions and actions that guide organization what should do, why do it, what do it for. This is a critical factor to ensure that organizational employees are working toward critical organization's goals. The careful preparatory step for a strategic planning is very important to help organization survive in todays dynamic and competitive environment (Fernando, 2013). Besides, strategic planning also helps the organization define identity in a sector, enhance the focus on the environmental changes, improve the way people work together, create new options and make the specific plan for the activities of all organizational employees (Aguinis, 2012).

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4.2 How is a strong strategic planning

A strong strategic planning ensures that organization must have the clear desired direction and the priority actions to gain toward that direction. That plan should provide a clear blueprint for a strategic action that supports all important organizational decision-making. Moreover, a strong strategic planning would include not only milestones to measure the progress but also organizational marketing to get support from the public and donors (Rogers, et al., 2001).

4.3 McDonalds plan to win

When referring to the success of the strategic planning, it is hard to find better example than McDonalds. In 2003, McDonalds faced the potential downfall when they met many weaknesses from the external environment that included market saturation, price competition and food costs. Especially, when most of consumers think fast food is unhealthy, they turned to healthier options with more upscale food (Enz, 2010). This pressure affected to McDonalds strongly and it was a time for McDonald's to rethink how they can get back on track. To abate these troubles, they have built a new program that called "Plan to win". The core value of this strategic planning is creating deeper connection with their consumers through five Ps of marketing. They have offered varied products for customer demand, upgraded contemporary stores, balanced value pricing with more expensive items and implemented series of bold and innovative promotions (Enz, 2010). By this plan, McDonald's not only continues to focus on their core competency that is burger but also increases the competitive ability in fast food industry.

5. Measurement Approach
There are three approaches that include behavior, results and trait to measure performance in organization. Depending on specific situations, organization can consider to use a single approach or combination of approaches to measure employee's performance (Aguinis, 2012).

5.1 Behavior approach

The behavior approach focuses on what an employee does. This approach is not the best choice for most of condition. So, it is the most appropriate to use this approach to measure performance when some conditions are met. These conditions include spending a long time to achieve the desired outcome, the link between behaviors and the desired outcome

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is not clear, desired results are distant in the future and the occurrence of conditions that beyond the employee's control leads to poor outcome (Aguinis, 2012).

5.2 Results approach

According to Aguinis (2012), a results approach emphasizes the specific desired outcomes and it is not focuses on how the work is done. This approach is usually perceived to be a fair way to measure employee performance because the results not only can be monitored more easily than observing behavior but also can be shown objectivity higher than behavior approach. The results approach will be used more effectively when employees have enough needed skill to do work. Besides, the obvious link between specific behaviors and certain results will be appropriated to adopt this approach. Furthermore, results show consistent improvement over time and performing the right job in many ways are two necessary conditions when organization applies this approach to assess performance (Aguinis, 2012).

5.3 Trait approach

The traits approach emphasizes the individual performers abilities and personality styles that remain stable over the individuals life and cannot be changed. This approach would be very appropriate to assess and hire people with the necessary traits for the specific positions to drastically transform its own organizational structure. However, a main disadvantage of this approach is that traits may not lead to desired behaviors or results even that traits are positive (Aguinis, 2012).

5.4 McDonalds performance measurement

To success in business, McDonalds has used both results approach and behaviors approach to measure their employee performance. There are many reward opportunities for managers when they achieve desired outcomes at McDonalds. McDonalds provides each restaurant manager several business principles in many areas such as customer service, marketing, and restaurant image. These managers will pick some principles that they needed to focus on for increasing organizational reputation and revenue in their local market. At the end of the year, the annual profitsharing of manager was based on how well the manager met its goals as well as on the manager's operating income (Hellriegel and Slocum, 2009). By the results approach, McDonalds not only retains talented managers for the organizational development but also increase the reliability of the organizational performance measurement system. 8|Page

In addition, McDonalds also has identified employee behaviors that are reviewed and used to encourage certain results. In this case, McDonalds tries to increase the customerservice quality by employees. To encourage employees to serve customers more effectively, McDonalds has designed "crew person of the year" for the best employee with the best service style. A racetrack that includes several evaluation standards such as customer feedback and nomination of restaurant manager was created among employees. When an employee achieves that award, he/she will receive 100$ gift certificate (McDonalds, 2013b). This approach not only creates big motivation for employees but also influences employees behavior positively.

6. Performance Management Skills

Manager must prepare several important skills to manage employee's performance effectively. These skills include coaching, observing and documenting performance precisely, giving feedback, and operating performance review meetings. It can be guided to employees for desired outcome in performance (Aguinis, 2012).

6.1 Coaching
Coaching is an approach to unlock employee's potential to maximize their performance (Whitmore, 2009). It is an ongoing process in which manager guides employees how to perform well, how to improve the performance and how to enhance its confidence and competence for employees. In addition, when employees have the problems, manager should support but not control them, motivate them to overcome those problems and then rewards employees with good performance (Aguinis, 2012).

6.2 Observation and documentation of performance

The continuity of observation and documentation is an important requirement for increasing the effectiveness of employee performance system. This means that manager must observe their employee's performance throughout the year, not just in the few days preceding evaluation meetings (Delpo and Guerin, 2013). The good and bad of employee behaviors must be documented to enhance the trust between managers and employees, serve idea for the development plan and become the effective tool to handle the litigation (Aguinis, 2012).

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6.3 Giving feedback

Feedback for employees can help them build confidence, develop competence and enhance the link between employees and organizational expectation (Aguinis, 2012). According to Buron and Mann (2007), an effective feedback provides the important and necessary information that employees need to develop on their strengths and to improve their weakness. In addition, a feedback becomes most useful if it be given timely, frequent, specific, verifiable, exactly reflected employee's performance and tied closely with consequences of behaviors and results. Besides, manager should not avoid negative feedback and give it early when the problem in bad performance is still manageable (Aguinis, 2012).

6.4 Performance review meetings

During the performance review meetings, manager plays the conflicting roles of being judges and coaches at the same time. There are six separate formal meetings and it sometime is merged into one or two time. However, it is better if manager separate the meeting to help employees can focus on only issue at the time (Aguinis, 2012).

6.5 McDonalds Advanced Operations Course

McDonalds Advanced Operations Course (AOC) is a training program that provides skill development in increasing communication and interaction of managers with employees. The teaching methods in this course include video feedback and small group exercises to improve the understanding of the role of communication. In addition, the purpose of this course includes setting goals, diversity management, team building, and employee development. In summary, McDonalds is a typical example that emphasis the importance of communication between managers and employees through the training manager program.

7. McDonalds Challenge in Performance Management

Although McDonald's has introduced a well-designed performance management system, this system still faces with some challenges. At many developed countries, many people change their daily habits to eat healthier food; it leads to the saturation of fast food market. So, McDonald's has continuously changed business strategy to improve organizational image and the quality of food. However, performance management will gain a firm

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platform when this system matches the pattern and structure of organizational business strategies (Kandula, 2006). For this reason, the change of organizational strategy has a direct effect on the performance management system. Besides, hiring many temporary and seasonal employees is a weakness in the McDonald's strategy. Because, the peak performance of these employees will only occur after several months and the managers must spend a significant cost to train them. Furthermore, these employees who are student usually tend to quit their job after several months to find another job with higher salary. According to Kandula (2006), planning and execution of performance management system need the enthusiasm of all employees and sometimes many years of hard work. Therefore, making sure new employees stay with firm is an investment that must be made.

8. Conclusion
Performance management system help organization measure how effectively the employees are contributing towards organizational goals. However, it is seem to be hard work due to facing a world of unprecedented speed of change. McDonald's has tried to survive and develop in fast food industry with competition at high level, especially the change of people's perception about fast food. Their strategies in performance management not only help them to overcome difficult times but also enhance employee's performance. However there are many challenges still lie ahead. So, it is important to understand the main objective as well as the core value of organization to design a performance management system that fit organizational goals and mission. It will become a solid foundation for future development.

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References
Aguinis, H. (2012) Performance Management. 3rd ed. United States of America: Pearson Education. Alston, B.A. & Mujtaba, B.G. (2009) Performance Management Execution for Effective and Continuous Employee Appraisals. Journal of Business and Economic Research, [ejournal] 7(9). Available from: http://journals.cluteonline.com/index.php/JBER/article/view/2332 [Accessed on 1 December 2013]. Axson, D.A.J (2010) Best Practice in Planning and Performance Management: Radically Rethinking Management for a Volatile World. 3rd ed. United States of America: John Wiley & Sons. Bhattacharyya, D.K. (2013) Performance Management Systems and Strategies. India: Pearson Education. Bryson, J.M. (2011) Strategic Planning for Public and Nonprofit Organization: A guide to Strengthening and Sustaining Organizational Achievement. 4th ed. United States of America: Jossey-Bass. Buron, R.J. & Mann, D.M. (2007) Giving Feedback to Subordinates. United States of America: Center for Creative Leadership. Delpo, A. & Guerin, L. (2013) Dealing With Problem Employees: A Legal Guide. 7th ed. United States of America: Nolo. Enz, C.A. (2010) Hospitality Strategic Management: Concepts and Cases. 2nd ed. Canada: John Wiley & Sons. Fernando, A.C. (2013) Business Environment. India: Pearson Education. Grote, D. (2002) The Performance Appraisal Question and Answer Book: Survival Guide for Managers. United States of America: Amacom. Hellriegel, D. & Slocum, J.W. (2009) Organizational Behavior. 12th ed. United States of America: Cengage Learning. Kandula, S.R. (2006) Performance Management: Strategies, Interventions, Drivers. India: Prentice Hall. McDonalds (2011) McDonalds 2011 Global Sustainability Scorecard [online]. Available from: http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Sustainability/Sustainabi lity%20Library/2011-Sustainability-Scorecard.pdf [Accessed 1 December 2013].

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McDonalds (2013a) Our Curriculum [online]. Available from: http://www.aboutmcdonalds.com/mcd/corporate_careers/training_and_development/hamb urger_university/our_curriculum.html [Accessed 1 December 2013]. McDonalds (2013b) Annual Employee Awards [online]. Available from: http://www.mccalifornia.com/12191/20133/Annual-Employee-Awards/ [Accessed 3 December 2013]. Pulakos, E.D. (2009) Performance Management: a new approach for driving business results. United Kingdom: Wiley-Blackwell. Rogers, G., Finley, D.S. & Galloway, J.R. (2001) Strategic Planning in Social Service Organizations: A Practical Guide. Canada: Canadian Scholars Press. Smither, J.W. & London, M. (2009) Performance Management: putting research into action. United States of America: Jossey-Bass. Whitmore, J. (2009) Coaching for Performance: Growing Human Potential and Purpose The Principle and Practice of Coaching and Leadership. 4th ed. United States of America: Nicholas Brealey.

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Appendix: Case Study

Source: Adapted from Bhattacharyya (2013)

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Source: Adapted from Enz (2010)

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Source: Adapted from Hellriegel and Slocum (2009)

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