HANDOUTS on Performance Management Systems and Performance Appraisal

Introduction: Recall your readings and comprehension on Training and Development. Try to
link our next topic on Performance Management with the previous topic on Training and
Development. How will the results of training initiated by the organization to concerned
employees bring light to performance management systems of an organization?

Performance Management System (PMS) is the process of creating a work

environment in which people can perform to the best of their abilities in order to meet a
company’s goals (Snell & Bohlander, 2014).

Performance Management is the system that provides an ongoing process of ensuring

that employees’ performance contributes to realizing the organization’s mission, goals and
strategies (Diamante & Tan, 2015).

Performance management systems involve numerous activities, and fulfill several

activities. Moreover, they are often constrained by difficulties in how they operate.

The performance management cycle has seven (7) steps. These are:

Step 1 Establish performance criteria and standards

Step 2 Clearly communicate the performance criteria and standards to the employee
Step 3 Monitor the employee’s job performance and provide ongoing feedback
Step 4 Document evaluation of employee’s performance
Step 5 Conduct effective performance evaluation discussion
Step 6 Provide intervention, as needed
Step 7 Redefine performance criteria and standards.

It is only when the organization goes through at least these seven steps that the
organization can claim to have performance management system. The steps has to be observe to
ensure that an employee’s contribution t the organization is aligned with organizational goals and
objectives. This performance management system works to the advantage of both the employee
and the organization.

In general, employees wake up in the morning, get ready for work and officially report to
their work thinking that they will make a contribution to the organization’s productivity. On the
part of the organization, the performance management systems enables a manager to align the
employee’s responsibilities and performance objectives with the organization’s goals and
objectives. This alignment creates the line of sight which ensures the supervisor that excellent
performance on the part of the employee will contribute toward achieving organizational goals.
 In order that performance management be effective, it should include ways by which
poor performance is addressed and corrected. An expectation for employees to perform at their
best requires the manager’s understanding and acceptance of the theory that performance is a
factor of motivation (M), ability (A), and environment (E), expressed in terms of P = M x A x E.
Hence, the presence or absence in any one of these three factors has a significant impact on
performance.

Oftentimes, when managers are asked if they have performance management system,
they would usually say that they do have a system and that they evaluate employees either semi-
annually or annually. However, conducting performance appraisal of an employee is only a
small portion of what constitutes performance management system.

Performance appraisals which are important part of performance management systems,

are the result of an annual or biannual process in which a manager evaluates an employee’s
performance relative to the requirements of his or her job. It uses the information to show the
person where improvements are needed and why. The appraisal process normally begins with
establishment of performance standards in accordance with the organization’s strategic goals.
These should evolve out of the organization’s strategic direction, and more specifically, the job
analysis and job description and specifications. These performance standards should be clear
and objective enough to be understood and measured.

Performance appraisals are therefore a tool organizations can use to maintain and
enhance their productivity and facilitate progress toward their strategic goals.

The purposes of Performance Appraisal

It has been said that “what gets measured gets done.” Performance appraisals are part of
an organizations measurement process. Good appraisal systems have the capability to influence
employee behaviour and improved an organization’s performance. Formal appraisal processes
also ensure employees get at least some feedback from their supervisors.

Appraisal programs provide input that can be used for the entire range of HRM functions
such as promotion, demotion, transfer, layoffs, and pay decisions. The practice of “pay-for-
performance” basing employees’ pay on their achievements is done by all types of organizations.
Studies have shown employees who earn performance-based pay are more satisfied.
Performance appraisal data can also be used for HR planning, to determine the relative worth of
jobs, and as criteria for recruiting particular types of employees.
 There are two most common purposes of performance appraisals, which are
administrative and developmental.

Purposes of Performance Appraisal

Developmental
- Provide performance feedback
- Identify individual strengths and weaknesses - Promote employees
- Recognize individual performance
achievements
- Help employees identify goals
- Evaluate goal achievement of employees
- Identify individual training needs
- Determine organizational training needs
- Reinforce authority structure
- Allow employees to discuss concerns
- Improve communication
- Provide a forum for leaders to help
employees
Administrative
- Document personnel decisions
- Determine transfers and assignments
- Identify performance problems and
develop ways to correct them
- Make retention, termination, and layoff
decisions
- Validate selection criteria
- Meet legal requirements
- Evaluate training programs and progress
- Assist with human resources planning
- Make reward and compensation
decisions

References:

DeCenzo, David A. and Robbins. Stephen P (2005). Fundamentals of Human Resource

Management, 8th ed., NJ: John Wiley & Sons, Inc.

Diamante, Melva M. and Ledesma-Tan, Genevieve (2015). Managing Human Resources: Local
and Global Perspectives (Outcomes-based Learning), QC: C & E Publishing, Inc.

Snell, Scott and Bohlander, Goerge (2014). Principles of Human resource Management. 16 th ed.,
Philippine Branch: Cengage Learning Asia Pte Ltd.