AN EFFECTIVE PERFORMANCE MANAGEMENT SYSTEM CAN

CONTRIBUTE IN ADDING VALUE TO AN ORGANIZATION: BY THE

PERFORMANCE MANAGEMENT THEORIES
BY
SAMANTHA

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 ABSTRACT
This report is mainly based on how the effective performance management system adding value
to the organization and the theories of the effective performance management implementation in
the organization and how the organization gaining through this effective performance
management systems in the organizations.
The main concepts of the effective performance management and the elements of the effective
performance management system in the organization and the control theory, goal setting theory
and the social cognitive theories impact on the organizational performance and adding value to
the each and every sector of the organization. These theories provide the proper idea for the
organization to establish the effective system in the management.
Finally the effective performance management system adding more value to the organization in
every processes in the organization and increase the profitability of the organization by reducing
the wastages and the idle time of the organization by these value adding works.

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Contents
1. Introduction 4
1.1 Main purposes of effective performance 5
1.2 Importance of effective performance 6
1.3 Elements of effective performance 6
2.0 Theories for effective performance 7
2.1 Goal setting theory 7
2.2 Principles of goal setting theory 8
2.3 Effective performance management cycle in goal setting theory 8
2.4 Control theory 10
2.5 Designing effective performance management in control theory 11
2.6 Social cognitive theory 13
2.7 Benefits of effective performance management theories 13
3.0 Conclusion 15
4.0 References 16

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 1. INTRODUCTION
Individual and team goals are connected with organizational goals in an effective performance
management system, ensuring that individual, team, and organizational performance is improved
through effective human resource management strategies. Through the formulation of individual
and team goals that are connected with the organization's strategic goals, an effective
performance management system guarantees that there is a continual process of performance
enhancement. This entails evaluating and evaluating performance as well as ensuring that
information, skills, and abilities are trained and developed. (Kozlowski and Chao, 2012)
A critical element to remember is that performance management is a year-round activity, not a
one-time event. As a result, quality performance management should combine a number of dif-
ferent, integrated activities together to form an ongoing "performance management cycle,” These
are the main things which make effective performance management in the organization those are
Regular and honest feedback and reviews – The more frequent and exact the feedback, the better
the individual's performance. That's all there is to it. Employees desire regular updates on their
job, and the more information they have about their own performance, the better equipped they
are to develop and exceed.
True transformation begins with a shift in perspective, as promising as the transformative powers
of an excellent performance management system sound. Traditional performance management
processes, no matter how bad they are, are still widely used around the world. However, given
the shift in employee attitudes on the subject, the future of performance management is one
worth pursuing. Organizations need to move away from rigidity and tight adherence to policies
and procedures and toward more rational practices that emphasize simplicity, flexibility,
relationships, and communication.

A renewal of a performance management process is undeniably a significant shift in the

dynamics of an organization's culture. To have the desired influence on corporate growth, a
change of such magnitude must be spearheaded by top managers and senior leaders. Companies
who continue to use old techniques of talent attraction should contemplate what the future of
talent attraction might look like if they do not upgrade in time.

1.1 MAIN PURPOSE OF THE EFFECTIVE PERFORMANCE MANAGEMENT IN

ORGANIZATION
The goal of performance management is to provide a clear and consistent framework for both
managers and employees to operate within, resulting in enhanced productivity. This system lays
out a road to success for employees, allows for performance measurement and feedback, and
provides opportunity for training and growth.

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Management can use performance management to understand what their staff are doing and
track progress toward company goals while also offering constant feedback. Which will enhance
the employee and the productivity performance in the organization.

1.2 IMPORTANCE OF EFFECTIVE PERFORMANCE MANAGEMENT IN

ORGANIZATION
It is critical to understand what your people are doing, how they are doing it, and why they are
doing it in any organization, regardless of size. It is far more difficult for managers to effectively
lead their people without a structure in place to define responsibilities, assess individual strengths
and weaknesses, provide constructive feedback, prompt interventions, and reward positive
behavior. (Abrudan and coita, 2008)
Performance management and incentive management are two processes that smart companies
use together. The two systems share a lot of similarities, from defining roles and goals to
reviewing and rewarding employee behavior, and as a result, they work well together. Using
incentive management also ensures that the crucial 'reward' element of performance management
is completed correctly.

1.3 ELEMENTS OF EFFECTIVE PERFORMANCE MANAGEMENT SYSTEM

1. Frequency
Communication is crucial to the success of performance management. The frequency of
feedback cycles sets the tone for both organizational and individual development.
Traditional feedback cycles, which occur once or twice a year, have little to no impact on
growth. As a result, these irregularly spaced cycles result in inefficiency and a lack of
responsibility. It's the same of leaving a child alone with a box of matchsticks and hope
he learns how to light a candle rather than the entire house on fire.
The frequency of feedback cycles should be determined by the goals and expectations at
the organizational, team, and individual levels in an effective performance management
model. This allows for flexibility while also encouraging feedback to become an
important part of the employee experience.(Lebas M.J,1995)
2. Time
Time is both an important component of a performance management system and a source
of frustration during performance reviews. Documenting individual performances over
the course of a year and compressing all that information on the day of the performance
review seems a lot like delaying until the exam and cramming all your notes on the last
day, especially with traditional feedback cycles paced at long distances. It's inefficient,
and it could lead to mistakes, making the knowledge untrustworthy. Effective
performance management platforms can significantly reduce these glaring
inconsistencies. Employees and managers can count on obtaining precise and accurate
feedback with continuing feedback. Furthermore, when it comes to goal-setting,

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 companies should avoid setting inflexible timetables and far-fetched goals at the start of
the year, instead opting for effective goals with organized durations. Employees are given
the freedom and drive to work productively as a result of this.
3. Accuracy
The 360° feedback model is the best method to express this piece. A 360° evaluation, as
the name implies, provides a comprehensive picture of a person's performance. Unlike
the typical top-down method, in which input is limited to an employee's supervisors, 360°
encourages feedback from all angles. Immediate feedback, as opposed to traditional
performance reviews, helps an individual to become aware of their performance in real
time, become more self-conscious, and take appropriate steps for further progress. It's no
surprise that the 360° feedback system is used by more than 85% of Fortune 500
organizations.
4. Purpose
The golden rule of motivation is to never lose sight of what really matters. All work,
whether personal or professional, is directed toward a certain purpose. We are
continuously on the lookout for a feeling of meaning in the job we undertake as humans.
Traditional performance management models underestimated its productivity-boosting
potential. The younger labor, on the other hand, takes satisfaction in finding meaning in
whatever they do, and it is up to employers to accommodate, or rather prioritize, their
well-being. The key is to encourage your staff to invest themselves in their work in their
own unique way. On a personal level, this benefits them, and on a professional level, it
benefits all parties involved.
5. Adoptability
Elegant design is overshadowed by effective implementation. Traditional performance
management systems already fail to deliver on their promises; nevertheless, if an
organization adopts a continuous performance management process, the system's success
will ultimately be determined by how well it is implemented. There are a variety of
employee performance management software’s available, each with its own set of
features. As a result, in order for a system to effectively integrate with an organization, it
(which simply provides onboarding services) would rather go with Hum, who provides
the recruitment services the business requires. It's critical for top leaders to figure out
what kind of goals they want to achieve with the help of those tools. For example, if a
small business wishes to improve its recruitment processes, it would not use Gusto.
Adoption is also contingent on ongoing efforts to put it into practice. Because a worker is
only as good as his tools, continuous and constant efforts are essential for successful
implementation.

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2.0 THEORIES RELATE TO THE EFFECTIVE PERFORMANCE MANAGEMENT
SYSTEM
2.1 GOAL SETTING THEORY
The consequences of setting goals on later performance are referred to as goal-setting theory.
Individuals who set particular, demanding goals outperformed those who set generic, simple
goals, according to researcher Edwin Locke (Yearta et.al, 1995). According to goal-setting
theory, clear and difficult goals combined with appropriate feedback lead to improved
performance. Employees are directed to accomplish their objectives via goals. It also makes it
easier for employees to comprehend how much effort they need to put in.
2.2 PRINCIPLES OF GOAL SETTING THEORY
Setting goals necessitates the creation of an action plan. Such action plans inspire and guide
employees or teams to achieve their objectives. In the goal setting theory it should have to be
SMART. Specific, measureable, achievable, relevant and time bound. Employee performance is
improved to a greater extent when goals are specified. (Lunenburg, 2011)
These are the 5 basic principles of goal setting theory
1. Clarity: - A goal that is well-defined and measurable is more likely to be achieved than
one that is vague. To put it another way, one should be explicit about their objectives.
The most successful goals include a deadline for completing the work. Effective
performance management system should have to be shows very clarity so it’s easy to
achieve the goal.
2. Challenge: - A reasonable level of difficulty must be there in the aim. This will encourage
staff to work hard in order to reach the goal. Because the goal is difficult, it encourages
employees to explore and develop solutions to fulfill their objectives. Such a challenge
motivates employees to perform at their best.
3. Commitment: - One should make a concerted effort to achieve the desired outcome.
When a goal is shared with employees, they become more accountable for achieving it.
Employees that are committed are held accountable for their efforts. This makes them
more accountable and conscious of their activities and results.
4. Feedback: - A means for receiving information on progress toward a goal should be
established. Meetings might be held from time to time to discuss progress and roadblocks
in accomplishing the goal. If the goal proves to be too difficult, it is preferable to alter the
goal's complexity. This understanding can be gained through feedback. Its provide the
effective performance management system in the organization.
5. Task complexity: - the effective performance management system provide the sufficient
time to complete the task and provide the proper training to achieve the goal.
This model can be applied for the big organizations for longer term because it has taken some
time to complete the task
In the goal setting theory effective performance cycle used to 2.3measure the performance of the
organization

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2.3 EFFECTIVE PERFORMANCE MANAGEMENT CYCLE-GOAL SETTING THEORY

Figure 1(De Waal A.A, 2007)

The performance management cycle is an important part of attaining organizational success and
gaining a competitive advantage.
The processes of planning, monitoring, reviewing, and rewarding performance are depicted in
the effective performance management cycle. It entails year-round communication between
supervisors/managers and employees in order to promote or advance the organization's goals,
vision, mission, and strategies.

PLANNING
The planning stage is the first stage and the foundation of the entire performance management
cycle the foundation for success is created in the planning stage. Before speaking with the
employee, the management team should convene and determine the organization's annual goals
and objectives.
This includes not only the company's overarching strategy, but also personal objectives for all
employees and teams, such as career ambitions, particular tasks, targets, actions, and behaviors.
It's time to meet with the employee and establish a strategic plan for the year once the
management team understands the details of what they want the employee to accomplish.
This should be a team effort, as an employee who understands why they are being given specific
goals and duties is more likely to be invested in achieving them. The planning stage should have
to meet the SMART objective of the organization

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MONITORING
Monitoring is an important function in the performance management cycle model for attaining
the goals set out in the planning stage. However, if the monitoring is only done once or twice a
year, it will be ineffective. Management should meet with staff on a monthly or quarterly basis to
check in on progress, offer assistance if needed, aid in the resolution of any issues that may have
occurred, and revise targets as appropriate.
Poor preparation and a lack of desire are common challenges in yearly goal formulation. A huge,
distant goal can be frightening, or it can appear so far away that the employee fails to take the
necessary, concrete measures. Breaking down the goal into monthly sub-goals can make the
process move more smoothly and provide the employee a more doable assignment. Management
can more readily control this process by scheduling monthly or quarterly meetings with the
employee. Organizational goals can change during the year, and more regular meetings might
allow for the introduction of new goals that better match with the organization's aims.

REVIEWING
Management and employees meet to discuss the past year and determine whether or not goals
were reached. This is yet another opportunity to work with the employee in a collaborative
manner. The more they are involved in the other stages of the performance management cycle,
the more motivated they will be to continue working hard to meet their own and the
organization's objectives. Management will already have a fair notion of how well the person
performed during the year if sufficient monitoring was done. Management and staff can evaluate
both the end product and the process during the evaluation.

REWARDING
This the final stage of the effective performance management cycle and the performance of the
employees rewarded for their effective performance. Rewarding and recognition are the essential
for effective performance.

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2.4CONTROL THEORY
By identifying forms of control between the organization and the systems within, control theory
aids in the maintenance of the performance management system. All systems' actions should be
in sync with an organization's overarching aims and objectives, according to control theory
(Barrows and Neely, 2012).control theory mainly focus on
-Structure of the organization,
-Organizational norms and policies, for example, are behavioral controls.
-Mechanisms for assessing performance
The control theory has three control systems
1. behavior control- monitor and evaluate the actions of the employees by the employer
2. output control-employee controlled by rewards
3. Input control-its shows the effective management system of employee selection to the
organization.
Control theory aids performance management by analyzing a system's output for compliance
with a set of pre-defined parameters. In the event of any departure, the system's controller will
make the necessary adjustments. The Cybernetic model is a popular name for this approach
(Barrows and Neely, 2012). This model aids managers in maintaining control over their
employees' performance. It also delivers faster and better outcomes by monitoring and providing
feedback on a regular basis. According to the cybernetic model, if an organization can execute
control and performance more effectively and efficiently, it will be more successful.
Control theory has a wide range of applications in the business. Managers must offer precise and
difficult goals to staff in order for them to improve their performance. Organizations should,
however, avoid unclear goals that lack specific criteria and feedback (Campion and Lord, 1982).
Employees will not be able to correct their mistakes without clear feedback and suitable
standards.
As a result, organizations can use Control theory in areas like performance appraisal, team
meetings, and check-ins. In the case of human resource management, all three types of control
systems can be used to examine an employee's behavior and performance: behavior control,
output control, and input control (Marr and Gray, 1992).
By the use of the control theory organization can be able to design the proper effective
performance management system in the organization

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2.5 DESIGNING AN EFFECTIVE PERFORMANCE MANAGEMENT SYSTEM IN AN
ORGANIZATION BY THE CONTROL THEORY

This involves a review of an organization's present performance management system's efficacy.

Simply follow the five simple steps below to assess the efficiency of performance management
system in the organization. (Evans E.M, 1991)

1. Benchmarks for Performance Management Practices should be researched and

established.

Successful performance management system looks like to identify where your present
performance management system is falling short.
In order to analyze the factors that should be included in an efficient performance
management system, thorough study is required. Reading case studies of companies
that have been successful in redesigning their performance management techniques
can provide valuable insight into how to create an effective performance management
system.
Analyzing current industry performance management practices and market leading
trends can also assist in establishing a benchmark.
2. For proper performance management organizations should establish clear
business goals/objectives.
Through good performance management the company can attempt to establish clear
goals.

-Improve the efficiency of the organization

Better goals will improve the efficiency of the organization and increase the
productivity of the organization.
-Align personal and corporate goals
Through the effective performance management it will lead to
-Establish a performance-oriented culture among staff.
It will increase the proper culture among the organization and lead to achieve the
goals.
-Improve individual results
By the effective performance management system all of the individuals get better
knowledge about the system and new innovative technology in the production and
marketing techniques which will improve the productivity and sales of the products of
the organization.
-Align individual behavior with the principles and culture of the company
All of the employees work according to the culture and the individual behavior of the
organization.
-Determine your personal growth requirements.
The effective performance management system shows the personal strength and the
level of growth for each employees in the organization
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 -Associate pay with performance
It shows to the employer to how much he has to pay for his employees according to
their performance and which shows the non-financial benefit ideas to the employer
3. Define success metrics for your organization's defined goals.
It's critical to understand what defines achievement of the organization's objectives
once it's chosen what it wants to achieve through a performance management system.
To put it another way, the organization must determine what metrics will be used to
determine whether or not the objectives were met.
When we consider these objectives of the organization
PERFORMANCE MANAGEMENT MEASURES
OBJECTIVES
Enhance your team's performance -Unambiguity on what staff are expected to
do.
-Employee performance alignment
-An increase in team profitability
-Expansion of Customer Satisfaction
Boost Employee Engagement and -Employee Engagement Survey Results
Motivation -Performance Review Acceptability as a
Useful Tool
-Better Employee Turnover Rates
Decisions on Pay for Performance -Management's ability to objectively and
accurately
-analyze performance
-Pay linked to performance
Additionally, firms must agree on metrics to assess the efficacy of performance
management methods and tools, such as an automated performance management
system.
4. Examine the current performance management system that the organization
using
It's time to start collecting data and evaluating your current performance management
system once you've set the benchmarks, objectives, and success measures.
A combination of quantitative and qualitative data should be used to fully
comprehend the effectiveness of your performance management system and to
understand how to improve it. To the degree possible, data on benchmarks,
objectives, and success measurements should be obtained.
Analyze the outcomes based on the success measures you specified and the
benchmarks you wanted to accomplish after you've collected the data. Compare your
performance to industry averages. This will assist firms in determining how effective
their present performance management system is and where it needs to be enhanced.
5. Time to act on the findings.
At this point, the company has assessed the performance management system's real
capabilities, compared them to the benchmarks established, and identified any
anomalies or flaws that need to be addressed. Now is the time to act on the findings

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 and take the necessary steps to improve the current performance management
system .It is critical to include in this process the stakeholders who are directly
affected by it, such as employees, supervisors, and senior management.

2.6 SOCIAL COGNITIVE THEORY

The concept that people learn by observing others is known as Social Cognitive Theory (SCT). It
claims that when people watch another person executing a behavior and the repercussions of that
activity, they utilize that information to direct their own subsequent actions.
Social cognitive theory contain three dynamic factors which are
-Behavioral factors
-Environmental factors
-Personal factors
People, according to social cognition theory, are active agents who both influence and are
impacted by their surroundings. Personal characteristics, environmental influences, and behavior
all interact in a dynamic three-way reciprocal model of human behavior. Because it focuses on
the interaction between internal factors such as thinking and symbolic processing (e.g., attention,
memory, motivation) and external determinants (e.g., rewards and punishments) in determining
behavior, social cognitive theory has been called a bridge between behavioral and cognitive
learning theories.
The concept of self-efficacy – individuals' belief in their ability to undertake an activity – is a
basic element of social cognition theory (Bandura, 2002). The combination of outcome
expectations (the degree to which people feel their activity will lead to specific outcomes) and
efficacy expectations (the degree to which they believe they can achieve the desired outcome)
determines behavior (Bandura, 2002)
By the social cognitive theory the organization can make drastic changes in the behaviors of the
employees like motivation, health and self-efficacy by the effective performance management
system which will improve the efficiency of the production and reduction of the wastages in the
firm which will lead to profit oriented firm.

2.7 BENEFITS OF EFFECTIVE PERFORMANCE MANAGEMENT THEORIES IN

THE ORGANIZATION
1. Better basis role descriptions, expectations, and goals that are unambiguous. By the use of
effective performance which provide the better description of the job role and the proper benefit
of it as well as by the effective performance management provide the better ideas and knowledge
about the role and which will help to achieve the target very easily (Schiemann W.A,2009)

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2. Effective performance management provide the better employee motivation in the
organization by the intrinsic and extrinsic approaches.
3. Improve managerial leadership and coaching abilities by this the organization can be able to
manage any problems in the organization and the improved leadership will help to manage the
employees in the organization in the better way to achieve the higher productivity and the
reduction of the wastages in the organization.
4. Improved performance will increase productivity as well as the performance of the employees
will get boost up and which will lead to the higher productivity by the reduction of the
absenteeism of the employees and retention of the employees will increased and the cost of
production will get reduced it will increase the profitability of the firm.
5. Develop a performance incentive program that encourages achievement by this effective
performance management which will provide the better ideas to the employers to provide the
financial and non-financial rewards to employees to enhance the employee performance.
6. Emphasizes the importance of training.
7. Improves morale.
8. Aids in finding the best candidates for advancement.
9. Aids in the formation of professional routes.
10. Assists with workforce planning.
11. Employee retention is improved.
12. Provides more employee autonomy.
13. Improves transparency and accountability

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3.0 CONCLUSION
mechanism for successful performance management Improved organizational performance,
employee retention and loyalty, increased productivity, communication obstacles overcome,
unambiguous accountability, and cost savings are just a few of the benefits. Saves time and
reduces conflicts, while also ensuring efficiency and consistency. Effective performance
management also results in higher-quality products and more employee involvement in the
manufacturing process

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4.0 REFERENCES
1. Bandura, A., 2002. Social cognitive theory in cultural context. Applied psychology, 51(2),
pp.269-290.
2. Marr, B. and Gray, D., 2012. Strategic performance management. Routledge.
3. Campion, M.A. and Lord, R.G., 1982. A control systems conceptualization of the goal-
setting and changing process. Organizational behavior and human performance, 30(2),
pp.265-287.
4. Neely, A. and Barrows, E., 2012. Are you giving away your most intimate secrets when
you shop? See how Target learns about you through the power of analytics.
5. Lunenburg, F.C., 2011. Goal-setting theory of motivation. International journal of
management, business, and administration, 15(1), pp.1-6.
6. Yearta, S.K., Maitlis, S. and Briner, R.B., 1995. An exploratory study of goal setting in
theory and practice: A motivational technique that works?Journal of Occupational and
Organizational Psychology, 68(3), pp.237-252.
7. De Waal, A.A., 2007. Successful performance management? Apply the strategic
performance management development cycle! Measuring Business Excellence.
8. Evans, E.M., 1991. Designing and effective performance management system. Journal of
compensation and benefits, 6(5), pp.25-9.
9. Lebas, M.J., 1995. Performance measurement and performance
management. International journal of production economics, 41(1-3), pp.23-35.
10. Schiemann, W.A., 2009. Aligning performance management with organizational strategy,
values, and goals. Performance management: Putting research into action, pp.45-87.
11. Abrudan, M.M. and Coita, D., 2008. The Importance of Implementing Performance
Management System in Romanian Firms. Annals of University of Craiova-Economic
Sciences Series, 3(36), pp.1204-1210.
12. Kozlowski, S.W. and Chao, G.T., 2012. The dynamics of emergence: Cognition and
cohesion in work teams. Managerial and Decision Economics, 33(5-6), pp.335-354.

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