Lecture 2: Framework of Performance Management

Quad Squad
 Goal Setting Theory
The goal-setting theory states that specific and challenging goals with
appropriate feedback contribute to improved performance. Goals direct
the employee to perform their jobs. It further facilitates the employees in
understanding the number of efforts required to put in.
Moreover, Goal-setting theory is an employee-engagement tactic that
involves setting specific and measurable goals to improve productivity.
By incorporating the goal-setting theory into the workplace, you can
both improve employee performance as well as bolster employee
engagement.
Properties of Goal setting Theory
 Cont.…

 According to Locke, there are five basic principles that allow goal setting to perform
better. These include clarity, challenge, commitment, feedback, and task complexity
(Locke & Latham 2006).
• Clarity refers to a clear and measurable goal that can be achieved within a specific
timeline and within goal setting.
• Challenge refers to the goals being able to achieve a decent level of difficulty,
motivating the individual and organisation to strive for positive goal achievements.
• Commitment makes individuals or organisations put on deliberate efforts in meeting
goals. Furthermore, it also helps goals to become more achievable.
• Feedback provides information on the progress towards achieving goals. Individuals
and organisations can adjust goal setting according to the feedbacks.
• Task complexity makes the achieving of goals easier by laying down process and
steps. Goal setting can be achieved by applying all the principle stringently and
ensuring that all goals account for the principles.
Applications of Goal Setting Theory in Performance Management
 Applications of Goal Setting Theory
Include employee in goal setting: Whatever goal the organization is
selected, employee must be engaged with the goal setting process. Because
without employees, goal setting process is not worked.
Tie goals to work unit: Goals must be knot with work unit, otherwise goal
cannot be achieved.
Set specific goals: It is not important that every employee can be do any
job. So achieve the final goal the organization set the short terms goal or
specific goals for their employees.
Ask supervisors to their goals: When the employees work for achieving
goals they ask their supervisors to goals for accordingly to their needs.
 Cont.…
Hold performance meetings: every organization arrange shot time meetings in weekly or
monthly to evaluate how employees putting their performance in organization to achieve the
goal.
Ongoing feedback and coaching: Organization evaluate employees performance and give
them feedback how their work going on. And if in case some problems arise or something
needs to be modified the organization play a coach role for their employees.
Ensure focus on relevant areas: When organization achieved their goal they must be
focused on also relevant areas which connected with the goals.
Align reward system with results: The organization set a process where reward systems are
connected with employees result. When one employee doing good performance he/she
automatically receive different types of rewards. And this thing is motivating for every
employee.
 Control Theory

Control Theory helps performance management by evaluating the output

of the system for its consistency with pre-defined sets of parameters.
According to control theory, actions of all systems should be in sync with
the overall goals and objectives of an organization (Barrows & Neely,
2012).

As people receive feedback on their behavior they appreciate the

discrepancy between what they are doing and what they are expected to
do and take corrective action to overcome discrepancy.

To summarize, Control theory tells us that errors, or discrepancies between goal or
reference conditions and perceived conditions, produce action (if necessary).
 Relationship between Control Modes and
Performance
Control theory has three types of control systems:
• Under behavior control, employer monitor and evaluate the actions of the employees on
a regular basis, as per the standards of the organization and then reward accordingly.
• In case of output control the performance of an employee is controlled with rewards or
sanctions after evaluating it on the basis of organizational standards.
• Input control system seek to control the selection and training process of an employee.
However, it is important to ensure the availability of required competencies in the
employees as desired by the organization for growth and development (Krausert, 2009).

Out of these three systems, organizations can use any type of control system or a
combination of different models. Selection of the control depend on the structure,
norms, policies and administrative information in an organization.
Application of Control Theory in Performance
Management
There are various techniques of managerial control which can be classified
into two broad categories namely-
 Techniques of Controlling

Traditional Modern
Techniques Techniques

 Personal Observation  Return on Investment

 Statistical Reports  Ratio Analysis
 Break-even Analysis  Management Audit
 Budgetary Control  PERT & CPM
 Traditional Techniques
Personal Observation
This is the most traditional method of control. Personal observation is one of those techniques
which enables the manager to collect the information as first-hand information.
Statistical Reports
Statistical reports can be defined as an overall analysis of reports and data which is used in the
form of averages, percentage, ratios, correlation, etc. that present useful information to the
managers to read them more easily & allow a comparison to be made with performance in
previous periods & also with the benchmarks.
Break-even Analysis
Used by managers to study the relationship between costs, volume & profits. It determines the
overall picture of probable profit & losses at different levels of activity while analyzing the overall
position. The sales volume at which there is no profit, no loss is known as the breakeven point.
Budgetary Control
Management uses budgets to evaluate the performance of employees and their department. They
can also use budgets to evaluate and benchmark the performance of a business.
 Modern Techniques
Return on Investment
Return on investment (ROI) provides the basics and guides for measuring whether or not invested capital has
been used effectively for generating a reasonable amount of return.
Ratio Analysis
The most commonly used ratios used by organizations can be classified into the following categories:
 Liquidity ratios (ability to pay off current debt obligations without raising external capital)
 Solvency ratios (ability to meet its long-term debt obligations)
 Profitability ratios (how efficiently a company generates profit and value for shareholders)
 Turnover ratios (company’s efficiency and how it uses its assets to earn revenue)
Management Audit
Management audit refers to a systematic appraisal of the overall performance of the management of an
organization. The purpose is to review the efficiency &n effectiveness of management & to improve its
performance in future periods.
PERT & CPM
PERT (programmed evaluation & review technique) & CPM (critical path method) help in performing various
functions of management like planning; scheduling & implementing time-bound projects involving the
performance of a variety of complex, diverse & interrelated activities.
 Overview of Justice Theory
Justice theory, also known as organizational justice, refers to the extent in
assessing the perceptions of the employees regarding organization’s
performance management system.
 These performances can influence attitudes and behavior of the
employees. These behaviors can have a negative or positive impact on
employees’ performance and the organization’s success (Baldwin, n.d.).
 According to a study there is a positive correlation between
organizational justice and job satisfaction. In other words better the
employee perception of an organization, the higher the satisfaction level
of that employee (Ali, 2010).
 Properties of Justice Theory
According to Baldwin (n.d.), there are four basic principles which can enhance
employee’s perceptions of an organizational justice:

 Voice: Voice gives the chance to be heard and gives the opportunity to present the
information. This can enhance the feelings among the employees that they are being
listened to.
 Respect: Organisation should treat its employees with utmost dignity and respect.
 Interaction: Employees often seek some sort of interaction with their supervisors. It
gives the opportunity so that employee can share the information appropriately.
 Authority: Perceptions on a manager’s authority can affect organizational justice
judgments.
 Advantages of Justice Theory
On the basis of various studies it can be said that there should be a well defined
system that promotes fair and equitable justice in an organization. This type of
system is a key to improve the employee productivity and helps in realizing the
goals of an organization. The advantages of just treatment by work organizations
include:
 Commitment helps in building the strong connection between the employees and
the organization.
 Fostering job performance enhances the overall performance of the organization.
 This helps in reducing the employee’s absenteeism and enhance the level of
organizational justice (Baldwin, n.d.).
 Improved health outcomes and well-being is an important focus of
organizational psychology and management research.
 Limitation of Justice Theory

• Justice theory sometimes viewed as time-consuming and

controversial, especially when it comes to increment of pay structure
of the employees which leads to dissatisfaction among them.
• Justice Theory may involves emotions on the part of employers in
assessing the performance level of employees (Gupta & Upadhyay,
2012).
 Application of Justice Theory

 It can be said that justice theory being perceived by employees is an

important parameter for an organizational effectiveness.
 This is because it individually affects its working employee who are
responsible for carrying out different organizational tasks.
 It promotes better planning for the institution, which results in achieving
the employee goals to organizational goals.