Discuss about the New Trends for Reinventing Performance Management.
The aim of this paper is to prepare a mini-literature review on one of the selected articles, “Reinventing Performance Management”. Performance management is a process in which the employees and management work together to monitor and review the work objectives. This paper presents a summary of the article and four key questions are presented. Further, a literature review is conducted in relation to the key questions identified in the article. The key question is linked with the keywords found in the research.
Every business is concerned with the performance of its employees. The employees directly hit the bottom line of every organization. This article aims at reinventing performance management. The article begins with a critique of the ‘batch style’ review process in which the managers evaluate the performance across different criterions. A study was conducted in which 4,492 managers were provided ratings by two bosses, subordinates and peers (Buckingham and Ashley 2015). It was found that there was 62% variance in the ratings due to peculiarities of perception (Buckingham and Ashley 2015). Therefore, it is very difficult to compare the ratings of different people.
In this article, Buckingham and Ashley (2015) lay out an alternative way for performance management. This article addresses how Deloitte realized that the system for evaluating the work of employees, training, promoting and paying them accordingly was not in alignment with their objectives. The article further reviews the new system that shall have no 360-degree feedback tools, no annual reviews, and no cascading objectives. Deloitte requires speed, constant learning, agility and one-size-fits-one approach in the performance management system. Therefore, Deloitte relied on three aspects- a careful controlled study of their organization, review of research in the science of ratings and simply counting the hours. One factor that stands out the most while reinventing performance management at Deloitte is frequency. It is pointed out that the optimal frequency must be evaluated on a weekly basis. Also, regular check-ins must be initiated by the team members. Transparency is recognized as one of the major issues in the performance management process. Lastly, Buckingham and Ashley (2015) redesign Deloitte’s performance management system, calling it ‘performance snapshot’ that helps the in reviewing performance accurately and reliably.
Four critical components form the key research questions:
What are the best ways to judge the employee’s performance that has a significant impact on your business?
According to Buckingham and Ashley (2015), Deloitte adopted three ways to judge employees’ performance- a careful controlled study of their organization, review of research in the science of ratings and simply counting the hours. According to Spence and Keeping (2013), employee performance ratings are influences by several factors such as rater cognitions, measurement and rater volitions. The author describes the theory of planned behaviour in which a strong relation is established between intentions and behaviour. Performance appraisals are complex and the managers’ intentions of performance ratings is getting prominent. The study argues that the behaviour for each employee is rated. A numerical rating scale is beneficial as the organizations can customize the rating based on the importance of characteristics (Spence and Keeping 2013). However, when the managers’ give lower ratings to the employees’, it may leave them disappointed. Ratings can help in comparing multiple employees and identify the areas of improvement. Spence and Keeping (2013) have formulated a model that explains the rating intentions and integrates the justifications with the current appraisal processes. It is argued that the planned behaviour is a psychological theory for understand and predicting behaviour. This model is designed to avoid conflict that is the most common result in rating system (Spence and Keeping 2013).
Therefore, rating system can be considered as one of the most effective techniques to evaluate employee performance. Without accurate evaluation of employee performance, their performance cannot be improved.
According to Buckingham and Ashley (2015), the three items that have high correlation in a high performance team are- commitment to do quality work, motivation towards achieving organizational mission and opportunities to use the strengths. The article states that the most powerful item amongst the three is opportunities for the employees to use their strength. According to Vural, Vardarlier and Aykir (2012), every organization requires talented employees to maximize the organizational performance. It is not problematic to look for talent or manage them, but to offer them retention so that the performance can be high, permanent and sustainable. The study conducted by Vural, Vardarlier and Aykir (2012) was on 123 middle and senior managers. This study was conducted to understand the policies of the organization and measure the employee commitment. It is argued that organizational mission attracts talent and creating strategies to retain the talented employees in the organization. Talent management involves high motivation, high value and commitment. The research study showed results that talent management leads to high performance teams. The two hypotheses were proven- firstly, the organizational commitment level increases if the talent management can be integrated with performance evaluation; secondly, the level of organizational commitment is dependent on company types (Vural, Vardarlier and Aykir 2012).
Therefore, retaining the talent is necessary in the organization for building high performance teams. The strengths of the talented employees must be used by retaining them that links to the main research question.
According to Buckingham and Ashley (2015), Deloitte reinvented its performance management approach to one-size-fits-one. The research study found that the employees are left waiting and powerless when one-size-fits-all approach is followed. According to Hou, Priem and Goranova (2017), the management must create standardized practices for the pay plans and align the employees’ pay according to the goals. The study is specifically focused on the pay plans of CEO. Hou, Priem and Goranova (2017) build theories proposing that CEO compensation varies over tenures and the over-standardization of their plans can be harmful for their shareholders. The research study had 500 companies as sample between the years 1998 to 2005 that compared size and firm performance (Hou, Priem and Goranova 2017). The research study shows the declining benefits to shareholders when the employees are paid compensation based on performance in the form of bonuses and options. It is argued that the increase in CEO tenure has an opposite effect on salary pay. The study finds that CEO pay types vary over the CEO tenure. It is found that the increasing standardization of CO pay plans can create a misfit between the shareholders and CEO interests. Therefore, the rich information may be withheld while designing the compensation for CEO (Hou, Priem and Goranova 2017).
Therefore, the future of performance management relies on one-size-fits-one approach and not one-size-fits-all. The study links with the main research question as the firms are increasingly adopting the one-size-fits-one approach as the standardized approach is a misfit in the organization.
According to Buckingham and Ashley (2015), the existing performance management approach did not drive employee engagement or high performance. According to Kromrei (2015), that annual performance appraisal process is ubiquitous in nature. There is a need to mitigate evaluation biases so that performance can be improved accurately. The annual performance appraisal process is not preferred by both the supervisor and employee. This study focuses on two participants to maximize the efficacy of the performance evaluation efforts in the organization. Firstly, Kromrei (2015) describes the evaluation rater in which the level of performance is evaluated. The ways to reduce biases are by raising awareness to potential biases. Also, performance dimension training can be provided to educate the raters. Further, Kromrei (2015) considers the individual performer in which self-assessment plays an active role. This engages the employees thereby providing competitive advantage. The employee participation can be increased by the self-appraisal process that reduces defensive behaviour (Kromrei 2015).
Therefore, self-assessment and rating methods can help in engaging employees thereby reducing biases. Performance evaluation is an essential process, but it is necessary to increase trust in the process that are appreciated by all and improves evaluation outcomes.
Conclusion
Conclusively, this paper reviews the findings of several authors and researchers in relation to performance management. Like Deloitte, every organization in need must redesign its performance management system. Retaining the talent is necessary in the organization for building high performance teams. Rating system can be considered as one of the most effective techniques to evaluate employee performance. The future of performance management relies on one-size-fits-one approach and not one-size-fits-all. Self-assessment and rating methods can help in engaging employees thereby reducing biases/
References
Buckingham, M. and Goodall, A., 2015. Reinventing Performance Management. [online] Harvard Business Review. Available at: <https://hbr.org/2015/04/reinventing-performance-management> [Accessed 1 May 2017].
Hou, W., Priem, R. and Goranova, M., 2017. Does One Size Fit All? Investigating Pay–Future Performance Relationships Over the “Seasons” of CEO Tenure. Journal of Management, 43(3), pp.864-891.
Kromrei, H., 2015. Enhancing the Annual Performance Appraisal Process: Reducing Biases and Engaging Employees Through Self-Assessment. Performance Improvement Quarterly, 28(2), pp.53-64.
Spence, J. and Keeping, L., 2013. The road to performance ratings is paved with intentions. Organizational Psychology Review, 3(4), pp.360-383.
Vural, Y., Vardarlier, P. and Aykir, A., 2012. The Effects of Using Talent Management With Performance Evaluation System Over Employee Commitment. Procedia – Social and Behavioral Sciences, 58, pp.340-349.
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