Performance Management Approaches And Practices In Business Organizations

The Importance of Performance Management in Business Organizations

Question:

Discuss About The Vital Elements The Business Organizations?

Performance management (PM) is an effective process of assessing, evaluating and rewarding the employees’ performances, the business processes and various other factors to assess the progress towards to achievement of the set organisational goals and aims. It is one of the most vital elements of the business organisations as it helps in ensuring that whether the objectives of the organisations are meeting up or not. The performance management can also be recognized as a system which develops a link between the goals and strategies of the operations and the behaviour of the individuals (Aguinis, 2009). It is a systematic and formal process by which the organisational managers influence, evaluate and measure the performance of the employees. Measuring the employees’ performances is considered as the backbone of the management of the business organisations. it is a vital aspect as with the measurement of the performances, it is assessed that what all contributions the employees are making in the growth and success of the organisation. There are diverse set of performance management approaches which are used by the organisations for measuring and appraising the performance of the employees. It is necessary that the approach selected must be appropriate which can help the organisation to achieve adequate results and have improved performance result (Ferreira and Otley, 2009).

(Source: Dey and Giri, 2017)

There are different performance management approaches which are used by the companies to assess and evaluate the performance of the employees and to further manage the same to achieve desired results. There are basically five different types of performance management approaches that comprises of behavioural approach, result approach, quality approach, attribute approach and comparative approach. The first approach is Comparative PM Approach which comprises of ranking based performance of the employees in respect with the other employees of the organisation or the specific group (Broadbent and Laughlin, 2009). There is a highest to lowest set of performances where comparison is the key aspect of evaluating the performances of the employees. The second approach is Attribute PM Approach in which the performances of the employees are evaluated and rated on the basis of a particular set of defined parameters that includes innovation, creativity, judgement, communication, teamwork and problem solving skills (Gruman and Saks, 2011).

Third approach is Behavioural PM Approach which is one of the oldest approaches for the measurement of the performances of the employees. There are five to ten vertical scales on the basis of which the employee are scored and given ranking but such an approach is highly controversial and have associated issues of biasness from the managers’ side. The fourth approach is Result based PM Approach which is a straight-forward and simple concept where the employees are rated on the basis of the results of their performances. There is taken use of a balanced scorecard for analysing the results which are based on four perspectives i.e. growth and learning, internal and operations, customer and financial results (Verbeeten, 2008). The employees who have improved results are rewarded and recognized for their efforts. The last and the fifth approach is Quality based PM Approach which has its key emphasis upon improvement in the satisfaction level of the customers by decreasing the number of errors and attaining continuous improvements in the services offered to the customers. There is involvement of both the external and the internal factors in the assessment of the performances of the employees. The organisations take use of any of the five approaches for assessing the performance of the employees (Buckingham and Goodall, 2015).

Different Approaches for Measuring and Appraising Employee Performance

Coles Supermarkets Australia is one of the most renowned supermarket chains which is a subsidiary of Wesfarmers. The company was established in the year 1914 i.e. around a century ago and have gained recognized growth and success with its continued global expansions and high quality performance delivering workforce (Coles, 2017). To understand the aspect of performance management, the organisation selected is Coles Group as there is an extensive need to understand the role of the employees in the success of the organisation by the means of the performance management approach. The PM system for Coles is a way for ensuring that the objectives of the business are met by the employees or not. It is considered as a strategic tool for the organisation which supports to keep a focus on the organization as well as on the employees as a whole (Wu, Tzeng and Chen, 2009). The organisation take use of the result based performance management approach and is effectively implemented by the organisational managers. There is an all-inclusive process of performance management at Coles that comprises of the competencies objectives, the performance of the group, and performance of the individuals and the strategic goal of the organisation. Once there is identification of all the critical factors, the next step in the process is the way they are synchronized with the goals of the organisation for achieving increased level of success of the organisation (Van Dooren, Bouckaert and Halligan, 2015).

• The performance planning which are the initial step and the most vital element of the complete system of performance management.
• The second element is the performance review and the performance appraisal which takes place between the employees and the managers at Coles.
• The third element in the performance management system of Coles is feedback mechanism on the employees’ performance. The supervisors and the managers offer feedback to the employees on their performances by analysing the result of their performances.
• The reward and pay system of Coles has its emphasis upon the perks, rewards, annual compensation and performance linked plan.
• For the employees, there are performance improvement plans which comprises of the various aspects which can help the employees in enhancing their performances such as mentoring, coaching and training.
• The sixth element of the performance management system of Coles is the future appraisal of the workforce which comprises of the future growth and the promotion plan of the employees based upon their performances (Dwivedi, et al., 2012).

The reason behind selecting the result based performance management approach for the PM practices and process is that the company realized that the actual contribution of the employees in the achievement of the goals can majorly be evaluated through the end results of their performance only. Coles is a great retail giant who has a key aim of having upsurge sales thus the employees who have their vital support in the increase of sales and customer base are the best performers and they get entitled for the monthly, quarterly and annually rewards and appraisals. The result based PM approach help the organisation in motivating the employees to work hard and improve their performances (Kehoe and Wright, 2013). The organisation takes use of the Balanced Score Cards for analysing and evaluating the performances of the employees on the result basis. There are four basic aspects on which the managers give scores to the employees at Coles. The first aspect is the financial aspect which illustrates that in the overall sales and profit earned by the company, how much have the individual contributed which can be analysed by the achievement of their individual targets of sales. The second aspect is customer which demonstrates the relationship of the employees with the customers and how much focused and good the employee is in resolving the queries of the customers (Moynihan and Pandey, 2010).

Analysis of Coles Group’s Use of Result-Based Performance Management Approach

The third aspect is internal work and operations of the company which shows that how much capable the employee is in handling those operations in an effective manner. The last aspect is learning and growth which illustrates the past growth record of the employee for analysing the individual’s potential as well as the learning capability of the individual is also analysed. Based upon all these aspects, the employees received the scores and their performance is measured and further managed (Walker, Damanpour and Devece, 2010). The key advantage experienced by Coles of using the result based PM approach is that helps in converting the strategies into operations in a more holistic way. There is also a concerned amount of consideration laid upon the external factors too which can impact the performances of the employees such as customers and learning. The result approach does not completely rely upon a single factor i.e. financial aspects of the employees’ job performance. But there are certain key negative implication and aspects too which are associated with the result based PM approach such as the lack of focus upon the human resource element and absence of few particular stakeholders in the set indicators for analysing performances. One more threatening negative aspect of the approach is an increase in the level of competition among the workforce of Coles which is termed mainly as the negative competition (De Waal, 2013).

As analysed that there are certain negative aspects too in the result based PM approach selected by the organisation. To manage those negative elements and improve the current performance management practices, there are few recommendations offered to Coles:

• The first and the key recommendation is to develop a robust organisational culture which can help the employees in understanding and realizing the advantages associated with performance and result based reward and appraisal system. It is essential for the organisational managers to make the employees sense the level of ethicality and equality associated with the use of this approach. When the employees will understand that they are rewarded only on the basis of their individual efforts and not any other factors that create biasness in results then they will strongly believe on the authenticity of the result based approach (Takeuchi, Chen and Lepak, 2009).
• The second recommendation to improve the current performance management practice and process is that there must be high involvement of the employees. There is an extensive need to have employees’ participation at all the levels of the organisational decision making. It will help in identifying the several issues as well as opportunities prevailing in the performance management system and will also help the company in finding ways to overcoming the souses and having appropriate suggestions from the employees for enhancing the improvement and efficiency of the performances of the workforce (Kompaso and Sridevi, 2010).
• The next recommendation is that there must be increased investments in recruiting right organisational managers who can significantly have a strong association with the employees. The correct manager can effectively engaged the employees in improving their performances, can offer valuable and corrective feedback to the employees, manage the issue with appropriate action as well as can offer the required training and coaching to the employees so that they can work on their weaker sections and can enhance and improve their performances and get a netter result. This will both motivate the employees as well as help the organization to achieve faster attainment of the organisational goals and objectives (Armstrong and Taylor, 2014).

Conclusion

It would be correct saying that to improve the employees’ performance and organisational productivity, the organisations must invest increased amount of capital in the performance management practices and processes. Coles is one of the organisations that effectively work upon this aspect and have an efficient performance management system in the organisation. from the report, it can be concluded that there are several positive impacts of the performance management practices of the company on its employees in terms of increased productivity, improved performances, enhanced development, upsurge level of employee engagement and organisational commitment. It can also be stated that the result based performance management approach is one of the best ways to analyse and evaluate the performance of the employees and have reward program. But to overcome some of the issues, there must be implementation of the recommendations suggested so that more improved results can be fetched from these performance management practices.

References

Aguinis, H., 2009. Performance management. Upper Saddle River, NJ: Pearson Prentice Hall.

Armstrong, M. and Taylor, S., 2014. Armstrong’s handbook of human resource management practice. Kogan Page Publishers.

Broadbent, J. and Laughlin, R., 2009. Performance management systems: A conceptual model. Management Accounting Research, 20(4), pp.283-295.

Buckingham, M. and Goodall, A., 2015. Reinventing performance management. Harvard Business Review, 93(4), pp.40-50.

Coles, 2017. About Coles. Accessed on: 13^th September, 2017. Accessed from: https://www.coles.com.au/

De Waal, A., 2013. Strategic Performance Management: A managerial and behavioral approach. Palgrave Macmillan.

Dey, A., and Giri, I., 2017. Approaches for measuring performance of employees. Accessed on: 13^th September, 2017. Accessed from: https://www.projectguru.in/publications/approaches-measuring-performance-employees/

Dwivedi, A., Merrilees, B., Miller, D. and Herington, C., 2012. Brand, value and relationship equities and loyalty-intentions in the Australian supermarket industry. Journal of Retailing and Consumer Services, 19(5), pp.526-536.

Ferreira, A. and Otley, D., 2009. The design and use of performance management systems: An extended framework for analysis. Management accounting research, 20(4), pp.263-282.

Gruman, J.A. and Saks, A.M., 2011. Performance management and employee engagement. Human Resource Management Review, 21(2), pp.123-136.

Kehoe, R.R. and Wright, P.M., 2013. The impact of high-performance human resource practices on employees’ attitudes and behaviors. Journal of management, 39(2), pp.366-391.

Kompaso, S.M. and Sridevi, M.S., 2010. Employee engagement: The key to improving performance. International journal of business and management, 5(12), p.89.

Moynihan, D.P. and Pandey, S.K., 2010. The big question for performance management: Why do managers use performance information?. Journal of public administration research and theory, 20(4), pp.849-866.

Takeuchi, R., Chen, G. and Lepak, D.P., 2009. THROUGH THE LOOKING GLASS OF A SOCIAL SYSTEM: CROSS?LEVEL EFFECTS OF HIGH?PERFORMANCE WORK SYSTEMS ON EMPLOYEES’ATTITUDES. Personnel Psychology, 62(1), pp.1-29.

Van Dooren, W., Bouckaert, G. and Halligan, J., 2015. Performance management in the public sector. Routledge.

Verbeeten, F.H., 2008. Performance management practices in public sector organizations: Impact on performance. Accounting, Auditing & Accountability Journal, 21(3), pp.427-454.

Walker, R.M., Damanpour, F. and Devece, C.A., 2010. Management innovation and organizational performance: The mediating effect of performance management. Journal of Public Administration Research and Theory, 21(2), pp.367-386.

Wu, H.Y., Tzeng, G.H. and Chen, Y.H., 2009. A fuzzy MCDM approach for evaluating banking performance based on business Scorecard. Expert Systems with Applications, 36(6), pp.10135-10147.