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Kaur_Kiranjit_Performance Management System.docx

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Kwantlen Polytechnic University
School of Business
HRMT 5110
HR Management (P60)
Individual Research Report
Performance ...
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Table of Contents
Abstract.................................................................................................
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Abstract
Due to high competition, an organization must attract and retain skilled labour to succeed. In
every industry, ...
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Kaur_Kiranjit_Performance Management System.docx

  1. 1. 1 Kwantlen Polytechnic University School of Business HRMT 5110 HR Management (P60) Individual Research Report Performance Management System Kiranjit Kaur 100423832 10 October 2022
  2. 2. 2 Table of Contents Abstract.........................................................................................................................................................3 Introduction ..................................................................................................................................................3 Performance Management System ..............................................................................................................4 Purposes of Performance Management System ..........................................................................................5 Performance Management Process..............................................................................................................7 Stage 1: Prerequisites ...............................................................................................................................7 Stage 2: Performance Planning.................................................................................................................8 Stage 3: Performance Execution...............................................................................................................9 Stage 4: Performance Assessment............................................................................................................9 Stage 5: Performance Review.................................................................................................................10 Stage 6: Performance Renewal and Reconstructing...............................................................................10 Problems or challenges while implementing a Performance Management System..................................11 Performance management best practices..................................................................................................13 Conclusion...................................................................................................................................................14 References ..................................................................................................................................................15
  3. 3. 3 Abstract Due to high competition, an organization must attract and retain skilled labour to succeed. In every industry, whether it is big or small, Human Resources Management evaluates and manages employee’s performance with a systematic approach known as Performance Management System or PMS. This system is a strong strategic tool to improve the performance of employees and helps an organization achieve its goals. The process of a performance management system commences when an employee joins a company, and the process ends when an employee quits or leaves a job. This report will provide an overview of the performance management system, the purposes of PMS, how to implement it or the performance management cycle, and some common problems faced while implementing the performance system. Also, it describes the characteristics of successful PMS. Key Words: Human Resource Management, employee performance, performance management, performance appraisal Introduction As we are living in the epoch of Liberalization, Privatization, and Globalization, it is important for every organization to have a competitive advantage. To remain on track, the Human Resources Management revise and review old policies and strategies and develop some new strategies to improve the performance of employees because effective performance is key to success for any organisation (Gautam & Jain). It is seen that HR is the only resource, if used efficiently, can help an organization in gaining a competitive advantage over rivals (Shrivastava, Mathur, & Barodiya, 2019). Most companies these days rely on PMS as it is a useful tool for
  4. 4. 4 employers as well as employees. This system helps employees know their roles and responsibilities and what is expected from them to achieve the organisation's mission, vision, and strategy. On the other hand, it helps employers to ensure that employee’s behaviour matches the aim or objective of an organization. Traditionally, the focus of the Performance system was to just shape the behaviour of employees, and some factors like wages and salaries were considered to meet the goals, however, this focus is now shifted towards learning and development in a work environment (Gautam & Jain). Performance Management System Performance Management is a strategic tool for measuring and managing employee performance to increase organizational effectiveness (Hartog, Boselie, & Paauwe, 2004). According to Simon, performance management is defined as “the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities” (De Waal A. A., 2010). Performance Management includes providing coaching and feedback, meeting organizational goals, and evaluating the performance of the employee (Ghosh, Long, & Murphy, 2004). Performance Management is a continuous process of aligning employee performance with the strategic goals of an organization. Here, the main focus component is “a continuous process.” In other words, if an employee’s performance is evaluated once a year then it is not performance management (Aguinis, An expanded view of performance management, 2009). There is a difference between performance management and performance appraisal. Performance appraisal is a part of the strategy of performance management (Aguinis & Pierce, Enhancing the relevance of organziational behavior by embracing performance management research, 2007). Performance appraisal means providing
  5. 5. 5 feedback to employees about their performance that ultimately helps an organization make decisions related to promotions and pay increases (DeNisi & Pritchard, Performance Appraisal, Performance Management and improving individual performance: A motivational Framework, 2006). Performance management includes several policies, procedures, and activities to improve the performance of employees. This system starts with the performance appraisal and then includes training, feedback, and a reward system (DeNisi & Murphy, Performance Appraisal and Performance Management: 100 Years of Progress?, 2017). Purposes of Performance Management System Performance management system serves six important purposes in an organization: 1. Strategic: It links organizational goals with an employee or individual goals. In other words, it links individual goals with the team goals that are eventually linked to the organizational goals (Agunis, 2020).
  6. 6. 6 2. Administrative: PMS is used in making administrative decisions (promotions, merit increases, salary adjustments, employee termination or retention, identifying poor employees) about employees. If there is no effective PMS in an organization then administrative decisions would be biased or based on personal preferences (Aguinis, An expanded view of performance management, 2009). 3. Communication: It is an effective communication channel in which employees are informed about their performance and in which areas there is a need for improvement (Aguinis, An expanded view of performance management, 2009). 4. Developmental: Managers give feedback to employees and improve their performance. This feedback includes causes of performance deficiencies, strengths, and weaknesses of employees (Aguinis, An expanded view of performance management, 2009). For the improvement of employees, managers use different methods like training and mentoring (Shrivastava, Mathur, & Barodiya, 2019). 5. Organizational maintenance: A performance Management System provides information about accurate talent inventories (abilities, skills, assignment history of current employees) as well as future training needs, and evaluates HRM inventories, like Is there any improvement in the performance of employees after training or not? (Aguinis, An expanded view of performance management, 2009). 6. Documentation: PMS creates an accurate database for an organization that contains information about employees, such as their skills, knowledge, performance level, and rewards (HR Help Board, 2022).
  7. 7. 7 Performance Management Process For the equal and fair treatment of employees, many organizations use performance management for their pay and HR decisions. Performance management is a continuous process that includes six steps: Stage 1: Prerequisites Before implementing PMS, two prerequisites are needed i.e., the organization’s strategic goals, missions and knowledge of the jobs in question. If an organization’s mission and strategies are unclear, then employees will not be clear about what to do. After establishing goals for the organizational level, the goals cascade downwards from the departmental level to the employee level (Aguinis, An expanded view of performance management, 2009).
  8. 8. 8 Based on these stages, management designs a Performance Management System that describes job specifications, and job descriptions to obtain organizational objectives (Shrivastava, Mathur, & Barodiya, 2019). Stage 2: Performance Planning When the performance management cycle starts, firstly, managers and employees discuss what needs to be done or achieve and how to achieve it. The performance planning includes three attributes: Results: The results are known as performance standards which are used to measure employee achievement. In simple words, results mean the outcome that is produced by an employee. It tells the achievements and gaps (Shrivastava, Mathur, & Barodiya, 2019). The results that employees need to achieve, must be tied to organizational goals and strategy (Pulakos, 2004).
  9. 9. 9 Behavior: It is a difficult task to measure behavior. Employees do not have control over the results of their behavior (Aguinis, An expanded view of performance management, 2009). Their behavior can be measured through close observation and monitoring by the HR department (Shrivastava, Mathur, & Barodiya, 2019). Behavioral standards include competencies (knowledge, skills, and attitudes) that help to determine how to achieve a result (Aguinis, An expanded view of performance management, 2009). Development plan: It includes results and behaviors. The development plan identifies the strength and areas of improvement and further sets goals that are needed to improve the weakness. PMS will be implemented after meeting prerequisites and completing the planning phase (Aguinis, An expanded view of performance management, 2009). Stage 3: Performance Execution This stage cannot be ignored because the whole procedure of implementation of PMS and building standards is dependent upon it (Shrivastava, Mathur, & Barodiya, 2019). Feedback is provided based on effective and ineffective performance. It must be a two-way communication process in which employees and managers have joint responsibilities. Employee’s responsibility is to understand how they are performing through feedback or self-assessment; however, the manager’s responsibility is to observe, and provide constructive feedback (Pulakos, 2004). Stage 4: Performance Assessment Both employees and managers participate in the performance assessment process. The manager fills an appraisal form as well as employees also fill out their form in which they self-
  10. 10. 10 rate their performance standards. Then, these self-ratings are compared with the manager’s rating (Pulakos, 2004). This process can lead to disagreement between employees and managers when the manager’s feedback is more negative than the employee’s self-evaluation. On the other hand, self-appraisal can increase employee satisfaction during an appraisal meeting. Employees would have feelings of accuracy and fairness (Aguinis, An expanded view of performance management, 2009). Stage 5: Performance Review This stage is known as an appraisal meeting in which employees and managers exchanged their feedback and review performances. The appraisal discussion focuses on the past (what was done), present (compensation received), and future (goals to be achieved before the next review session). In other words, this stage is the base of the next years appraisal cycle (Aguinis, An expanded view of performance management, 2009). Stage 6: Performance Renewal and Reconstructing This is stage is like the performance planning stage. However, this stage uses the information from other stages. This process starts with the stage of prerequisites and ends with the stage of performance renewal and reconstruction. As it is a continuous process, the process starts again after stage 6 which should align with the mission and strategic goals (next year) of an organization. Due to the external environment, such as a change in customer preferences and needs, market, product, competitors, and suppliers, there is a need for change to prerequisites so that performance planning is consistent with the strategic objectives of organizations (Aguinis, An expanded view of performance management, 2009).
  11. 11. 11 Problems or challenges while implementing a Performance Management System Organizations usually spend a huge amount of money and time on their performance management systems but still the results are not satisfactory. Some common complaints were:  Employers say that a Performance Management System is time-consuming and a burden.  Employees say that this system does not reward high performance, which demotivates them (Ghosh, Long, & Murphy, 2004). An organization can face some common problems while implementing the PMS and if these problems are not rectified then the organization have to deal with the problems repeatedly. Every organization should have “a successful PMS, " meaning PMS should be used daily to manage and control the organization. In a study, thirty-one issues were observed while implementing PMS (De Waal & Counet, 2009). One of the problems is that management is busy solving short-term problems and implementation of PMS requires more time and effort due to which they give less priority to the development and implementation of the PMS. Also, for the implementation, some organizations do not have a sufficient budget (resources) and people (capital), which delays the implementation (De Waal & Counet, 2009). In other words, an organization must have sufficient resources and capacity for implementing PMS. It is observed that the lack of a clear goal is another problem of failure of PMS, which means organizational members are not having a clear understanding of the mission, objective, and strategies of the organization. The unstable phase is another obstacle in implementing PMS. For
  12. 12. 12 example, if an organization is facing financial issues or any other instability situation, it will delay the implementation of PMS (De Waal & Counet, 2009). Institutional Fragmentation is also one of the key issues in the development and implementation of PMS. In other words, decision-making is segmented between different bodies instead of just one authority. This creates problems in the division and allocation of authority, coordination, accountability, and responsibility, resulting in discouragement among the policymakers (Ohemeng, 2009). Another problem is that the Performance management system is not used on a daily basis. For example, performance management knows the advantages of using this system continuously but still, they see it as ‘just another task’. There would be more differences between the employees and managers if employees will not get regular feedback (Devarajan, Maheshwari, & Vohra, 2016). Some common reasons why performance management system is poorly managed are: a) Unfair rating system: Sometimes managers make a judgement and give an opinion based on preferences. There can be biased or less interest from the managers side due to which employees did not get proper feedback on their performance. b) Ineffective communication: In many organizations, there is a lack of proper channel of communication between managers and employees which lead to the poor performance management system. c) Damaged relationship: less interaction between employees and supervisors can results in deficiency in the performance management system. If there is regular interaction,
  13. 13. 13 then employees will be provided with feedback that can eventually increase their performance and vice versa. Performance management best practices The following characteristics will discuss the successful implementation of a performance management system:  Thoroughness: A thorough system is needed for effective PMS.  Specificity: It must provide clear and detailed information to employees about what are the expectations from them and how to achieve them (Aguinis, An expanded view of performance management, 2009).  Reliability: effective performance management means measuring performance that is error-free. If two or three supervisors are giving a rating to the same employees, then there should not be a mismatch of ratings (Aguinis, An expanded view of performance management, 2009).
  14. 14. 14  Fairness: a good system should be fair for all employees. Performance evaluation should be based on work performance not up on other factors like country, or culture (Aguinis, An expanded view of performance management, 2009).  Openness: there should be no secrets. A good system includes providing continuous performance, feedback, a two-way communication process, and open and clear communication (Aguinis, An expanded view of performance management, 2009). Conclusion The organization that has talented and motivated employees are more successful and provide outstanding services to their customers. The customers are more satisfied even though the rival companies are offering the similar products. Performance management system is the only way to change employee’s motivation and talent into business advantage. For the successful performance management system, performance management should look broader organizational context instead of just viewing performance appraisal (Aguinis, An expanded view of performance management, 2009). It must work with HRM functions like training, compensation, succession plan, and staffing. There should be clear definition of performance management system, which means employees should have proper information what they need to achieve and how to achieve it (Gautam & Jain).
  15. 15. 15 References Aguinis, H. (2009). An expanded view of performance management. (J. W. Smither, & M. London, Eds.) Performance management Putting research into action. Retrieved from http://www.hermanaguinis.com/PM2009.pdf Aguinis, H., & Pierce, C. A. (2007, September 22). Enhancing the relevance of organziational behavior by embracing performance management research. Journal of Organizational Behavior, 140. doi:10.1002/job.493 Agunis, H. (2020, December 07). Using Performance Management to achieve multiple purposes - Part 1. Retrieved from Binus University: https://qmc.binus.ac.id/2020/12/07/using- performance-management-to-achieve-multiple-purposes-part-i/ De Waal, A. A. (2010). Performance-driven behavior as the key to improves organizational performance. Measuring Business Excellence, 14(1). doi:10.1108/13683041011027472 De Waal, A. A., & Counet, H. (2009). Lessons learned from performance management systems implementations. International Journal of Productivity and Performance Management, 58(4), 368. doi:10.1108/17410400910951026 DeNisi, A. S., & Murphy, K. R. (2017). Performance Appraisal and Performance Management: 100 Years of Progress? Journal of Applied Psychology, 102, No. 3, 421– 433. doi:http://dx.doi.org/10.1037/apl0000085
  16. 16. 16 DeNisi, A. S., & Pritchard, R. D. (2006). Performance Appraisal, Performance Management and improving individual performance: A motivational Framework. Management and Organization Review, 253. doi:https://doi.org/10.1111/j.1740-8784.2006.00042.x Devarajan, R., Maheshwari, S., & Vohra, V. (2016). Implementing New Age Performance Management System in IT MNC: Leveraging Communication and Training. SAGE Publication Pvt. Ltd. doi:https://dx.doi.org/10.1177/2277977916665983 Gautam, D. A., & Jain, M. S. (n.d.). Implementing Performance Management Systems: A Strategic Tool for Human Resource Management. Academia, 2. Ghosh, A. D., Long, J. L., & Murphy, K. (2004). Performance Management that makes a Difference: An evidence-based approach. Society For Human Resource Management, 7. Retrieved from https://www.shrm.org/hr-today/trends-and-forecasting/special-reports- and-expert-views/documents/performance%20management.pdf Hartog, D. N., Boselie, P., & Paauwe, J. (2004, September 03). Performance Management System: A model and Research Agenda. Applied Psychology, 53(4), 556-557. Retrieved from https://iaap-journals-onlinelibrary-wiley- com.ezproxy.kpu.ca:2443/doi/epdf/10.1111/j.1464-0597.2004.00188.x HR Help Board. (2022). What is Performance Management? Retrieved from https://www.hrhelpboard.com/performance-management.htm Ohemeng, F. L. (2009). Constraints in the implementation of Performance Management Systems in developing countries The Ghanaian Case. Internation Journal of Cross
  17. 17. 17 Cultural Management, 9, 123. Retrieved from https://journals-sagepub- com.ezproxy.kpu.ca:2443/doi/epdf/10.1177/1470595808101158 Pulakos, E. D. (2004). Performance Management A roadmap for developing, implementing and evaluating performance management systems. Society For Human Resources Management. Retrieved from https://www.shrm.org/hr-today/trends-and- forecasting/special-reports-and-expert-views/documents/performance- management.pdf Shrivastava, R., Mathur, D. G., & Barodiya, D. P. (2019). Scoping Review study on Performance Management System: A strategic Tool for Human Resource Management. International Journal of Scientific Development and Research (IJSDR), 4(5), 5. Retrieved from https://www.ijsdr.org/papers/IJSDR1905002.pdf

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