The Performance Management In The Business Sector

Published Date: 02 Nov 2017

Abstract

This research project is initiated to identify the best performance appraisal technique in small organizations. This essay describe how different companies practice a range of concepts and approaches to performance management. However most companies have realized that there is a need to improve performance management through a new performance appraisal system. The main aim of this research is to evaluate the present performance appraisal techniques practiced by the companies and identify the best performance system to the companies.

The literature review explain the background to the development of performance and its measurement in different small scale organizations. It includes a detailed analysis of thinking on performance appraisal. The literature review concludes that performance appraisal can benefit organizations, but appears to not be delivering in many cases. A conceptual model is developed to frame empirical research.

This research is conducted by providing questionnaire to the selected sample of people from various organizations. A focus group were held for managers and team leaders or staff to obtain different perspectives in all the organizations was conducted to analyses the situation further. Through the findings it has been revealed that there is a prominent need for a new performance appraisal system for the staff of different organizations. And more attention is required to appraise team efforts.

The conclusions of the research have informed the main recommendations, to develop a new system that is much more comprehensive , and should be developed through engagement with staff.

Introduction

The main aim of this research project is to Identifying the suitable appraisal method to measure the post placement performance from the staff point of view, in order to find out a improved new performance evaluation technique for the organizations.

Background to the research

The research project was initiated because there have been considerable developments in how organizations are introducing and operating processes for performance management and how they have applied the technique of performance management in their organization and find out the effectiveness of the current appraisals in different organizations. The research included the analysis of 30 questionnaires completed by respondents .

Research question

On the whole the research problem concern about the reliability and effectiveness of the current appraisal systems in practice for different organizations. From the literature review we can simply identified the draw backs of the performance appraisal applications in different organizations. By conducting the literature review it has been identified that so many authors have written about the realities of the performance management. So the main aim is to find out whether the existing appraisal system measure the performance accurately suggesting the most suitable appraisal method for organization

Objectives of the study

to find whether the existing appraisal system in the organization exactly measures the employees performance

to provide a basis for rewarding employees in relations to their contribution to organizational goals

Methodology

The research design comprises of the plan and structure of investigation conceived so as to arrive at the responses to the research queries. It there by address the aims and objectives of the study, both descriptively and analytically.

Literature review

This chapter reviews literature relevant to the research objectives. It builds a theoretical foundation upon which the research is based. it commences with an examination of what performance is, and why it is measured. The chapter then considers how performance appraisal fits into the parent discipline of performance management. A literature review covering appraisal systems and their application follows, and this includes reference to the system in different organizations.

Performance defined

If you can’t define performance, you can’t measure or manage it. It has been pointed out by Bates and Holton (1995) that ‘ Performance is a multi dimensional construct , the measurement of which varies , depending on a variety of factors. They also state that it is important to determine whether the measurement objective is to assess performance outcomes or behavior.

A more comprehensive view of performance is achieved if it is defined as embracing both behavior and outcomes. This is well put by Brumbrach (1988)

Factors affecting performance

Performance is affected by a number of factors, all of which should be taken into account. These comprise:

personal factors- the individual’s skills, competence, motivation and communication

leadership factors- the quality of encouragement, guidance and support provided by managers and team leaders

team factors- the quality of support provided by colleagues

system factors- the system of work and facilities provided by the organization

contextual factors- internal and external environmental pressures and changes.

Performance management.

Performance management is a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing capabilities of teams and individuals contributors.

What does performance management set out to be?

Two simple propositions provide the foundation upon which performance management is built:

when people know and understand what is expected of them, and have taken part in forming these expectations, they will use their best endeavors to meet them

the capacity to meet expectations depends on the levels of capability that can be achieved by individuals and teams, the level of support they are given by the management , and the processes, systems and resources made available to them by the organizations.

These propositions imply that the basic aims of performance management are to share understanding about what is to be achieved, to develop the capacity of people and the organization to achieve it and to provide the support and guidance individuals and teams need to improve their performance.

The four stages of performance management

These are

business role clarification

performance planning

performance development

performance measurement

in this project mainly we are going to deal with the performance measurement stage .

this stage has two distinct aims

to provide ongoing feedback during the plan do evaluate cycles

to provide an annual summary of an employee’s performance to be used as the basis for decisions on financial or non financial reward

when assessing performance , not only the achievement of targets but also the way in which the individual has worked towards the targets have to be taken into account.

Performance management in the business sector

An organization is exists to achieve a purpose, which is to meet the needs and expectations of the stakeholders; the people working there or associated with it, customers, clients, owners trustees or governing bodies, suppliers and the public at large. Every organization is effective in its own particular way within its own particular context. Perhaps the only feature that is generally recognized is the importance of defining the objectives and planning to achieve them. One characteristics of having clear objective is that they provide for performance in the future to be improved as a result of the analysis of past experience.

Statement of the problem

The research is expect to investigate the different performance appraisal techniques practiced by the selected organizations and examine the most common errors occur in it

Need and importance of study

This research was carried out to investigate the different appraisal techniques followed by the organizations, due to the time constrain and resource, this research was limited to the selected sample of 30 respondents who works in different organizations

Analysis of previous studies

All most all the respondents who were answered the questionnaire are employed in different organizations . 80% of the employees are from the private sector and 15% are from the private sector manufacturing organization 4% from the public sector organization and 1% from other types organizations. From the data it is been identified that most of responded from these organizations are recently joined their respective companies and they have 1- 2 years of experience in the relevant field. Majority of the organizations use Ranking methods and grading and forced choice description appraisal techniques are equally followed by other types of business organization. All most all the organization they conduct the performance appraisal procedure by annually .

Methods of reviewing the literature

Data was collected from primary and secondary sources to examine the purpose of study. Specially primary data was collected from the questionnaire which was prepared to collect the actual measures of performance management . further more secondary data was collected from conducting personal and telephone interviews with the organizations.

Conclusions

The importance of regarding performance management as no more, or no les, than one aspect among others of an intergraded approach to managing the performance cannot be over estimated. The context within which the organization functions, its purpose, values and business strategy, its core competence , its culture and its managing style all provide the basis upon which processes for managing the performance of individuals and teams are developed and implemented.

Measures of performance management

The questionnaire which was intended to the measures as well as the factors which affect the performance of the employees of the organization, simply the factors were categories in to two main groups, firstly human factors such as capacity to learn, morale, job satisfaction, and quality of work at the same time the system factors such as the link between the outcomes as well as the implementation of the performance appraisal technique s such as the purpose, design, execution and implementation of the system.

Factors used to determine the effectiveness of PM

A list of possible criteria was provided , and respondents were asked to identify the most important. They could rank as many as they wished from the list of six criteria provided based on their appraisal system followed in the organization. The key criteria combine concern to develop skill and competence improved customer care, and quality, and achievement of financial targets, some sort of logical link among these could be detected. It is reasonable to assume that, in arriving at judgments about the effectiveness of PM, some of these criteria are used.

In most cases senior managers and the team leaders are the personnel who sets the performance requirements for the individuals in most of private companies.

Purpose of performance appraisal systems in organization

Indeed , in any organization there will be some good managers for whom adopting the performance management process is just ‘doing what comes naturally’ . they can be invaluable as champions, developers, and coaches. But there may be many more who need encouragement , support and guidance that can be provided by a well defined framework for managing performance, especially if they have taken part in its development. Performance management provides structures build round the natural planning, monitoring, and reviewing processes of management. Generally people like to have some structure within which they can operate, as long as the structure appropriate and does not constrain then unduly. And they need to appreciate to appreciate how they can use the processes to their advantage as well as to that of the organization by performing better themselves or by helping others to perform better. Performance management also provides the impetus for planned and systematic learning activities and events that might otherwise be lacking . finally, the skills developed and nurtured by performance management are once everybody can use to their own benefit as well as to that of others.

According to the survey respondents were asked to give the purpose of performance appraisal systems in their respective organizations, 53% of the respondents have reported that performance appraisal systems are used to assess the training and the development needs of the individuals in their organizations. Simply it is concerned with creating a culture bin which organizational and individual learning and development are a continues process. It provides means for the integration of learning and work so that everyone learns from the success in their day to day activities.

Around 23% of the respondents reported that appraisal systems are used to assess the individuals future potential and promotion needs. simply it is one of the result of performance appraisal in the public sector organizations, it could be advancement of an employee in an organization to another job, which commands better pay, wages, better status, prestige, higher opportunities, challenges, greater responsibility, and authority, better working conditions, environment and hours of work.

13% other respondent have said to provide compensation packages and have succession planning in the organization , companies practice performance appraisal system. comparatively, these two elements have a less importance in the performance appraisal system from the selected sample of 30 respondents. Of course at the same time 40% of the interviewees’ agreed that after an appraisal procedure the compensation would definitely increase. The research however, showed that contingent or differential pay is still important element in many performance management schemes. This is because paying for performance or for competence, or both, is regarded by many organizations as desirable for the following reasons.

It motivate the people to perform better or to develop their skills and competence

It is fair and equitable to reward people differentially according to their performance, competence or contribution

Majority of the companies conduct their performance appraisal methods Bi-annually , simply this could be evaluate the individuals performance. Performance and development reviews provide those involved with the opportunity to reflect on past performance as a basis for making development and improvement plans. Obtaining historical perspective through analysis is a necessary part of the review, but reaching agreement about what should be done in the future is really what it is all about. The purpose of performance and development review is to enable those concerned to get together so that they can engage in a dialogue about the individual’s performance and development and the support provided by the manager. They are not occasions for top-down appraisal, although some feedback will provided, neither are they interviews in which one person asks the questions and other provides the answers. they should be more like free flowing , open meeting, in which views are exchanged so that agreed conclusions can be reached.

Appraisal systems in the organization

Based on the survey it is been identified three methods of performance appraisal are used in by the selected sample of 30 respondents. .firstly the ranking and secondly grading and finally forced choice description method.

Ranking

The oldest and simplest system of formal systematic rating is to compare one person with all others for the purpose of placing them in a simple rank order of worth. In doing this the appraiser considers person and performance as an entity, no attempt is made to systematically fractionize what is being appraised into component elements.

One of the objections to the ranking process is that we are asking the rater to perform an impossible feat. The analysis of one person’s performance is not simple. Yet we are asking the rater to compare several people simultaneously and turnout an accurate rank order. Can the human mind handle all these variables at one time. To simplify this , the paired comparison technique of ranking can be used. Each person can be compared with every other person , one at a time. For example suppose there are five employees , employee A’s performance is compared with B’s and a decision is made concerning whose is the better performance. Then A is compared with C,D and E in order. The same approach is used for other personnel. Thus the use of the paired comparison technique with these five employee would mean a total of ten decisions., only two people being involved in each decision.

From the survey we have identified that 19 respondents have undergone the ranking appraisal system in their respective organization. This system does not tell how much one job differs from another, it merely says that one job is higher and the other is lower. And this method is highly unreliable in cases where the job to be evaluated is widely dissimilar. Hence this method can be used only when the jobs belong to the same class or the same department. In spite of the serious limitations referred above, this system does provide an overall review of jobs at one time. This method is highly suitable and less expensive in case of small organization or where the jobs are few in number. Especially it is more suitable for rating supervisory and executive job positions where intangible factors are to be taken into account for the purpose of evaluation.

Grading

In the grading system , certain categories of worth are established in advance and carefully defined. For example , there may be three categories of personnel, outstanding satisfactory and unsatisfactory. Employee performance is then compared with these grade definitions and the person is allocated to the grade the best describes his or her performance. The employee can receive an O , S or U . there can of course, be more than three grades. This is the basic system of measurement that is used in the job evaluation system called, "grade description".

According to the questionnaire 6 respondents have undergone grading appraisal system in their respective organizations.

Forced choice description

One of the fundamental objectives of the forced choice approach is to reduce or eliminate the possibility of the rater bias by forcing a choice between descriptive statements of seemingly equal worth. For example . a pair such as the following will be presented to the rater

Gives good, clear instructions to subordinates

Can be depended upon to complete any job assigned

The rater is asked to select the one statement most characteristic of the rates. The rater is also forced to choose between statements that are seemingly equally unfavorable such as the following pair.

Makes promises that he or she knows cannot be kept

Shows favoritism toward some employee

Only one of the statements in each pair is correct in identifying the better performance and this scoring key must be kept from the raters. There are certain primary disadvantages of the forced choice system. First it is difficult , if not possible to keep the key secret. Secondly, the system is a very poor one to use if employee development is to be emphasized. Neither the rater nor the rate can figure out from the desired mode of behavior, and in fact, if the form is shown to the rate, he or she is usually unable to accept it or the philosophy behind it. In addition, raters often object to being forced to make decisions which they feel cannot or should not be made. Because of these disadvantages , the use of forced choice system is not widespread.

It is a proven record from the survey that only 6 respondents have told that forced choice description method of appraisal is in practice in their respective organizations.

Expectation from the employee perspective about the appraisal systems.

A Majority of 80% of the respondent did not wholly agree that higher pay was the most important part of their jobs. Most people felt that their organization valued their contribution , in terms of provided basis for carrier planning, job satisfaction, and improve the quality of work. But inconsistently , a large proportion felt that hard work is not necessarily recognized or rewarded. But managers or team leaders are quite comfortable conducting meetings, think that it is time well spent and are convinced that they rate staff fairly. They believe performance management helps them to manage and motivate their teams better. Half of the respondents felt that they could have been better trained, and they were somewhat doubtful about the documentation about the different appraisal systems in their organizations. And quite a few want changes made to the process, due to the draw backs they witnessed in the appraisal systems in the organization,

Feedback

Giving feedback based on fact, not subjective judgment, is an important part of a performance and development discussion. In this respect at least, performance meetings have some of the characteristics of a system, in that minor percentage of organizations provide feedback to people on their performance which help them to understand how well they have been doing and how effective behavior has been. but majority of the respondents have said in their organization after the appraisal meeting there is no feedback given to them. They see this aspect as a major drawback in their appraisal system, neither they receive the feedback or the development option , but in contrast some of the respondents have said, they are subject to receive a the pay or the compensation after the appraisal meeting but superiors used to provide recommendation to improve their selves. But as far as for an effective performance appraisal system providing feedback is very vital. The aim is for feedback to promote this understanding so that appropriate action can be taken. This may be corrective action, where the feedback has indicated that something has gone wrong, or more positively, action may be taken to make the best use of the opportunities the feedback has revealed. In the later case feedback acts as a reinforcement, and positive feedback can be a powerful motivator, because it is a recognition of achievement. But unfortunately the overall findings of the research revealed that most of the companies that do not share both positive and negative feedback with appraise in the same meeting.

Conceptual model

This conceptual model framework sets out the critical issues that need to be examined.

Estimation of the post placement performance

Post placement Appraisal techniques

Human factors

Capacity to learn and initiative

Morale

Job satisfaction

Previous experience

Quality of work

System factors

Purpose

Design

Execution

Outcomes

Will be omitted

According to the conceptual model, we are assuming that human factors will be correctly estimated by the selected appraisal method. So for that the hypothesis will be;

H0: Human factors will not be able to accurately estimate the post placement performance of an employee

Hi: Human factors will be able to accurately estimate the post placement performance of an employee

*According to the conceptual model, we are assuming that system factors will be correctly estimated by the selected appraisal method. So for that the hypothesis will be;

H0: System factors will not be able to accurately estimate the post placement performance of an employee

Hi: System factors will be able to accurately estimate the post placement performance of an employee

Conclusions

The effectiveness of Performance management was measured through two factors which affect the post placement techniques

Human factors

System factors

These are used to evaluate the effectiveness of high performers , average performers and poor performers. the aim was to identify judgments of results from the perspective of the candidates.

High performers

Respondents

High performers

Just in time

Completion of work

Performance rating

Sum of human factors

25

1

1

1

3

7

1

1

2

4

16

1

1

2

4

22

1

1

2

4

27

1

1

2

4

18

2

1

2

5

23

1

2

2

5

1

2

2

2

6

14

2

2

2

6

17

2

2

2

6

Based on the above analysis it is expected to see some link between the relation between the actual performance and the performance rating they got in their organizing to measure the effectiveness of performance management techniques which are in practice. From the above table we have identified the best or high performers from the selected sample based on their responses regarding their actual performance the actual performance rating they have got in their respective organizations .the criteria used to calculate the human factors are, the just in time, time taken to complete the work by an employee and his or her actual performance rating.

The following table illustrate the average performers as well as the poor performers

Average performers

Respondent

Just in time

Completion of work

Performance rating

Sum of human factors

2

2

3

2

7

24

2

3

2

7

29

2

3

2

7

19

2

2

3

7

26

3

2

3

8

30

3

2

3

8

4

2

3

3

8

28

2

3

3

8

5

3

3

3

9

11

3

3

3

9

12

3

3

3

9

Based on the questionnaire we have identified the average performers according to the calculation of human factors, candidates are from different nature of companies.

Poor performers

Respondent

Just in time

Completion of work

Performance rating

Sum of human factors

3

3

3

4

10

8

3

3

4

10

15

3

3

4

10

20

3

3

4

10

13

3

4

4

11

6

3

4

4

11

21

3

4

4

11

9

4

4

4

12

10

4

4

4

12

From the above tables we have categories high performers, average performers and poor performers based on the sum of human factors. Comparatively we could see that there is a gap between high performers and others two performers.

The results in the above three tables reflect that the measurement or criteria used to evaluate the conceptual model of this research project, first of all we have identified the high performers and the average performers

Intercorrelations between high performers and average performers

Because of all measures of all the overall effectiveness of PM are provided by the same respondent , it is possible that they are highly intercorrelated and can be seen as representing a single factor, when we compare the best performers and the average performers the results indicate that the criteria used to test the hypothesis has a direct link to actual performance rating. It should be noted that the identified best performers has a very good attendance in their respective organization. they excel in completing the work on time as well as few are good in practicing the Just in time technique in their job activities. According to the responses from the average performers they also have a good attendance but at the same time, a mix of good and average performers have been included in that category. Their performance is less effective compared to best performers and they complete the work activities in a average mode. Since there is a similarity between the actual performance rating of best performers and the average performers , most of the average performers rated as their work activities not seems to effective as high respondents and they are rated as below 60% of effectiveness since it doesn’t sound good.

Intercorrrelation between Average performers and poor performers

As above mentioned the criteria used to evaluate the interrelation between the actual performance and the performance rating reveals that there is a slight difference between sum of human factors , of average performers and poor performers. Comparatively average performers are moderately performing well in their given task and completion of work, but at the same time respondents who categories as poor performers rated below the line of standards and improvements should be made in their working conditions. when we consider the difference between the total sum of average performers and the poor performers we could find variance between the respondents as well. At the same time there is a major different between the least performers as well average performers . this is due to variation between the individual contribution to the overall performance management techniques

Intercorrelation between best performers and poor performers

It is proven that there is a vast divergence between the final results of the higher respondents, and the poor performers and the results reveals there is a link between the actual performance and the performance rating they got in their respective organization. Respondents who have categories as poor performers have got maximum sum of human factors compared to best performers. Which is a problematic situation in the organizations which will lead to low productivity, behavior problems, absenteeism , labor turnover etc.

Conclusion set against conceptual model

Overall if we analyze the overall approach human factors such as motivation, job satisfaction, previous experience, quality of work, capacity to learn do have a direct link with the performance of the individuals. But at the same time, we could see that other factors such as work environment, lack of knowledge and skills regarding the job, no previous experience may be the cause for the average and poor performance of the employees.

So managing underperformers and average performers is a positive process which is based on feedback throughout the year that looks forward to what can be done by individuals to overcome performance problems, by conducting training session, provide continues motivation., planning development programs may help to improve the performance of the employees as it is mentioned by them in the questionnaire.

t-Test: Two-Sample Assuming Unequal Variances (High Performers)

 

Variable 1

Variable 2

 

Mean

17

4.7

Variance

65.77778

1.122222

Observations

10

10

Hypothesized Mean Difference

1

df

9

t Stat

4.368832

P(T<=t) one-tail

0.0009

t Critical one-tail

1.833113

P(T<=t) two-tail

0.0018

t Critical two-tail

2.262157

 

 

Based on the above t-test analysis we can simply reject the following null hypothesis

H0: Human factors will not be able to accurately estimate the post placement performance of an employee

Since the test show that the P value is less than 0, so can say that human factors will be accurately estimate the post placement performance of an employee

Conclusions

From the questionnaire and based on the results we have identified that human factors have a direct link with the performance of the employees. But at the same time it is proven that there is a gap between the best performers as well as the poor performers, identified reasons could be the failure in the execution of the appraisal system that is practice in the respective organization. 60% of the respondents have reported that they don’t feel that the organizations that they work in does not have an effective performance appraisal system. Though we find best performers from the different appraisal systems in their organization. Majority of the respondents provide a negative comment on the appraisal systems in practice, they said that the present performance appraisal system is lacking in many aspects ,simply employees expect that the performance management technique provide enough room for the potential future needs and fulfill training and development needs. but failure of build skills through training and failure to recognize excellent performance has been indicated as the major drawback that they seen in their present system. They have addressed that the system does not involve user participation, failure to develop performance measures from job analysis, and the rating systems administrated subjectively and finally few of the respondents have commented that results used to discriminate the employees on the basis of race, sex, etc.

Basically we find average performers and poor performers even in all the companies, this is due the insubordination given from the management to their employees, related with the execution of appraisal system they have adopted in their organizations . it is easy to design forms and produce handbooks . but it is much more difficult to get people carry out performance management processes effectively and with conviction. time spent on implementation is always time well spent. The problems that may arise in execution of a appraisal system should not be ignored

So the staffs expect a comprehensive appraisal system that is well design, has staff involvement , and benefits from training in its use to overcome and eliminate the variance in individual performances in the same field and from the same organization. Most of the employees are not happy with the current appraisal system which was developed within last two years of time, since it has fail to identify the employee needs and build skills through training. And must include a wider rating system than currently used. They expect behaviors and competencies to be measured as well as achievement of objectives. And the outcomes of the interviews and the appraisal meeting should be fair enough and feedback should be provided which consist of improved performance all round and short term and long term training.

Recommendations

From the above conclusion we can see that there is need for a development of a new appraisal system which should be implemented to overcome the issues that arise the identified three methods of appraisal system which are currently in practice from the selected sample of 30 respondents. A new appraisal system should be developed as soon as possible and should incorporate the following elements.

Progress against individual objectives

Helps to clarify corporate goals

Identify the training and development needs of the employee

Creates a shred understanding of what is required to improve performance and how this will be achieved

Encourages self management and individual performance

Provide continues feedback

A broad ranged rating system for final score

Should not primarily concerned with linking performance to financial reward

User participation in the system dev elopement

Should apply to all staff fairly and honestly

Managers, team leaders, individuals, and their representatives should be involved in the design of new appraisal system to ensure that they meet their needs and to resolve any doubts about how useful and fair the processes will be. The use of range of communication channels is desirable to ensure that everyone understands what performances management means, how it will affect them, and the part they will expected to play.