Business Growth Through Performance Management

Nitish Kumar Sahu

Abstract
Organizational growth and performance management provide tw o important research topics for both enterprises and public sector organizations.Improving performance levels, or at least keeping them stable over time, is a hot topic not only for business executives and entrepreneurs, but also for managers and policy makers in public and non-prot institutions. How best to design Planning& Control (P&C) systems to support organizational performance management andassessment in a sustainability perspective? This paper illustrates the need for a methodological framework that would link system dynamics to P&C systems so as to support decision-makers in managing organizational performance, as well ast o f o s t e r s u s t a i n a b l e g r o w t h a n d m o n i t o r c r i s i s p r e v e n t i o n . T h e n e e d f o r t h i s conceptual framework is discussed in the paper.

Introduction

The process of HRD helps the employees to acquire and /or develop technical, managerial and behavioral knowledge, skills and abilities and moduls the values beliefs and attitudes necessary to perform present and past future roles. The process of performance apprasila helps the employees and the management to know the level of employees performance compared to the standard/pre determined level. Performance apprasila is essential to understand and improve the employees performance through HRD. In fact, performance appraisal is the basis for business growth. It was viewed that performance appraisal was useful to decide upon employees promotion/transfer, salary determination and the like. But the recent development in human resources management indicates that performance appraisal is the basis for employee development.

Strategic management and performance appraisal:

Performance appraisal practices also depend upon the strategy adopted by the company. Traditional techniques of performance appraisal are appropriate for the stability and sustainable growth of company but the modern appraisal techniques are suitable for growth strategies like expansion, diversification, joint ventures, merges and acquisitions. Modern techniques of performance appraisal and 360 performance appraisal enhance employee creativity which in turn contributes for the achievement of new product development as well as low cost leadership and differentiation strategies.

Need and Purposes:

Performance appraisal in needed in order to: I. Provide feedback information about the level of achievement and behavior of the subordinate. This information helps to review the performance of subordinate rectifying performance deficiencies and to set new standards of work, and growth the way of business. II. Provide information about the performance ranks. Decision regarding salary fixation, confirmation, promotion, transfer and demotion are taken based on performance management. III. Provide information to diagnose deficiency in the employee regarding skill, knowledge, determine training and developmental needs and to prescribe the means for employee growth in an organisation.

Purpose or Objective:
I. II. To create and maintain a satisfactory level of performance. To contribute to the employee growth and development through training, self and management development programmes. III. IV. V. VI. To help superiors to have proper understanding about their subordinates. To guide the job changes with the help of continues ranking. To facilitate fair and equitable compensation based on performance. To facilitate for testing and validating selection tests. Interviews techniques through comparing their scores with performance appraisal ranks.

Organizational Growth, Strategy, and Performance

The concept of organizational growth concerns the strategic domain of management. It underlies the aptitude of an organization to attain a set of results leading to its long-term success and continuity. Growth, strategy, and performance are strictly relatedconcepts. Strategic decisions concern the constitution, improvement, or change of a setoff structures, e.g., those involving organizational, production, distribution, and cultural assets. Such decisions affect the relationships between an organization and its environment, so as to change organizational performance. The common denominator in strategic decisions may be characterized as the search for a level of performance that is based on a set of measures which show a balanced and sustainable organizational development. Organizational growth can be considered as a qualitative rather than a purelyphenomenon. In these terms, growth impliesdevelopment, i.e., a learning

process that enhances synergies with stakeholders. O r g a n i z a t i o n a l g r o w t h also can be studied under a quantitative or dimensional perspective, w h i c h c a n b e f r a m e d u n d e r b o t h s t r u c t u r a l a n d o p e r a t i o n a l viewpoints. Under the rst viewpoint, growth is measured in terms of investment stocks available at a given time. Under the second viewpoint, growth is measured in terms of ows, e.g., sales volumes or revenues, personnel turnover rate, change in machinery capacity, or R&D investments. This different perspective on growth, so different from the rst, gauges the aptitude of an organization to i n c r e a s e i t s structural endowment of resources over time. Though an organization may be affected by a lack of dimensional growth over along time span, its survival and lifelong existence cannot disregard the need for a continuous search for qualitative growth . The pursuit of a hypothetically stable condition is a symptom of decline. Every organization needs learning, which in turn is a prerequisite for growth. Underlying the management of sustain-a b l e g r o w t h i s a n a p t i t u d e t o m a t c h s h o r t - w i t h l o n g - t e r m p e r s p e c t i v e s , a n d t o combine efficiency with effectiveness.

This paper outlines a conceptual framework to support policy-makers in framing and assessing performance within the perspective of sustainability. It analyzes the role of system dynamics (SD) in supporting Planning & Control (P&C) systems

Three Perspectives of Sustainable Growth

An organizations growth rate is balanced if it crosses different perspectives With respect to the organization itself, growth can be assessed bothunder an internal and an external prole. Under the internal prole, balanced growth emerges from the search for
consistency between different subsystems, sectors, and departmental/functional areas of an organization. Therefore, an unbalanced growth rate could be associated with either a size increase or an improvement in operations, in one area of engagement to the detriment of another. For example, the performance of a strategic business area (SBA) in a company could be improved by diverting the resources invested in another SBA in the same company. Likewise, unbalanced growth in the public sector may imply a too-intensive effort towards investments in an industry (e.g., agriculture) to the detriment of another (e.g., tourism) in the same area. Under theexternal prole, a balanced growth should be associated to performance rates crossing the three most relevant dimensions of organizational success, i.e., nancial, competitive, and social. Such dimensions outline the physiological goals of an organization. The rst dimension relates to the financial equilibrium and profitability, or at least to the balance between revenues and expenses in public and non profit organization. The second dimension relates to the capability of an organization to satisfy its customers needs with its products or services at a reasonable price, and therefore to generate value to the users benet. The third dimension expresses an organizations capability of meeti n g t h e expectations of its different stakeholders, e.g., workers, funders, and community. Another perspective in which to assess sustainable growth istime.

Performance Appraisal to Performance Development

In fact performance appraisal, in recent times, emerged as performance analysis and development. Performance analysis and development is a departure from the traditional and controlling approach. It views from the development aspect of the employees. Therefore the main purpose of performance analysis and development is to analyse the present performance of the employee from multiple view points, observe the gap/ developmental needs and develop the employee. Performance appraisal is also a technique of HRD. The performance interview and the process of the performance analysis helps the subordinate to interact closely with his supervisor. The interaction helps particularly subordinates learn from his superior the job related and behavioural related aspects.

360 Performance Appraisal

The appraiser may be any person who has thorough knowledge about the job contents, contents to be appraised, standards of contents and who observes the employee while performing the job. The appraiser should be capable of determining what is more important and what is relatively less important. He should prepare report and make judgements without bias. Typical appraisers are supervisors, peers, subordinates, employee themselves, users of service and consultants. Performance appraisal by all these parties is called 360 performance appraisal. Ponds, General Electric, Hindustan Unilever Limited, Grasim, Colgate-Palmolive, Hewlett Packard, practice 360 performance appraisal.

Performance Appraisal and Competitive Advantage

The objective of performance appraisal, listed above, point out the purpose which an exercise seeks to meet. What needs emphasis is that performance evaluation contribute to firms competitive strength. Besides encouraging high level of performance, the evaluation system helps identify employees with potential, reward performance equitably and determine employees needs for training. Specially performance appraisal helps an organization gain competitive edge in the following ways.

Improving performance

An effective appraisal system can contribute to competitive

advantage by improving employee job performance in two waysby directing employee behavior towards organizational goals, and by monitoring that behavior to ensure that the goals are met. Making Correct Decisions As stated above , appraisal is a critical input in making

decision on such issues as pay rise, promotion, transfer, training, discharges, and completion of probationary periods. Right decision on each of these can contribute to competitive strength of a firm. If promotion, for example made on performance, the promote feels motivated to enhance his or her performance. Ensuring Legal Compliance Promotion made on factors other than performance might

land up a firm in legal battle, thus diverting its focus on non-productive areas. Companies can minimize costly performancerelated litigation by using appraisal system that fair and accurate ratings. Minimising Job Dissatisfaction and Turnover Employees tends to become emotional

and frustrated if they perceive that the ratings they get are unfair and inaccurate. Such employees find that the effort they had put in become futile and obviously get demotivated. Dissatisfaction in the job sets in and one of the outcomes of job dissatisfaction is increased turn over. Fair and accurate appraisal results in high motivation and increased job satisfaction. Consistency Between Organisational Strategy and Behaviour An organization needs a

styrategy consistent with the behavior of its employees if it were to realize its goals. A truism of organizational life is that people engage themselves in behaviours that they perceive will be rewarded. As employee wants to be rewarded they tend to occupy themselves more with those activities on which organization emphasizes. For example, if the focus is on service, employees will behave in ways that will help them in gaining rewards associated with service delivery. If the focus is on cost control, employees will seek to control and thus be recognized and rewarded. If the focus is on rewarding productivity, employees will strive for productivity. The performance appraisal become not only a means of knowing if the employees behavior is consistent with the overall strategic focus, but also a ways of bringing to the fore any negative consequences of the strategy behaviourfit.

How to Use Performance Appraisals to Motivate Employees ?

Motivation is the process that energizes employees and propels them to pursue their goals. Welldesigned and well-executed performance appraisals have a strong motivational impact. Appraisals have the power to motivate employees because they provide a number of interconnected benefits: They demonstrate the need for improvement. If employees dont have a clear understanding of how theyve been performing, they cant be motivated to make any improvements. They meet higher-level psychological needs. Researchers continue to find that recognition is one of the most powerful forms of motivation for large numbers of employees. Although you can find numerous possible sources of recognition on the job, performance appraisals are an opportunity for employees to receive formal, significant, and enduring recognition from their manager. They build a sense of personal value. When managers take the time and effort to carefully review, analyze, document, and discuss performance with employees, the underlying message to the employees is that theyre important and valuable, and this alone is quite rewarding, whether the feedback is positive or not. They enhance personal development. Performance evaluations are motivational for employees who are looking to enhance their personal learning, growth, and development. Appraisals are a highly valuable source of information, insights, and tools necessary for such progress. Performance appraisals are similarly motivational for employees whose needs are centered on achievement, goal attainment, and sensing personal effectiveness, respect, and trust. They turn employees around. When employees are performing poorly, performance appraisals can provide the wakeup call that they need to get refocused and reenergized. With performance appraisal, however, the purpose of the session is not strictly disciplinary, so the employee is more likely to walk in with a more receptive and open mind. As a result, your comments regarding an employees questionable performance have an excellent chance of being heard and generating action as a result. They increase satisfaction. When performance appraisals meet the employees needs in such areas as gaining recognition, sensing achievement and competence, experiencing growth, and meeting objectives, theyre also contributing to the employees job satisfaction, and this is one of the most important elements at work today. When employees are satisfied, some of the most visible indicators are reduced turnover, absenteeism, and tardiness. .

Performance Appraisal Methods

Ranking Method The ranking system requires the rater to rank his subordinates on overall performance. This consists in simply putting a man in a rank order. Under this method, the ranking of an employee in a work group is done against that of another employee. The relative position of each employee is tested in terms of his numerical rank. It may also be done by ranking a person on his job performance against another member of the competitive group. Advantages of Ranking Method i. ii. Employees are ranked according to their performance levels. It is easier to rank the best and the worst employee.

Limitations of Ranking Method iii. The whole man is compared with another whole man in this method. In practice, it is very difficult to compare individuals possessing various individual traits. iv. This method speaks only of the position where an employee stands in his group. It does not test anything about how much better or how much worse an employee is when compared to another employee. v. When a large number of employees are working, ranking of individuals become a difficult issue. vi. There is no systematic procedure for ranking individuals in the organization. The ranking system does not eliminate the possibility of snap judgements.

Forced Distribution method This is a ranking technique where raters are required to allocate a certain percentage of rates to certain categories (eg: superior, above average, average) or percentiles (eg: top 10 percent, bottom 20 percent etc). Both the number of categories and percentage

of employees to be allotted to each category are a function of performance appraisal design and format. The workers of outstanding merit may be placed at top 10 percent of the scale, the rest may be placed as 20 % good, 40 % outstanding, 20 % fair and 10 % fair. Advantages of Forced Distribution vii. viii. This method tends to eliminate raters bias By forcing the distribution according to pre-determined percentages, the problem of making use of different raters with different scales is avoided. Limitations of Forced Distribution ix. The limitation of using this method in salary administration, however, is that it may lead low morale, low productivity and high absenteeism.

Employees who feel that they are productive, but find themselves in lower grade(than expected) feel frustrated and exhibit over a period of time reluctance to work. Critical Incident techniques Under this method, the manager prepares lists of statements of very effective and ineffective behaviour of an employee. These critical incidents or events represent the outstanding or poor behaviour of employees or the job. The manager maintains logs of each employee, whereby he periodically records critical incidents of the workers behaviour. At the end of the rating period, these recorded critical incidents are used in the evaluation of the workers performance. Example of a good critical incident of a Customer Relations Officer is : March 12 - The Officer patiently attended to a customers complaint. He was very polite and prompt in attending the customers problem. Advantages of Critical Incident techniques x. This method provides an objective basis for conducting a thorough discussion of an employees performance.

xi.

This method avoids recency bias (most recent incidents are too much emphasized)

Limitations of Critical Incident techniques xii. xiii. Negative incidents may be more noticeable than positive incidents. The supervisors have a tendency to unload a series of complaints about the incidents during an annual performance review sessions. xiv. xv. It results in very close supervision which may not be liked by an employee. The recording of incidents may be a chore for the manager concerned, who may be too busy or may forget to do it. Checklists and Weighted Checklists In this system, a large number of statements that describe a specific job are given. Each statement has a weight or scale value attached to it. While rating an employee the supervisor checks all those statements that most closely describe the behaviour of the individual under assessment. The rating sheet is then scored by averaging the weights of all the statements checked by the rater. A checklist is constructed for each job by having persons who are quite familiar with the jobs. These statements are then categorized by the judges and weights are assigned to the statements in accordance with the value attached by the judges. Advantages of Checklists and Weighted Checklists xvi. Most frequently used method in evaluation of the employees performance.

Limitations of Checklists and Weighted Checklists xvii. xviii. xix. This method is very expensive and time consuming Rater may be biased in distinguishing the positive and negative questions. It becomes difficult for the manager to assemble, analyze and weigh a number of statements about the employees characteristics, contributions and behaviours.