PERFORMANCE

MANAGEMENT
 WHAT IS PERFORMANCE MANAGEMENT
• Performance Management is a continuous process of identifying, measuring,
and developing the performance of individuals and teams and aligning
performance with the strategic goals of the organization.

• Performance management creates a direct link between employee

performance and organizational goals. For example: every individual
department is working towards the organization’s goal.
PERFORMANCE MANAGEMENT VS.
PERFORMANCE APPRAISAL
• A system that involves employee evaluation once a year without an
ongoing effort to provide feedback and coaching is performance appraisal
system.
• Performance appraisal tells about employees strength and weakness
• Component of performance management.
 SIEMENS
• Performance management is based on three pillars
• Setting clear and measurable goals
• Implementing concrete actions
• Imposing rigorous consequences

• Performance oriented organization

 PERFORMANCE MANAGEMENT
CONTRIBUTION
• Motivation to perform is increased
• Self esteem is increased
• Managers gain insight about subordinates
• The definition of job and criteria are clarified
• Self-INSIGHT AND DEVELOPMENT ARE ENHANCED
• Administrative actions are more fair and appropriate
• Organizational goals are made clear
• Employee become more competent
• Employee misconduct is minimized
• There is better protection from lawsuits
• Better and more timely differentiation between good and poor performance
• Supervisors’ views of performance are communicated more clearly
• Organizational change is facilitated
• Motivation, commitment and intentions to stay in the organization are
enhanced
• Voice behavior is encouraged
• Employee engagement is enhanced
 DISADVANTAGES OF POORLY
IMPLEMENTED PM SYSTEM
• Increased turnover
• Use of misleading information
• Lowered self esteem
• Wasted time and money
• Damaged relationship
• Deceased motivation to perform
• Employee burnout and job dissatisfaction
• Increased risk of litigation
• Unjustified demands on managers and employee resources
• Varying and unfair standards and ratings
• Emerging biases
• Unclear rating system
 REWARD SYSTEM
• Set of mechanism for distributing both tangible and intangible returns as part
of an employment relationship

• All returns are not allocated on the base of performance such as seniority
COST OF LIVING ADJUSTMENT--COLA
• Same percentage increase for all employees regardless of their individual
performance

• To combat the effect of inflation in an attempt to preserve employees

buying power

• CONTINGENT PAY

• REFFERED to as merit pay

• Given as an addition to the base pay based on past performance.

• Additional payment depends on your performance.

• Short-term incentives

• Allocated based on past performance.

• Incentive are not added to the base pay

• Temporary pay adjustments based on the review period

• Incentives are one-time payments and are referred as variable pay.

• Incentive are known in advance

• For example: if you meet your sales quota, you’ll receive 3,000 bonus at the
end of the year

• In contingent pay, the specific value of the reward is not known in advance.
 LONG TERM INCENTIVES
• Attempt to influence future performance over a longer period of time.

• Employees get personally invested in the organization’s success and

translated to a sustained high level of performance.
INCOME PROTECTION
• Serves as backup to employees salaries in the event that an employee is
sick, disabled or no longer able to work.

• Example:
• Medical insurance
• Pension plan
• Paid time off
• Retirement benefits
• Canadian organizations pay into a fund that provides income protection in
case of disability.
WORK/LIFE FOCUS

• These benefits include programs that help employees achieve a better

balance work and non work activities.

• Example:
• Vacation time
• Counselling
• Onsite fitness program
• Telecommuting
• Nonpaid time off
CHARACTERISTICS OF AN IDEAL PM
SYSTEM
• Strategic Congruence: Individual goals must be aligned with Unit and
organizational goals.

• Context Congruence: System should be congruent with the organization’s

culture as well as the broader context of the region or country.
Culture plays as important role in the effectiveness of performance
management system. For example: in japan there is emphasis on both
behavior; how do people work and their result as compared to US where
only result matters.
Thoroughness: should be in 4 dimensions
1. Employees should be evaluated including managers.
2. All major job responsibilities should be evaluated including behaviors and
results.
• 3. Evaluation should include performance spanning the entire review period,
not just few weeks or months.
• 4. Feedback should be given on both positive performance and area of
improvement.

• Practicality: Good and easy to use system

• Specificity: Detailed and concrete information to employees.
• Reliability: ratings should be similar by two different employees.
• Acceptability and fairness
• Inclusiveness: must represent the concerns of all the people who would be
affected by the outcome.
• Openness: 2-way communication
• Ethicality: supervisor suppress his personal interest in providing evaluation.
Privacy of the employees should be respected.