Effective people resourcing includes not only the acquisition of the appropriate quantity and quality of people but also the management of employees to ensure that skills and competencies are developed and that performance levels are consistent with the achievement of organisational objectives. Employees need to know what is expected, not just in terms of duties and responsibilities but also in terms of standards of performance. Performance management does not consist solely of the appraisal of performance. It is a holistic process which encompasses the definition of organisational aims, the development of team and individual objectives, effective processes for measurement and assessment, the integration of reward strategies, constructive feedback and support for employees to develop and acquire the skills needed to contribute to organisational success. Performance management is a process, not an event, and operates in a continuous cycle. Managing employee absence is an important part of managing performance and is also addressed in this chapter.
Much is written and spoken about performance management and to understand this more fully it is important to be clear about what is meant by the term. Definitions include:
A process which contributes to the effective management of individuals and teams in order to achieve high levels of organisational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people which will ensure that it is achieved.
A systematic approach to improving individual and team performance in order to achieve organisational goals . . . the approach you take should depend on your organisation: its culture, its relationship with employees and the types of job that they do.
However, Bones (1996) made an interesting observation that ‘Performance does not need managing. It needs encouraging, developing, supporting and sustaining.’ These definitions recognise that performance management should be a strategic and integrated activity with processes designed to facilitate improvements through personal development while encouraging and rewarding appropriate employee behaviours. The People and Performance model of Purcell et al.
(2003) emphasises the role of individual behaviour in delivering high performance by explaining that performance is a function of ability, having the necessary knowledge and skills; motivation, having the willingness to use the skills; and opportunity, having the chance to perform to a high level. This also relies on having a supportive context in terms of the organisational structure and culture while acknowledging the need ‘to gain employee commitment which is central to the achievement of positive organisational outcomes such as high quality goods and services which are at the heart of organisational performance’ (Guest, 2000). Armstrong and Baron (2005) stress the importance of strategic fit and integration and consequently performance management needs to include broad issues and long-term goals as well as bringing together.
All the aspects of the business. To be successful performance management needs to focus on both continuous improvement and the development of people. Holbeche (2008), in launching the CIPD research project examining high performance working ‘Shaping the Future’, asserts that ‘great performance occurs when people know what is expected and why that matters’. She explains how ‘recent global events show how fast the context is moving and how interconnected our fortunes are as individuals, organisations and society as a whole’. Consequently organisations that cannot lever up performance and build change into the heart of the organisation will find the business climate challenging. When asked about the essential components of high performing organisations Holbeche stressed the need for ‘the right people, delivering the right results’. However, she acknowledged that:
The development of an appropriate performance management process is just one element in the development of a performance culture because it will require employees to continuously examine their business processes in order to maximise the quality of their outputs and regularly review their competencies to determine their personal development needs. However, performance management is not an annual event, it is a continuous process and the elements and linkages of a performance management process are identified in Figure 11.1. The performance management concept may be readily understood and be seen as a suitable way of successfully managing people, but the challenges lie in developing a performance management process that works.
Performance management is a flexible process and consists of sequential stages. First, clearly define organisational goals to support the setting of unit, team and individual objectives (or performance indicators). Second, the agreement of training and development plans to ensure that learning needs are met and objectives can be achieved. Third, an appraisal process to encourage an open exchange of views and discussion on whether objectives have been achieved, exceeded or not achieved. Fourth, regular feedback is necessary to enable the individual or the team to assess the extent to which their objectives are being achieved. Fifth, financial and non-financial rewards need to be allocated to encourage people to continue to perform. Finally, the process can come full circle by encouraging the individual to develop individual career plans which take into account the long-term vision of the organisation and the strengths, weaknesses and aspirations of employees.
Performance management starts with a clear exposition of the organisation’s values and beliefs to support the definition of the organisational vision and provide a framework for the corporate culture necessary to achieve business objectives. The organisation vision is an important component of corporate strategy in communicating consistently and succinctly to employees and customers the underpinning values and beliefs which drive the business. The publication of a vision is not an end in itself. Effective communication and enactment of the vision and the associated values is critical because employee acceptance is fundamental to the development of involvement and commitment.
Corporate strategy needs to reflect the vision and focus on both where the organisation is going and how it will get there. It is not a one-off activity, but a continuous process which is reviewed and adjusted in line with changes in the internal and external contexts. Consideration should be given to factors such as global changes, the stage in the economic cycle, product and labour markets and changing technology, inter alia (see Chapter 1). To be workable the strategy needs to be simple and focused and identify the critical success factors, including the part played by the management of employee performance in realising the corporate vision.
In recognising the critical workforce role in achieving organisational goals and the need for integration of the business with the talent management activities, an effective HR strategy can contribute to an environment where employees understand the culture of the organisation, the standards expected and the support available to achieve high levels of performance. A communication strategy is needed to engage the ‘hearts and minds’ of employees. This somewhat evangelical perspective can attract the criticism that performance management is merely a mechanism for managerial control. This criticism can be exacerbated if employees neither understand nor accept the basis of the process. Warm words can sound like empty words in the absence of a genuine managerial acknowledgement of the employees’ contribution to corporate success or a failure to appreciate employee concerns about the operation of the performance management process.
Objectives, or performance indicators, can be defined at business unit, team or individual levels. At business unit level they are closely aligned to organisational goals and will specifically define the targets that the unit is expected to achieve in order to maximise its contribution. At team or individual level the objectives need to relate specifically to the role of the team or individual and the contribution that they are expected to make to the achievement of business unit objectives. Management normally set objectives, but legitimacy will be increased if the objectives are agreed with the team or individual. Setting objectives requires managers to be familiar with the skills and competencies of the employees and with business unit objectives. Managers need to be able to describe the objectives in terms of tasks and behaviours
In order to maximise the business impact of the performance management process the description and allocation of objectives should be done within a framework of equity and fairness and aim to provide motivating jobs which utilise skills and competencies while offering personal development opportunities. There is value in objectives being SMART, but this approach may be seen as lacking flexibility in the modern fast moving business environment:
S Specific: Define precisely what is required in clear language, so that it is clearly understood by both employee and employer.
M Measurable: Normally include both quantitative targets and qualitative outputs which can be objectively assessed.
A Agreed/Achievable: Managers define objectives, but they are agreed with the employee. Management-imposed objectives that are not owned or accepted by the employee have less chance of being achieved.
R Realistic: Objectives must be achievable and fairly allocated. Setting objectives which are easy to achieve for one employee while giving another objectives that are unlikely to be met is not only unfair but it may also be de-motivational for both of these individuals.
T Time-related: Incorporate clear target dates or time scales which are not open ended.
Hall (2009) usefully expands the SMART acronym:
S specific, significant, stretching
M measureable, meaningful, motivational
A attainable, agreed upon, achievable, action orientated
R realistic, relevant, reasonable, rewarding, results orientated T time-based, timely, tangible
Exhibit 11.1 provides examples of a quantitative objective or target (1), a qualitative objective described in behavioural terms but measured quantitatively (2), and also what is best described as a performance standard (3). Armstrong and Baron, 2005 describe performance standards as ‘a statement of the condition that exists when a job is being performed effectively’. These are more focused on the level of service provision and are a fundamental part of the job; although the detail of the objective may change, for example from two to three days if resources change, the task still .
Two principal criticisms of objective setting are, first, the difficulty of setting objectives, which results in the setting of objectives that can easily be measured, at the expense of the less tangible elements of the job − the intangibles may be fundamental to the achievement of a high level of performance and therefore not all parts of the job will be covered; and, second, a loss of flexibility because organisational changes need to be incorporated into the objectives and if objectives are not continuously reviewed to retain currency, the individual may put effort into out-of-date objectives because they remain the basis for performance measurement and reward. Rigid performance objectives therefore decay in rapidly changing environments. Rose (2000) examined the continuing role of SMART objectives and contends that:
SMART objectives assume that organisations operate within a stable environment, but changes in technology and increased globalisation create a world in which winning organisations are those that can lead change, or can at least respond rapidly to market changes. The losers are those that are still driven by year-old objectives.
Consequently, it is important that the performance management process is able to recognise and respond to the external and internal environments, and managers need to guard against the danger that rather than being a force for change the performance management process can become an inhibitor of change. Rose examined the extent to which a process of continuous improvement would be more suited to organisations. The basis of continuous improvement is to identify key performance indicators and to strive to enhance these rather than setting targets which are based on past performance. This moves the organisation from being backward-looking to becoming more forward-looking and increases the flexibility in the performance management process. Rather than the rigidity of SMART objectives, CASE objectives may provide a more appropriate framework. CASE objectives are:
C Conditions: reviews the environments within which the organisation operates, if these change then the performance objectives should be reviewed.
A Action: describes what the employee or team should do.
S Standards: defines the level of achievement expected.
E Evaluation: develops a process of regular review and adjustment.
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