The purpose for performance management is to manage the company’s expectations along with managing the employee’s performance allowing individual development. Both the employee and employer should be clear on what should be done moving forward to achieve the companies end goal. Ideally a holistic approach would be used, as it is best practice. It is not one single event that occurs once a year (appraisal) but should be a continuous cycle ingrained within the company. It concerns all members aligning their goals and should not be integrated as a ‘top down’ process.
The benefits are it allows recognition for employee’s efforts, highlighting positive or negative performance on an unbiased platform. This encourages communication, troubleshooting any small issues that could potentially escalate. With clear objectives set it also allows employees to develop their skills further within the organisation. This should also increase staff retention, creating a stable work force who are all hopefully motivated to acquire their skills and knowledge from the management tools provided. There are many different areas that it can include such as the following:
• Performance appraisal
• One to ones – reviews
• Promotion opportunities
• Personal Development opportunities
• Objective setting
• Managing under-performance
• Motivational theories introduced
The components that constitute a performance management system should not be confused with performance appraisal. The system must be integrated into a company with a clear induction to the system that is clear and concise, along with managing expectations says Ross MD at Type A Media . It requires confirmation of agreed aims, objectives and targets from both parties so a clear and established target is set. There must be strong communication throughout, discussing the data, documents or observations recorded required. An incentive, appraisal or acknowledgement must also take place, regardless whether the performance target has been met or not. A discussion on what went right or wrong must be in place to move forward and diagnose the employee’s performance.
However, there are many barriers that can affect this becoming successful, such as the below:
• Lack of Support from Senior Management
• Lack of Commitment from Line Managers
• Lack of Understanding and training in the policy and process
• Lack of Involvement in design and implementation of policy
• Previous experiences – pessimism; distrust, doubt
• Time Pressures
• Failure to ‘monitor’ objectives
• Limited resources in terms of reward package/training support
It is important an employer is aware of these and considers how to overcome them when implementing management systems and expecting more of employees.
The relationship between motivation and performance management is ambivalent and there are
many studies around this to try and distinguish a correlation says Aaron senior manager at Churchill Knight & Assocaites Ltd. An employee’s motivation can either come from intrinsic or extrinsic factors and based on this their employer can implement motivators and take the appropriate management style correspondingly.
According to McGregor’s theory of X and Y, which categorises and compares an employee’s attitude, direction, responsibility, motivation, creativity and responsibility, company owners may find it a useful way to evaluate their current and potential employee’s characteristics. Allowing them to categorise whether they would benefit from employing X or Y stereotypes dependant on the organisation and industry. For example, Y (intrinsic) employees would be more suited to a creative, hospitality or medical industry because they show interest or love their work, they are more self-sufficient, creative and less money orientated. Whereas X’s (extrinsic) are more motivated by money and accept a directive approach with simple processes to success, therefore the corporate or manufacturing industry would match their inner motivators.
F.W.Taylor’s motivational theory of Taylorism compared to McGregor’s theory is a simpler model however, it has been successfully used worldwide. For example, McDonald and Ford operate on their employees preferring this. It is a small process which creates small parameters which all employees must follow to succeed. It is believed to be an outdated model due to it standardising performance of each job, lacking consideration on an individual’s circumstances or behaviours. This model would suit a manufacturing company or those who don’t enjoy to be challenged as it would be a monotonous process.
Rewards should be applied fairly and consistently throughout the organisation for either contributing, value, skills, knowledge or expertise. The purpose of a reward strategy is to attract and retain staff not just through remuneration but by rewarding employees in other ways for those employees that want to promote and engulf the organisation and company culture. Implementing rewards should improve and add value to performance, as it motivates staff and makes them feel more valued and not just an employee. It should also promote positive employee relations between employers and employees therefore, increasing loyalty and diminish any potential disputes.
A total reward system for an employee’s contribution should constitutes of a financial reward, employee benefits and non-financial reward to cement and compliment the organisations psychological contract. Whereas a remuneration reward for example would be just receiving a financial reward and employee benefits. The advantages of implementing a total reward system would make it easier to recruit better quality of staff, reduces staff turn-over, increases business performance and enhances the performance of the organisation as an employer of choice.
Typically, an organisation would use a basic/flat rate scheme for employees that sets pay hourly, weekly or yearly, disregarding any individual contributions or performance. It’s a cheap, simple system to operate and administer that creates a fairness and stability throughout the organisation. It gives a straight forward forecast of cost predictions for owners however, it doesn’t equate for any anomalies and could create a hierarchy that is inflexible to change and development. An example of this is in the NHS where the employees are paid in bands regardless of their contribution or efforts put in.
A variable rate scheme in comparison does take into account the individual, department or company performance. It usually is dependent on monthly targets, KPI’s and performance indicators this could be linked to Vroom’s expectancy theory. This is a theory that believes that the more effort an employee’s puts in it will equate to better performance and motivation. This pay structure can allow an individual to be recognised and rewarded directly related to their contribution enabling them to potentially feel more valued within the organisation. It can be responsive and flexible to business change needs in the short-term. However, it can seem to be subjective, unfair, biased and cause long-term damage the business if implemented incorrectly. It can also create amnesty towards a harmonious team if they believe the system is biased and cause employee relations to deteriorate.
A reward doesn’t have to just be in the form of monetary reward it can be made to enhance an employee’s well-being to complement their pay package, but never instead of. Through knowing your employee’s motivators, you can apply relevant non-financial rewards to what suits them and their lifestyle such as:
• Childcare vouchers
• Advances and loans
• Company cars
• Company shares
• Private health schemes
• Medical insurance
• Gym membership
There is strong evidence that people don’t purely focus on financial rewards, especially if you look at those who choose to work in the public sector. The points below show the reasons and main factors drawing employees towards an industry that doesn’t necessarily pay more:
• Making a positive difference e.g. NHS, Police work, Council work, Social workers, teachers etc.
• Interesting work
• Career progression
• Career people have always wanted to do
• Working with people
In addition, many employees will feel rewarded by simply receiving recognition and appreciation for their efforts either informally daily or through formal recognition schemes. According to Armstrong et al, 2005, ‘Recognition processes enable appreciation to be shown to individuals for their achievements either informally on a day-to-day basis or through formal recognition schemes. They can take place quietly between managers and individuals in their teams or be visible celebrations of success.’
3.1 High performance isn’t just about focusing on rewards there are many factors that should be considered when managing good or poor performance. An individual can be affected by any of the below in an organisation:
– Lack of resources/Time issues
– Motivation for the PRM
– Lacking skills/knowledge
– Extenuating Circumstances
These are aspects of the organisation that could be addressed and provoke thought towards other aspects that could be changed or enhanced in the business. This will therefore, allow employees the best possible chance to reach company targets and their potential. However, regardless of these an employees attitude, personal circumstances, economic factors are just a few of the external factors that an employer cannot control. If an employee has had a bereavement, house move or pregnancy then it all plays a role in their mood and how they will be able to cope with work stress and any added potential personal worry or strain.
3.2 To support a performance and reward management review, it is required that data is used to back up and measure agreed targets, KPI’s and objectives previously set. It is import that the employee and the employee understand the job role to achieve those targets, maintaining an honest relationship as well as also allowing the employee to see their contribution to the company. It is vital it is used to validate up an individual’s positive or negative performance, as if a manager doesn’t use data to back an employee could feel personally attacked and it could be easily manipulated by the manager if they were biased to a certain person.
For example, for a sales consultant it could be through analysing internal call recordings and sales figures comparing and reviewing the performance in previous months. However, if an employee is in a customer care role you could base it on the external customer feedback. Furthermore, minutes from previous review meetings, SMART and current company objectives, career goals and recorded absent or sicknesses can also be used to bench mark performance and indicate whether it is satisfactory to the company’s objectives and standards to achieve the end goal.
Holding frequent performance reviews will allow an employer to express any concerns about their
personal circumstances if they wish to open up about, it would be easier for them in a private meeting and without causing an obvious fuss. Holding them too frequently however will reduce their effect and meaningfulness. But it has also been found holding them annually is too long as it becomes to general and just a check list that must be ticked, instead of properly delving into issues, lacking information. Therefore, quarterly or every 6 months would be sufficient enough to allow change to develop and implement the necessary tools, skills or structure.
Managers often struggle to see the purpose or can be bothered to find the time to carry out a performance review but there are many benefits of this that they must be aware of:
• Assesses performance, potential, development needs
• Examines achievements, objectives and targets
• Use as a motivational tool (with or without pay)
• To praise and recognise efforts
• A structured approach to help improve performance
• Tool to reflect on the past to shape the future
• To identify future development needs
Reflecting on a performance review can be a successful process to express the employees concerns in a safe environment. Before a performance appraisal took place, it is wise to look at the targets set in place, KPI’s and check previous meeting minute notes along any SMART objective set and recorded absent or sicknesses. To make them feel comfortable and at ease you should chose to make this an informal meeting hopefully reducing any anxiety.
This meeting will give the employee an opportunity to open up about personal issues which they may feel uncomfortable doing without the confide setting of the meeting. It will allow them to express bottled up emotions along with recognising strengths and potential areas to develop.
