A performance management system is one of many types of employee evaluation methods. It does this by setting performance-based criteria for evaluating worker productivity and contributions. This allows business owners to guide performance to suit their organization’s activities and needs. For example, a manufacturer might achieve its organizational objectives by requiring workers to produce a specific number of units per hour. Those who achieve this goal are rewarded, while those who do not are encouraged to pick up their production speed.
According to Hoopla, a major advantage of a performance management system is it allows managers to evaluate and compare employees in ways that are relevant to the overall organization’s goals. For example, suppose a company wants its workers to be more productive. By implementing a performance management system, the company can divide workers into competent performers, under-performers and over-performers. Group membership is defined by objective criteria, such as items produced per hour, clarifying which workers need remedial training or increased support and which should receive bonuses.
Establishing an objective system of evaluation can remove subjectivity and bias from the evaluation process. Because of this, management is also less likely to judge employee performance based on personal biases, which can be helpful for company diversity and inclusion goals.
Favoritism and nepotism are less likely to thrive if managers must evaluate performance in objective terms, such as items produced. Also, an objective performance management system helps workers understand what’s expected of them. Instead of trying to decipher nebulous directives, workers can compare their performances to clearly defined standards.
If a company chooses faulty criteria to evaluate its workers, it can render a performance management system worthless or even pose a danger to an organization’s strategies. Criteria that don’t accurately measure true productivity – for example, if the system tabulates produced items without evaluating their quality – can sabotage the company’s overall strategy. And criteria that allow workers to game the system allow unethical workers to take advantage of the organization.
In addition, criteria can sometimes be based on measures that employees do not have control over. For instance, if employees need data or parts from another department to meet objectives, it might sometimes be impossible to do so. One person might have a departmental contact who swiftly replies to emails, while another waits for days to receive a reply. The person assigned the better contact ends up looking like a stellar performer, while the employee assigned the less responsible contact is often seen as less competent.
According to Indeed, one of the disadvantages of performance management systems is that worker morale can suffer, especially if unethical employees claim the lion’s share of the rewards. Even if the system is largely fair, internal competition and the strain of meeting rigorous standards could weigh on employees. If a business has a finite number of promotional opportunities and a specific number of employees who will need corrective action based on the company's ratings system, workers might start to focus more on where they stand in that hierarchy rather than on their job-related duties.
Another problem is that a performance management system might discourage free thinking. If employees fixate on achieving production numbers, for instance, they might not approach problems creatively or risk novel solutions. Failing to consider employee initiative in favor of raw numbers may mean a more inefficiently-run business as your workers focus on what you measure instead of what you need.
Performance Management is a continuous and systematic approach to identifying, measuring, and developing the performance of the employees in the organization. Performance Management is an important aspect of the HR department that helps to create such an environment where peoples work through self-motivation to provide their best effort for achieving organizational goals. Employees will be committed to driving quality work if organizations can implement an effective performance management system. Performance Management is – ‘The development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organization which supports and encourages their achievement.” Armstrong and Baron, “A strategic and integrated approach to increasing the effectiveness of organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.” Suggested: Top 15 Employee Motivation Strategies and Benefits Types of Performance Management System in HRMThere are different types of performance management systems as bellows:
Purposes of Performance Management System in HRMThe performance appraisal system is directly linked with KPIs for HR Manager, and the performance management system serves the following purposes:
Objectives of Performance Management System in HRM Performance management system serves the following objectives:
Advantages of Performance Management System The advantages of the performance management system are as follows:
Disadvantages of Performance Management System The disadvantages of the performance management system are as follows:
Elements of Performance Management System There are 3 major elements of an effective performance management system as below: Element One: Goal Setting Goal setting is a process of establishing objectives that can be achieved over a period of time. This goal should be aligned with organizational goals. During goal setting, it should be ensured that goals are SMART:
Examples of effective goals statements:
Element Two: Performance Review Performance review is a process of assessing an employee’s progress toward the goals. Performance review and evaluation process include:
Element Three: Performance Improvement Plan The organization uses different types of formats for generating performance improvement plans. This is helpful to achieving performance expectations. The format of the Performance Improvement Plan (PIP) should include the following components:
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