Performance Management: Benefits and Concerns

Sections of This Topic Include:

4 Key Benefits of Performance management
15 Other Benefits
Concerns

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4 Key Benefits of Performance Management

1. PM focuses on results, rather than behaviors and activities
A common misconception among supervisors is that behaviors and activities are the same as results. Thus, an employee may appear extremely busy, but not be contributing at all toward the goals of the organization. An example is the employee who manually reviews completion of every form and procedure, rather than supporting automation of the review. The supervisor may conclude the employee is very committed to the organization and works very hard, thus, deserving a very high performance rating.

2. Aligns organizational activities and processes to the goals of the organization
PM identifies organizational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (drivers) to achieve the goals. This chain of measurements is examined to ensure alignment with overall results of the organization.

3. Cultivates a system-wide, long-term view of the organization.
Richard A. Swanson, in Performance Improvement Theory and Practice (Advances in Developing Human Resources, 1, 1999), explains an effective performance improvement process must follow a systems-based approach while looking at outcomes and drivers. Otherwise, the effort produces a flawed picture. For example, laying off people will likely produce short-term profits. However, the organization may eventually experience reduced productivity, resulting in long-term profit loss.

4. Produces meaningful measurements
These measurements have a wide variety of useful applications. They are useful in benchmarking, or setting standards for comparison with best practices in other organizations. They provide consistent basis for comparison during internal change efforts. They indicate results during improvement efforts, such as employee training, management development, quality programs, etc. They help ensure equitable and fair treatment to employees based on performance.

15 Other Benefits of Performance Management

Performance Management (PM):
1. Helps you think about what results you really want. You're forced to be accountable, to "put a stake in the ground".

2. Depersonalizes issues. Supervisor's focus on behaviors and results, rather than personalities.

3. Validates expectations. In today's age of high expectations when organizations are striving to transform themselves and society, having measurable results can verify whether grand visions are realistic or not.

4. Helps ensure equitable treatment of employees because appraisals are based on results.

5. Optimizes operations in the organization because goals and results are more closely aligned.

6. Cultivates a change in perspective from activities to results.

7. Performance reviews are focused on contributions to the organizational goals, e.g., forms include the question "What organizational goal were contributed to and how?"

8. Supports ongoing communication, feedback and dialogue about organizational goals. Also supports communication between employee and supervisor.

9. Performance is seen as an ongoing process, rather than a one-time, shapshot event.

10. Provokes focus on the needs of customers, whether internal or external.

11. Cultivates a systems perspective, that is, focus on the relationships and exchanges between subsystems, e.g., departments, processes, teams and employees. Accordingly, personnel focus on patterns and themes in the organization, rather than specific events.

12. Continuing focus and analysis on results helps to correct several myths, e.g., "learning means results", "job satisfaction produces productivity", etc.

13. Produces specificity in commitments and resources.

14. Provides specificity for comparisons, direction and planning.

15. Redirects attention from bottom-up approaches (e.g., doing job descriptions, performance reviews, etc., first and then "rolling up" results to the top of the organization) to top-down approaches (e.g., ensuring all subsystem goals and results are aligned first with the organization's overall goals and results).

Concerns About Performance Management

Typical concerns expressed about performance management are that it seems extraordinarily difficult and often unreliable to measure phenomena as complex as performance. People point out that today's organizations are rapidly changing, thus results and measures quickly become obsolete. They add that translating human desires and interactions to measurements is impersonal and even heavy handed.

Performance Management: Overall Goal and Basic Steps

Overall Goal and Focuses of Performance Management

The overall goal of performance management is to ensure that the organization and all of its subsystems (processes, departments, teams, employees, etc.) are working together in an optimum fashion to achieve the results desired by the organization.

Performance Improvement of the Organization or a Subsystem is an Integrated Process

Note that because performance management strives to optimize results and alignment of all subsystems to achieve the overall results of the organization, any focus of performance management within the organization (whether on department, process, employees, etc.) should ultimately affect overall organizational performance management as well.

Ongoing Activities of Performance Management

Achieving the overall goal requires several ongoing activities, including identification and prioritization of desired results, establishing means to measure progress toward those results, setting standards for assessing how well results were achieved, tracking and measuring progress toward results, exchanging ongoing feedback among those participants working to achieve results, periodically reviewing progress, reinforcing activities that achieve results and intervening to improve progress where needed. Note that results themselves are also measures.

Note that these general activities are somewhat similar to several other major approaches in organizations, e.g., strategic planning, management by objectives, Total Quality Management, etc. Performance management brings focus on overall results, measuring results, focused and ongoing feedback about results, and development plans to improve results. The results measurements themselves are not the ultimate priority as much as ongoing feedback and adjustments to meet results.

The steps in performance management are also similar to those in a well-designed training process, when the process can be integrated with the overall goals of the organization. Trainers are focusing much more on results for performance. Many trainers with this priority now call themselves performance consultants.

Basic Steps

Various authors propose various steps for performance management. The typical performance management process includes some or all of the following steps, whether in performance management of organizations, subsystems, processes, etc. Note that how the steps are carried out can vary widely, depending on the focus of the performance efforts and who is in charge of carrying it out. For example, an economist might identify financial results, such as return on investment, profit rate, etc. An industrial psychologist might identify more human-based results, such as employee productivity.

The following steps are described more fully in the topics Performance Plan,
Performance Appraisal and Development Plan, including through use of an example application. The steps are generally followed in sequence, but rarely followed in exact sequence. Results from one step can be used to immediately update or modify earlier steps. For example, the performance plan itself may be updated as a result of lessons learned during the ongoing observation, measurement and feedback step.

NOTE: The following steps occur in a wide context of many activities geared towards performance improvement in an organization, for example, activities such as management development, planning, organizing and coordinating activities.

1. Review organizational goals to associate preferred organizational results in terms of units of performance, that is, quantity, quality, cost or timeliness (note that the result itself is therefore a measure)

2. Specify desired results for the domain -- as guidance, focus on results needed by other domains (e.g., products or services need by internal or external customers)

3. Ensure the domain's desired results directly contribute to the organization's results

4. Weight, or prioritize, the domain's desired results

5. Identify first-level measures to evaluate if and how well the domain's desired results were achieved

6. Identify more specific measures for each first-level measure if necessary

7. Identify standards for evaluating how well the desired results were achieved (e.g., "below expectations", "meets expectations" and "exceeds expectations")

8. Document a performance plan -- including desired results, measures and standards

9. Conduct ongoing observations and measurements to track performance

10. Exchange ongoing feedback about performance

11. Conduct a performance appraisal (sometimes called performance review)

12. If performance meets the desired performance standard, then reward for performance (the nature of the reward depends on the domain)

13. If performance does not meet the desired performance standards, then develop or update a performance development plan to address the performance gap* (See Notes 1 and 2)

14. Repeat steps 9 to 13 until performance is acceptable, standards are changed, the domain is replaced, management decides to do nothing, etc.

* Note 1: Inadequate performance does not always indicate a problem on the part of the domain. Performance standards may be unrealistic or the domain may have insufficient resources. Similarly, the overall strategies or the organization, or its means to achieving its top-level goals, may be unrealistic or without sufficient resources.

* Note 2: When performance management is applied to an employee or group of employees, a development plan can be initiated in a variety of situations, e.g.,:
a.) When a performance appraisal indicates performance improvement is needed, that is, that there is a "performance gap"
b.) To "benchmark" the status of improvement so far in a development effort
c.) As part of a professional development for the employee or group of employees, in which case there is not a performance gap as much as an "growth gap"
d.) As part of succession planning to help an employee be eligible for a planned change in role in the organization, in which case there also is not a performance gap as much as an "opportunity gap"
e.) To "pilot", or test, the operation of a new performance management system

Maximum Performance – Different Things to Different People

Maximum Performance – Different Things to
Different People
Despite the recent attention to achieving maximum performance, there is no standard interpretation
of what that means or what it takes to get it. Still, you should be aware of the various views and be
able to choose your own. Information in this subsection will orient you to what people are
suggesting that it takes for organizations to achieve maximum performance.
Exploring Organizational Effectiveness
The phrase, “organizational effectiveness,” is commonly referred to when discussing organizations
that have achieved maximum performance. Perhaps one of the best overviews of the concept of
organizational effectiveness is provided by Herman and Renz (2002). The authors identify nine
fundamental propositions about organizational effectiveness. Their propositions were written about
nonprofit organizations. However, they also apply to organizations in general and, thus, their
descriptions are modified in the following paragraphs to apply to organizations in general.
1. Organizational effectiveness is always a matter of comparison.
When determining the effectiveness of an organization, to what are you comparing the
organization to conclude whether it is effective or not? For example, are you comparing to a
certain set of best practices or to another highly respected organization?
2. Organizational effectiveness is multi-dimensional.
Organizational effectiveness cannot be measured by one indicator. For example, a budget
surplus or a strong product outcome does not guarantee that the organization has achieved
overall maximum organizational effectiveness.
3. Boards make a difference in organizational effectiveness, but how is not clear.
There is a correlation between effective Boards and effective organizations. However, it is
not clear that one necessarily causes the other.
4. Organizational effectiveness is a social construction.
The concept of organizational effectiveness is “in the eye of the beholder.” One person
might have a completely different interpretation than another person.
5. More effective organizations are more likely to use correct management practices. /
The authors are careful to point out that the reverse is not necessarily true – that
organizations that use correct management practices will be judged as being effective. (The
correct practices were identified during focus groups in various studies.)
6. Claims about “best practices” warrant critical evaluation.
The authors explain that the results of their study do not agree with the wide assertion that
certain practices, for example, automatically produce the best Boards.
7. Measures of responsiveness may offer solutions to differing judgments.
This proposition reframes the concept of effectiveness for an organization to be about how
well that organization is doing in responding to whatever is currently important.
8. It can be important to distinguish different types of organizations.
This is true to make progress in understanding the practices, tactics and strategies that may
lead to organizational effectiveness.
9. Network effectiveness is as important to study as organizational effectiveness.
This proposition recognizes that the effectiveness of an organization might depend to a great
extent on the effectiveness of the wide network of organizations in which the particular
organization operates.
Suggested Capacities for Organizational Effectiveness
Letts, Ryan and Grossman (1998) suggest four key capacities for organizational effectiveness. These
capacities were suggested for nonprofit organizations. However, they also apply to organizations in
general and, thus, their descriptions are modified in the following paragraphs to apply to
organizations in general.
1. Adaptive capacity
is the ability of an organization to maintain focus on the external environment of the
organization, particularly on “performing” (meeting the needs of customers), while
continually adjusting and aligning itself to respond to those needs and influences. Adaptive
capacity is cultivated through attention to assessments, collaborating and networking,
assessments and planning.
2. Leadership capacity
is the ability to set direction for the organization and its resources and also guide activities to
follow that direction. Leadership capacity is cultivated through attention to visioning,
establishing goals, directing, motivating, making decisions and solving problems.
3. Management capacity
is the ability to ensure effective and efficient use of the resources in the organization.
Management capacity is accomplished through careful development and coordination of
resources, including people (their time and expertise), money and facilities.
4. Technical capacity
is the ability to design and operate products and services to effectively and efficiently deliver
services to customers. The nature of that technical capacity depends on the particular type of
products and services provided by the organization.
In addition, a fifth key capacity has been mentioned.
5. Generative capacity
is the ability of the organization to positively change its external environment. This capacity
is exercised by engaging in activities to inform, educate and persuade policy makers,
community leaders and other stakeholders.
Suggested Aspects for Performance
Blumenthal (2003) suggests improved performance might result from improvements in one or more
of the following four aspects:
1. Organizational stability
is in regard to whether services are consistently delivered and the organization survives.
2. Financial stability
is based especially on short-term survival, for example, the ability to pay its bills. Financial
stability is often ignored as an area of importance during capacity building.
3. Program quality (products and services)
is based on indicators of impact, including adequate research about effective programs and
an outcomes management system. This aspect also is often ignored.
4. Organizational growth
is based on attracting resources and providing more services. Blumenthal adds that growth
alone is not an indicator of performance.
Putting Best Practices into Perspective
While working to improve the effectiveness of organizations, consultants often refer to various
performance standards as conveyed in “best practices” and “standards of excellence.” The
performance standards correspond to the levels of quality in certain organizations that are widely
viewed by others as being high performing organizations. Those views usually reflect conventional
wisdom, but not necessarily findings from research. Consultants often use the standards to assess the
quality of practices in their client’s organization and then what must be done to improve that quality.
Although the practices and standards can be somewhat useful in getting some quick perspective on
the quality of a particular function, you need to be careful about how you choose them and about
how you draw conclusions from any comparisons. The best use of best practices for an organization
depends on a variety of factors, including the culture of the organization, nature of the products and
services that the organization provides, expectations of major stakeholders, and effects of change in
the environments of the organization. The open systems concept of equifinality suggests there is no
one right way, or best practice, for leading, managing or guiding organizations and change.
If you are working in a highly collaborative approach with your clients, you are much more likely to
work toward best practices in a manner that aligns those best practices with the nature and needs of
your client’s organization.

Performance Management: What Do We Mean by "Performance"?

On "Performance" in Organizations

(Performance management is a relatively new concept to the field of management. Performance management literature typically starts out with various examinations of the term "performance". The following information describes how the term "performance" in this library is used in this library.)

Supervisors have conducted performance appraisals for years. Employees have attended training sessions for years. Organization members have worked long, hard hours for centuries. Processes, such as planning, budgeting, sales and billings have been carried out for years in organizations. But all too often, these activities are done mostly for the sake of doing them, not for contributing directly to the preferred results of the organization.

Performance management reminds us that being busy is not the same as producing results. It reminds us that training, strong commitment and lots of hard work alone are not results. The major contribution of performance management is its focus on achieving results -- useful products and services for customers inside and outside the organization. Performance management redirects our efforts away from busyness toward effectiveness.

Recently, organizations have been faced with challenges like never before. Increasing competition from businesses across the world has meant that all businesses must be much more careful about the choice of strategies to remain competitive. Everyone (and everything) in the organization must be doing what they're supposed to be doing to ensure strategies are implemented effectively.

This situation has put more focus on effectiveness, that systems and processes in the organization be applied in the right way to the right things: to achieve results. All of the results across the organization must continue to be aligned to achieve the overall results desired by the organization for it to survive and thrive. Only then it be said that the organization and its various parts are really performing.

Performance Management Applies to More than Employees

Typically, we think of performance in organizations, we think on the performance of employees. However, performance management should also be focused on:
1. the organization
2. departments (computer support, administration, sales, etc.)
3. processes (billing, budgeting, product development, financial management, etc.)
4. programs (implementing new policies and procedures to ensure a safe workplace; or, for a nonprofit, ongoing delivery of services to a community)
5. products or services to internal or external customers
6. projects (automating the billing process, moving to a new building, etc.)
7. teams or groups organized to accomplish a result for internal or external customers