Analyse Performance Management Strategies

Analyse performance management strategies

Overview

This learning resource will help you to understand how performance management operates at the strategic, operational and functional levels of an organisation, its relationship to other human resource management activities, the planning process and the criteria that performance standards should meet. It will also explore practical approaches to performance management.

Performance management is managing the performance of people at work. It is designed to support the business goals and objectives of an organisation. The individuals and teams that make up an organisation provide this support.

Key terms

Human resource planning

An analysis of existing and future staffing needs.

Operational plan

A plan designed to meet the short-term goals of the organisation, usually a sub-set of a strategic plan.

Performance management

A process or set of processes for establishing a shared understanding of what an individual or group is to achieve, and managing and developing in a way which increases the probability it will be achieved in both the short and the long term.

Policies and procedures

Policies state what must be done; procedures explain how to do what the policy prescribes.

Strategic plan

Plan designed to meet the broad, long-term goals of an organisation.

Inputs

The knowledge, skills, attributes, attitudes, behaviours and experience that employees contribute through their work.

Outputs

The products and services that employees produce and through their work.

Outcomes

The results, in terms of productivity, efficiency etc of the outputs.

Systems approach

An approach that recognises that there are interrelated parts that make up the whole.

Stakeholders

Those individuals or representatives of a group who have an interest in a particular decision. This includes people who influence a decision, or can influence it, as well as those affected by it.

Owners, shareholders, managers and employees are the internal stakeholders. Customers, suppliers, contractors, consultants and the public are external stakeholders.

Organisational culture

The values, beliefs, behaviours, norms and ethics that form the culture of an organisation.

Goals and objectives

Goals are ultimate ends or targets to be reached. Objectives are the means for achieving goals.

SMART acronym

An approach for writing goals and objectives that considers what are Specific, Measurable, Achievable, Realistic and Timely.

Mission/Vision Statement

The guiding principles an organisation lives by and/or wants to live by in the future. The mission statement indicates the “big picture” as projected by those running the organisation.

Introduction

A performance management system directly links the performance of individuals and teams to organisational performance strategies, as shown in Figure 1:

Figure 1 Organisational performance links

STRATEGIC

(organisational level)

OPERATIONAL

(unit level)

INDIVIDUAL

(individual level)

Try it

Investigate the links in the performance management system in your own organisation.

While investigating the links between organisational strategy and teams and individuals in your own organisation, are you able to identify a pattern similar to the one shown in Figure 1?

Explain your findings:

______

Performance and productivity

Performance is directly related to productivity. By definition, productivity is to achieve maximum output with a minimum of input.

The performance of employees has the potential to optimise organisational productivity. Productivity applies as much to providing services in a restaurant or flying a commercial aircraft, as it does to processing cheese or assembling cars.

Outputs

The focus of performance management on maximising outputs is on the ability of individuals and teams to competently and effectively utilise their inputs. Inputs in relation to performance management are the knowledge, skills, attributes, attitudes, behaviours and experience that employees contribute through their work.

Outputs are the products and services that employees produce and provide as a result of the work they do. Outputs are the table waiting service and the food on the menu, the provision of flights and air travel services for airline passengers, just as cheese is an output from the cheese factory, and cars from an assembly line.

Outcomes

Outputs are not to be confused with outcomes.

There are two aspects of outcomes that need to be considered in relation to performance management. First, there is the question of how, and how much impact, outputs have on performance outcomes. For example, producing a large quantity of goods that are of poor quality reflects on the management of performance; despite the quantity of outputs, the poor quality of outputs is a worrying outcome for any company. As the biscuit manufacturer Arnott’s announces: “There is no substitute for quality”. Desired performance outputs do not necessarily equate to desired performance outcomes.

The second issue in relation to outcomes and performance management is with the processes needed to achieve the outcomes. Processes that are quick may be ineffective. Processes that are effective may be inefficient.

By definition, to be effective is to achieve what is intended, while to be efficient is to achieve what is intended with minimum cost and use of resources. The processes for achieving outcomes need to be both effective and efficient.

Planning

Productivity cannot be achieved without ensuring that inputs are effectively converted into intended outputs. No amount of inputs will necessarily guarantee required outputs. Performance management needs to systematically plan, measure, monitor, review, evaluate and provide feedback on the progress and results of how effectively and efficiently teams and individuals are converting inputs into outputs.

For this reason, productivity needs planning. Planning is a fundamental part of all management activities, for it determines the way ahead. For the same reason, planning is inherent in performance management as it determines the path towards achieving results, in terms of both outputs and outcomes.

Planning encourages foresight, and provides purpose and direction. During this section, you will address planning at all levels of the organisation, as you incorporate these levels of planning into your performance management systems:

strategic planning
team planning
individual employee planning.

Further to this, there is no point in planning the way ahead if you fail to find out whether you have arrived, and in what state you arrived. If the planned performance you intend is to improve productivity by staying on track and achieving planned outputs and outcomes, then a performance management system must measure, monitor and review individual and team performance in a process of continuous feedback.

Rationale

Now that you have investigated the meaning of performance management and its relationship to organisational productivity, you can determine your reasons for wanting to introduce performance management systems into your own workplace. The following aims of performance management systems will provide you with some ideas.

Performance management systems aim to:

accomplish organisational success through the performance of teams and individuals
inspire a performance-orientated organisational culture
facilitate change
encourage creativity and innovation
develop individuals and teams to their full performance potential.

When you know why and how you want to introduce performance management systems, you will be better prepared to implement them with the staff who will be involved. It will allow you to ‘sell’ your systems by expounding the benefits of your proposals. It will also enable staff to tailor-make the system to suit workplace circumstances and needs. One functional area, such as an administrative department, may require a different approach from that of the mechanical workshop in the same organisation, or a company branch office in Alice Springs from another in Hobart.

Some organisations have introduced performance management systems to make cultural changes, others to improve their customer service or make efficiency improvements, while others want to link pay to performance (or performance to pay), identify training needs, or devolve more control to teams.

Think

Consider your rationale for wanting to introduce a performance management system into your organisation, or into a particular operational area.

You may want to improve community services, patient care or product quality. You may wish to change from a departmental structure to self-managed teams, or change work practices in a home-based industry. You may be looking to increase outputs from a factory line, or improving water quality in a treatment plant. Whatever your reasons for introducing a performance management system, it must allow for a reasonable degree of scope and flexibility, despite the need to have processes and procedures in place.

You need to allow performance management systems to be flexible and adaptive, so they suit particular situations.

Flexibility, adaptability and responsiveness

Performance management systems must also be flexible, adaptive and responsive to the changing needs of the organisation. Organisations, whether public or private, operating for profit or not-for-profit, rarely remain static or stable for long. The internal mechanisms of an organisation need to be able to respond to the fluctuations of the external environment.

International and local political and economic factors, changing populations and markets, advancing technology, social and environmental expectations, legislation and consumer demands can force an organisation to change direction at any time. Your performance management system must be able to respond accordingly.

Over a period of employment, workers will find things within the workplace will change. This is the reality of work life in the twenty-first century. The review and feedback component of a performance management system provides for employees to monitor, measure and reassess their changed performance directions, both as individuals, and as individuals working as team members.

Flexibility, adaptability and responsiveness are the practical benefits and productivity assets of well-designed performance management systems.

A performance management system must be able to respond to the changing needs of an organisation. These may include:

a need for a rapid response to changes in industrial relations legislation
a need to avoid lost time with staff disruption as changes to work areas, work practices or business diversification are made
a need to take a proactive approach to improving productivity and profits, or respond to new competition

Whatever the change, it will influence staff, which in turn will influence their performance, which in turn will determine the success of the organisation in achieving its goals.

If organisational change in any form or for any length of time affects performance to the point of undermining productivity, then your performance management system must respond to manage staff performance in the changing times. You may need to:

change periods between review
re-write or change measurement and review processes, procedures or tools
re-design jobs and re-write job descriptions
train or re-train team leaders
create different approaches to feedback or learning and development

Continuous and cyclical process

As well as being flexible, adaptable and responsive, the performance management process is a continuous process. It is a continuous and cyclical process of planning, implementing, reviewing, and providing feedback, as indicated in Figure 2.

Figure 2 Performance management cycle

(Figure needs to remade)

plan

feedback implement

review

Systems approach

By definition, a performance management system takes a systems approach. This means that there are interrelated parts that make up the whole. A typical performance management system would have the following interrelated parts:

organisation with a mission/vision that is communicated to its employees
organisationally determined performance targets/key results areas that link organisational objectives with functional/ operational units
performance standards and indicators against which individual/team performance are measured
methods for measuring individual/team performance
monitoring process to track progress towards achieving targets
regular, formal review process to determine the achievement of targets
review process that identifies individual/team performance gaps, and training and development needs
development and improvement review process that identifies the need for action
review process that identifies the need for individual/team rewards or remedial action
provisions for a continuous feedback process
process to evaluate the contribution of individual/team performance to organisational effectiveness
evaluation process that allows for system improvements and changes

The components of a typical performance management system can be seen in Figure 3.

Figure 3 Performance management system

(Figure needs to remade)

The main benefit of a performance management system, beyond a performance appraisal system, is that performance management is a holistic system with direct links between the performance achievement of the organisation and the performance contribution of its employees. Performance management systems comprise ongoing processes that include performance appraisal.

Try it

Determine your present position for developing a performance management system. Use the list of the parts of a performance management system as a checklist to answer YES or NO to each point:

Does your organisation have a mission/vision that is shared with employees? / YES / NO
Does your organisation have goals and objectives that are communicated to employees? / YES / NO
Does the organisation have performance targets/key results areas that link organisational objectives with operational units? / YES / NO
Do you have performance standards and indicators against which performance can be measured? / YES / NO
Are you aware of the methods for measuring individual/team performance? / YES / NO
Is there a monitoring process to track progress towards individuals/teams achieving targets? / YES / NO
Is there a regular, formal review process to determine the achievement of set targets? / YES / NO
Is there a review process that identifies individual/team performance gaps? / YES / NO
Is there a review process that identifies individual/team training and development needs? / YES / NO
Is there provision for being able to give and receive feedback at any time? / YES / NO
Is there a development and improvement review process that identifies the need for action? / YES / NO
Is there a review process that identifies the need for individual/team rewards? / YES / NO
Is there a review process that identifies the need for individual/team remedial action? / YES / NO
Is there a process to evaluate the contribution of individual/team performance to organisational effectiveness? / YES / NO
Is there an evaluation process that allows for performance management system improvements and changes? / YES / NO

If you are unable to answer to any of these points, speak with someone in your organisation who may help you identify whether any of the above features of a performance management system exist.

You may find that what you thought was a performance management system is, in fact, a performance appraisal system.

Performance management in an organisational context

Underpinning the concept of performance management is the premise that the performance of people is intrinsic to the performance of the organisation. How well people perform, from the CEO and the office staff, to the factory workers and production line supervisors, is the key to the survival and sustained success of an enterprise.

A premise of performance management is that stakeholders are considered partners in the enterprise. These stakeholders include both internal and external partners. Owners, shareholders, managers and employees are the internal stakeholders. Customers, suppliers, contractors, consultants and the public are external stakeholders.

The scope of performance management provides for a shared responsibility of stakeholders. It concerns everyone involved in the organisation. It does not rely on the previous assumptions that managers manage, but rather on the assumption that all employees take responsibility and act for the success of the organisation. Successful performance management is contingent upon commitment to organisational achievements from all the stakeholders in an enterprise.

The internal environment

By describing your organisation, you will place yourself in a position of advantage for developing, introducing and managing your performance management system in times of need and change.

Business focus

In the next activity, you will develop a profile of your organisation. You will determine what it does, and why it does what it does. You will define your markets, and explain your products or services. Imagine what your organisation looks like to other people: to the internal customers, who are the various staff in work areas, and to the external customers, such as contractors and consultants.

Try it

Build a profile of your organisation.

Who owns the organisation?

______

What business does it do?

______

Why does it do the business that it does?

______

What are its products/services?

______

Who are the external customers?

______

Where are the markets to be found?

______

Does your organisation have an image it portrays to the outside world?

______

How is the image portrayed?

______

Who are the leaders in the organisation?

______

Who are the internal customers?

______

Determine who communicates with whom, and how they communicate. Identify who is responsible for what. Know the jobs and work practices that exist. Determine how many people for whom a manager/team leader is responsible.

______

The benefits of undertaking this activity will be evident when you introduce your performance management system later in the study of this unit. You will know how to approach and communicate with different staff. You will know what their jobs entail. You will be familiar with their work areas.

Remember, you are about to introduce change, and you will possibly be seen as a destabilising factor and perhaps a threat. Pave the way now and seek to understand the patterns of communication and behaviour, the existing organisational structure, jobs and work area, policies and procedures of your organisation.

Think

Consider the internal environment of your organisation.

Is it a tall hierarchal structure with many levels between the staff at the bottom and senior management at the top? Or, is it a flat structure with one or two levels between staff and senior management? Or, is it a branch office structure?