Managing People Performance

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Abstract
This study was intended to elaborate theoretical frameworks and studies of performance management, indicate possible trends and challenges of performance appraisal in organizations, and come up with logical solutions with a help of past research papers. Thus, study provides comprehensive information on performance management and its core activities (performance appraisal). Apart from that, study outlined current trends and difficulties of performance appraisal in today environment. Eventually assignment concluded by recommendation and suggestion paragraph where possible solutions are provided.

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Managing People Performance Table of Contents

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Abstract ........................................................................................................................................... 2 Introduction ..................................................................................................................................... 4 Performance appraisal (Performance Management) ....................................................................... 5 Performance Managements Five Key Components ................................................................... 6 Link between performance appraisal and reward ....................................................................... 7 Trends in Effective Performance Appraisal .................................................................................... 9 Challenges in Implementation of Effective Performance Appraisal ............................................ 11 1. 2. 3. 4. Developmental problems ................................................................................................... 11 Format and procedures ....................................................................................................... 11 Lack of Management capacity ........................................................................................... 11 Reward ............................................................................................................................... 11

System design and operation problems ..................................................................................... 12 Raters problems in performance evaluation ............................................................................ 12 Ratees problems in performance evaluation ............................................................................ 13 1.1 1.2 1.3 Job-focused ingratiation ............................................................................................. 13 Supervisor-focused ingratiation .................................................................................. 13 Self-focused ingratiation............................................................................................. 13

Emphasis on the recent past ...................................................................................................... 13 Past performance ....................................................................................................................... 14 CASE STUDY: McDonalds Performance Management............................................................. 15 Recommendation and conclusion ................................................................................................. 16 Reference ...................................................................................................................................... 18 Appendix 1: Elements of the Performance Appraisal process...................................................... 21 Appendix 2: Performance management assumptions ................................................................... 22 Appendix 3: Raters problems (continue) ..................................................................................... 23 Appendix 4: General and Specific Measures (sample) ................................................................ 24 Appendix 5 .................................................................................................................................... 25 Appendix 6: Training and Development in McDonald ............................................................... 26

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Managing People Performance Introduction

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Performance management is one of the main managerial activities in successful organizations. However, it has been defined and understood in different ways by different people. Some managers argue that performance management is a cost that does not worth, others stating that it is an element of successful organisation sustainability. One of the core activities of performance management is a performance appraisal. Basically, performance appraisals conducted annually, as it is continuous process. Some managers find it difficult to conduct effective performance appraisal, and they are the one who usually criticize it. On the other hand, there are numerous examples when organisation successfully implementing performance management in work-place. Therefore, aim of this study is to provide comprehensive and reasonable information with regard to performance appraisals, namely how beneficial they are and what difficulties might face managers in its implementation. There is also a case study of well-know McDonalds corporation to illustrate one of the way of conducting performance appraisal. Finally this study provides some recommendations and suggestions with regard to difficulties of appraisal systems.

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Performance appraisal (Performance Management)

Performance management has been defined in different ways by different researchers. In this study it is defined as: It is the systematic process of evaluation of the individual with respect to his or her performance on the job and his or her potential for development. More comprehensively, it is a formal, structured system of measuring and evaluating an employees job related behaviors and outcomes to discover how and why the employee is presently performing on the job and how the employee can perform more effectively in the future so that the employee, organizations, and society all benefit. (Aswathappa, A (2002) cited in Zelalem (2007)) In addition, the meaning of performance management means different things for different people. For instance, web-survey made by Chartered Institute of Personnel and Development (2009) in 2009 with 507 participants, indicated that majority 90% think that performance management is all about regular review meetings, 85.2% argued it is objective-setting, 83% regular feedback, 82.8% performance appraisal, and 75.1% assessment of development needs (Figure 1).
Figure 1: What do you understand by the term performance management

Adapted from: Chartered Institute of Personnel and Development PERFORMANCE MANAGEMENT IN ACTION (2009) Source:http://www.cipd.co.uk/NR/rdonlyres/AC5B3F1D-CA83-4CB2-AD979B2333411133/0/Performance_management_in_action.pdf

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Managing People Performance Performance Managements Five Key Components

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According to United States Office of Personnel Management (2001) performance management process consists of five key components illustrated in (Figure 2).
Figure 2: PERFORMANCE MANAGEMENTs FIVE KEY COMPONENTS

Adapted from: United States Office of Personnel Management (2001) Source: http://www.feddesk.com/freehandbooks/021110-1.pdf

Planning - is tend to be conducted in advance of the process, by setting goals and objectives, performance expectations of single employee and group, that need to be achieved. Author suggests that effective performance management planning require participation of employees in goals setting process. Developing is a component that involve employees developmental programs for the purpose of increasing employees performing capacity, developing new skills and increase level of knowledge. Monitoring refers to constant auditing of work performance throughout a year and providing ongoing feedback to participants on the level of performance, whether its good or bad. Page | 6

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Rating is the stage whereby documented employees performance summarized and being analyzed and evaluated. Perhaps, based on this information manager make his or her decision. Rewarding is take a place when organisation recognizes employees efforts and achievements by rewarding her or him accordingly. In most organizations, performance management is the one of the most essential parts of managerial activities. Performance appraisal is a key element of performance managements, which is usually conducted one a year. Maureen (2010) stated that managers of any organization are responsible for motivating, training, coaching, encouraging, and rewarding employees so that employees will be able to perform at top level. Performance appraisal is process by which managers are able to indicate how well employees are performing his or her job Maureen (2010) Gregorio (2003). Performance appraisal serves as a system to measure, evaluate, and reward employees who put a lot of efforts into their performance, and discipline employees whose performance is unsatisfactory Maureen (2010) (Figure 3). Author also indicated that feedback is one of the most important parts of motivation, as employee will understand his or her current good or bad performance, and at the same time see where they are going to be in a future. Link between performance appraisal and reward Referring to ACAS (2005), reward system stands separate from performance appraisal system in most organizations. However, decision for employee rewarding is based on performance appraisal information. Therefore there is a relationship between performance appraisal and reward, even if its not direct. Individual recognition and reward of employees will substantially reduce employees turnover and absenteeism rate in organisation. (Pawandeep Singh 2007)

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Figure 3: PERFORMANCE APPRAISAL PROCESS MODEL

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Adapted from: Maureen Hannay Performance Appraisal: Who Knows Best Source: http://business.troy.edu/jhre/Articles/PDF/4-4/54.pdf

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Trends in Effective Performance Appraisal

Practice of performance management process has criticized and debated by many researchers. Maureen stated that Glendinning, P. M. (2002) in his study outlined number of beneficial outcomes from conduction of proper performance appraisal (Table 1).
Table 1 : POSITIVE OUTCOMES OF PERFORMANCE APPRAISAL

Improved employee work performance Employees with potential for advancement are identified Planning for future HR needs is augmented Business objectives are realized Improved morale Improved customer satisfaction A clear linkage between pay and performance is achieved A competitive advantage is obtained Improved quality of supervision

Adapted from: Maureen Hannay Performance Appraisal: Who Knows Best Source: http://business.troy.edu/jhre/Articles/PDF/4-4/54.pdf

According to I&D agency (2006), effective performance appraisal will provide more efficient and quality improved service. Effectively conducted performance appraisal is about good performance management which ensures that organizational, managerial, and employees goals and objectives are achieved. Author also stated that one of the most privileges of performance appraisal system is that it allows indicate performance errors in earlier stage of work process and thereby overcome similar mistakes and improve future performance of employees. Besides this, effective appraisal system is a powerful tool for motivation and management of employees as well as managerial staff.

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Nathalie (2007) in her exploratory study outlined that effective performance appraisal in organization is improving its performance by building both job satisfaction and organizational commitment. When employee satisfied with performance appraisal, his or her work performance tends to increase. There are several factors that contribute to increase in work performance. Firstly, performance appraisal system encloses development programs of employees new skills and knowledge; thereby employees have a perception of being valued and being part of organisation. Eventually they may feel an obligation to organisation, and in return they will perform much higher than ever before. Furthermore author stated that even if there is no direct

relationship between appraisals of performance and performance of organization, properly conducted performance management will improve role clarity, communication effectiveness, merit pay and administration, and many others. ACAS (2005) outlined that, effective appraisals in organisation contribute better employees job performance by indicating strengths and weaknesses of each employee and then identifying how best those strengths can be used in organisation and how to overcome weaknesses to minimize negative impact on organizational performance. Apart from this appraisal system provide informational platform for effective human resource planning, where by information helps managers to successfully identify potential employees for promotion or development programs such as training, seminars, and so on. Finally appraisal performance also positively reflects communication flow between managers and employees by providing more constant communication and mutual understanding. Nevertheless, there are numerous disagreements toward performance appraisals in organisation. Coming back to web-survey of Chartered Institute of Personnel and Development (2009), it was indicated that majority of survey participants have neutral opinion of performance appraisal and they dont really realize how beneficial it is. In addition, great number of participants disagreed with benefits of performance appraisal. Survey findings are illustrated in (Appendix 2)

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Challenges in Implementation of Effective Performance Appraisal

M.L.E. Mapesela (2009) has conducted research with 11 different institutions of higher education in South Africa on topic Trends in the management of human resources in higher education. In their research authors indicated weaknesses of performance management systems of some institutions. 1. Developmental problems ratee employees of two institution argued that performance appraisal system is conducted though top-down approach only. They felt dishonest of top management with regard to this approach. Management of those institutions, however, explained that performance appraisal system is design to measure and evaluate only employees but not the management stuff. 2. Format and procedures in some institutions conditions of implementation of annual performance appraisal in term of time, objectives, criteria, rating scale, and other factors, seems to create uncertainty of the system and to complicate its implementation. 3. Lack of Management capacity participants of one institution realized that lack of management capacity is lead to functioning problems of appraisal system. Participant of that institution stated that Where we have managers that are not good at their own planning, we have a fundamental problem. Because that fundamentally undermines the whole idea

Author further explained that in organization managers of different levels possess different level of understanding and knowledge with regard to performance appraisal which eventually lead to different expectation of performance appraisal. 4. Reward Almost all institutions supported the fact that payment is related to performance. However such approach is not suitable in some cases, especially when it comes to public institutions. According to M.L.E. Mapesela (2009), public universities facing problems with rewarding their employees accordingly due to managerial and\or financial limitations. Some researchers suggested that in such cases diverse range of rewards must take a place. Referring to I&D agency (2006), there are some difficulties that organization may face in conducting effective performance appraisal system. In organizations with complex work Page | 11

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processes such as lawyers and painters, human programmers, and others, its difficult to set measures with dependable outcome targets based on which employee will be evaluated. In addition, managerial staff is bound to possess specific set of technical skills and strong people management skills to implement honest and robust performance appraisal. Apart from that, appraisal system requires strong organizational culture with substantial leadership and desire to improve, I&D agency (2006). In some organizations appraisal system may take several years for effective implementation and require constant time spending, attention, auditing, and desire. Natalie (2007) also identified issues associated with performance appraisal system. First of all, raters evaluation issues seem to be one of the common problems in conduction of effective appraisal system. In evaluation process, raters may unreasonably appraise their employees based on his or her personal biases, likes, and dislikes. Others may set different standards for the same line of employees what eventually lead to inconsistent and unreliability of whole appraisal system. It sometime happens intentionally or unintentionally. Zelalem (2007) in his study categorized difficulties of implementation of effective performance appraisal into three main groups. System design and operation problems Failure to conduct effective appraisal performance is the result of poor system design where objectives are not clear, administrative system in which it operates is not managed well, methods and techniques are too complex, and evaluation criteria are not defined properly. For instance according to research made by Clinton O.Longenecker in 1977 with 120 different managers from 5 US companies on title why managerial performance appraisals are ineffective, 83% of the participants stated that managerial performance appraisal is destined to fail because of unclear performance criteria or ineffective rating instrument used. Raters problems in performance evaluation Even if the system designed well, in some cases performance management may fail due to perceptional errors of raters such as effects of halo and horn, stereotyping, attribution errors, recency errors, leniency and strictness errors, and many others. Raters errors are explained in details in (Appendix 01) Page | 12

Managing People Performance Ratees problems in performance evaluation

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Author argued organisation may find difficulties in implementation of appraisal performance due to ratees problems. Employee may became a bootlickers and show too much of impression in order to influence performance rating. Referring to Wayne, S.J. and Ferris, G.R.,(1990) cited in Zelalem (2007) there three main types of ingratiating behavior of employee in workplace. 1.1 Job-focused ingratiation occurs when employee always point out his or her achievement to rater, when employee trying to appropriate to him or her-self achievements which had been done by group of people 1.2 Supervisor-focused ingratiation occurs when employee voluntary helps supervisor with work that is not even his or her, when employee complimenting supervisor on dress, haircut, and so forth, when employee pretending that he or she is really interested in supervisors personal life, and when employee is being agree with supervisors ideas anytime and anywhere. 1.3 Self-focused ingratiation occurs when employee trying to get supervisor attention and starting working hard, when employee deliberately saying to supervisor I want to let you know that I am working hard and doing good job, and finally showing off to supervisor that he or she is polite and friendly employee.

Author suggest that too much of unnecessary ingratiation behavior may distort rating system and make it difficult for raters to evaluate accordingly, and eventually may result in errors. Emphasis on the recent past Generally appraisal performance is tends to be conducted once a year where main evaluation process occurs at the end of each year. According to ACAS (2005), managers (raters) may find it difficult to recall and evaluate factors, events, and achievements by employee that had happened at the beginning of the year. Eventually raters may evaluate or assess employees performance by emphasizing on more recent events and activities that may impact of credibility of the final report ACAS (2005).

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Managing People Performance Past performance

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In some organisation operational managers are responsible for reporting on employees performance to senior managers. Reports made by those managers are crucial for future employee development. Difficulties may occur when senior manager will make his decision on single report and overlook past experience of employee ACAS (2005).

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CASE STUDY: McDonalds Performance Management

McDonalds is a well-known chain of fast-food restaurants worldwide. Number of employees in McDonalds is estimated approximately at 1.6 million (Pawandeep Singh, and others, 2008). Referring to McDonalds Corporation report (2009), McDonalds business model is described as Three-lagged stool which basically consist of 3 key elements owner (operators), suppliers and company employees. Thereby employees play important role in sustainability of McDonalds corporation (Figure 4). In corporation reports, it has been indicating that one of the main progress snapshot2008-2010 goals was to increase employment experience by adding to flexibility and variety of work setting, increase people programs and training for better career development, and others (Appendix 5). To do that, McDonald has its ongoing values integration elements which involve education, integration, and measurement. Education here means analyze of business processes and indication of core values of McDonald. Through integration, McDonalds are able to channel these core values to employees by training and development programs (Appendix 6). Finally, measurement conducted through annual employee commitment surveys and employee performance appraisals (Appendix 5).
Figure 4: MacDonalds Success of Sustainability

Adapted from: McDonalds Corporation Report 2009 Source: http://www.mcdonalds.at/presse/maps/McDCSR.pdf

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Recommendation and conclusion

Criticism toward performance appraisal systems is not really proven in its ineffectiveness. Naturally individual who does achieved his or her desired results tend to blame everything else but not him or her-self. Same may be applied here, whereby difficulties occur not due to integrity of performance management but due to poor planning of performance appraisal by organisation. There are numerous models, techniques, and methods had been developed to overcome difficulties and conduct effective performance appraisal in organisation. For instance model Performance Pyramid adopted from United States Office of Personnel Management (2001) suggests that one way to achieve effective appraisal system is to evaluate and recognize employee based on her or his achievements rather than activities (Figure 4). Author suggests that evaluation of activities will lead to better outputs whereas assessment of outputs will lead to better outcomes. In addition, author recommended the use of non-critical and additional performance elements as a means to measure employees performance.
Figure 4: PERFORMANCE PYRAMID

Adapted from: United States Office of Personnel Management (2001) Source: http://www.feddesk.com/freehandbooks/021110-1.pdf

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To be effective in appraisal system, organisation should accurately set up specific measures for employees evaluation. Richard Lynch and Kelvin Cross (1991) stated that in order to develop specific measures, management first has to decide on general measures and only than on specific one. Framework or model of Richard Lynch and Kelvin Cross (1991) cited in United States Office of Personnel Management (2001) is a useful tool that can be used by management for identifying general performance measures (Figure 5). Example of general and specific measures is illustrated in appendix (2)
Figure 5: PERFORMANCE PYRAMID FOR IDENTIFYING PERFORMANCE MEASURES

Cited: United States Office of Personnel Management (2001) Source: http://www.feddesk.com/freehandbooks/021110-1.pdf

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Reference
ACAS (2005), Employment relations and HR excellence agency, Employee Appraisal [online] Available from: http://www.acas.org.uk/media/pdf/o/q/B07_1.pdf [Accessed: 07 January 2012]

Dr Javier Martinez (2001), the Institute for Health Sector Development London, Assessing Quality, Outcome, and Performance Management [online] Available from: http://www.who.int/hrh/documents/en/Assessing_quality.pdf [Accessed: 07 January 2012]

DSP Dev Kumar (2005), Performance Appraisal: The Importance of Rater Training, [online] available from: http://rmpckl.rmp.gov.my/Journal/BI/performanceappraisal.pdf [Accessed: 22 December 2011]

Chartered Institute of Personnel and Development (2009), PERFORMANCE MANAGEMENT IN ACTION [online] available from: http://www.cipd.co.uk/NR/rdonlyres/AC5B3F1D-CA83-4CB2-AD979B2333411133/0/Performance_management_in_action.pdf [Accessed: 22 December 2011]

Gregorio Billikopf (2003), University of California, Labor Management: Cultivating Personnel Productivity chapter 6, [online] Available from: http://www.cnr.berkeley.edu/ucce50/ag-labor/7labor/AgLabor.pdf [Accessed: 17 December 2011]

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I&D, Improvement and Development Agency (2006), Audit Commission, A Managers guide to Performance Management second edition, [online] Available from: http://www.idea.gov.uk/idk/aio/4810918 [Accessed: 12 January 2012]

Leanne H. Markus (2004), Organisational Psychologist, Performance Management problems and potential [online] available from: http://www.performancegroup.co.nz/pm.pdf [Accessed: 22 December 2011]

MacDonalds Corporation (2009), Worldwide Corporate Responsibility Online Report [online] Available from: http://www.mcdonalds.at/presse/maps/McDCSR.pdf [Accessed: 17 December 2011]

Maureen Hannay (2010), Troy University, Performance Appraisal: Who knows Best? [online] Available from: http://business.troy.edu/jhre/Articles/PDF/4-4/54.pdf [Accessed: 21 December 2011]

M.L.E. Mapesela and Francois Strydom (2009), University of the Free State, Performance Management if academic staff in South African higher education [online] Available from: http://www.oecd.org/dataoecd/35/43/35327193.pdf [Accessed: 21 December 2011]

Nathalie Abi Saleh Dargham (2007), Effective Management of Performance Appraisal Process in Lebanon: An Exploratory Study [online] Available from: http://www.fgm.usj.edu.lb/files/a12008.pdf [Accessed: 12 January 2012]

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Pawandeep Singh, Akanksha Srivastava, and others (2007), Institute of Management Studies, Business report on McDonalds Employees Motivation [Online] Available from: www.scribd.com/doc/35052584/Mc-Donalds-Performance-Appraisal [Accessed: 15 December 2011]

United States Office of Personnel Management (2001), Work force Compensation and Performance Service, A Handbook for Measuring Employee Performance [online] Available from: http://www.feddesk.com/freehandbooks/021110-1.pdf [Accessed: 12 January 2012]

U.S. Department of the Interior (1995), Performance Appraisal Handbook [online] Available from: http://www.doi.gov/hrm/guidance/370dm430hndbk.pdf [Accessed: 10 January 2012]

Zelalem Bayisa Gurmessa (2007), Employees Perception on the Problems and Practices of Employee Performance Evaluation: a Case study of Awash International Bank (AIB) [online] Available from: http://etd.aau.edu.et/dspace/bitstream/123456789/1121/1/ALL%20TOGETHER.pdf [Accessed: 07 January 2012]

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Appendix 1: Elements of the Performance Appraisal process

Elements of the process Referring to Maureen (2010) there are three main elements that need to be considered to implement effective performance appraisal. Those elements are: Annual performance planning and goal setting managers and employees should group together and set certain goals that are expected to be achieved by employees at the end of the year. Those goals have to be set at the begging of the year, even if its fiscal or physical year. Author also outlined the importance of employees participation in goals setting process as they will show more commitment to those goals. Apart from that, managers should be able to link those goals with overall organizational goals, thereby they will indicate to employees how important their jobs for organizational success. Day to day coaching and feedback as it was mentioned earlier in this study, it is the managers responsibility to monitor their employees throughout a year. Maureen (2010) indicated that high level of employees performance can be only achieved by improving poor performance and rewarding good one. However, it does not mean that managers should do that only at the end of each year. They also bound to coach and provide feedback to employees, whether its bad or good, throughout the year. Annual Formal Performance Evaluation usually performance appraisal is conducted annually at the end of the year. Assessment of the collected records and data is basically used as basis for organizational decisions related to increase of salary, layoffs, promotions, and others.

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Appendix 2: Performance management assumptions

Web-survey findings by Chartered Institute of Personnel and Development (2009)

Adapted from: Chartered Institute of Personnel and Development PERFORMANCE MANAGEMENT IN ACTION (2009)
Source:http://www.cipd.co.uk/NR/rdonlyres/AC5B3F1D-CA83-4CB2-AD979B2333411133/0/Performance_management_in_action.pdf

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Appendix 3: Raters problems (continue)

Adapted from: DSP Dev Kumar PERFORMANCE APPRAISAL: The Importance of Rater Training (2005) Source: http://rmpckl.rmp.gov.my/Journal/BI/performanceappraisal.pdf

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Appendix 4: General and Specific Measures (sample)

Adapted: United States Office of Personnel Management (2001) Source: http://www.feddesk.com/freehandbooks/021110-1.pdf Page | 24

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Appendix 5 McDonalds progress snapshot2008-2010 goals

Adapted from: McDonalds Corporation Report 2009 Source: http://www.mcdonalds.at/presse/maps/McDCSR.pdf

MacDonalds ongoing Values Integration

Adapted from: McDonalds Corporation Report 2009 Source: http://www.mcdonalds.at/presse/maps/McDCSR.pdf

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Appendix 6: Training and Development in McDonald

Adapted from: McDonalds Corporation Report 2009 Source: http://www.mcdonalds.at/presse/maps/McDCSR.pdf

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