COURSE NAME

UNIT NAME

FORMAT FOR THE NOTES:

1.

Course Code

Course Title

2.

Learning Objectives of the Course

3.

These Notes cover Unit Number, Subtitle of

the Unit

4.

Contents of the Unit

Learning Objectives of the Unit

5.

Key Definitions, Key Words in the

definitions

6.

Key Concepts

7.

Past Questions on this unit

Q1 (SPPU, Nov/April 201_)
Q2
Q3
Q4
Q5

8.

Questions for Practice (Theory based,

application based)

9.

Learning Resources
Case Study

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Performance management is the continuous process of improving

performance by setting individual and team goals which are aligned to the
strategic goals of the organization, planning performance to achieve the
goals, reviewing and assessing progress, and developing the knowledge,
skills and abilities of people.
Here are some other definitions:
Performance management is a continuous process of identifying,
measuring and developing the performance of individuals and teams
Performance Management Fundamentals and aligning performance with the
strategic goals of the organization.
Performance management is the system through which organizations set
work goals, determine performance standards, assign and evaluate work,
provide performance feedback, determine trainingand development needs
and distribute rewards.
Performance management is a broad set of activities aimed at improving
employee performance.
Performance management is the key process through which work gets
done. Its how organizations communicate expectations and drive behaviour
to achieve important goals; its also about how organizations identify
ineffective performers for development programmes or other personnel
actions.
Performance management is regarded as a continuous, future-orientated
and participative system; as an ongoing cycle of criteria setting, monitoring,
informal feedback from supervisors and peers, formal multi-source
assessment, diagnosis and review, action-planning and developmental
resourcing.
Performance management is managing the business. Line managers are
there to manage performance and performance management helps them to
do this it is a natural process of management. It is not an HR-directed
annual ritual. And it is not simply a process of appraising people once a
year.Performance management is a continuous process whilst traditional
performance appraisal tended to be just an annual event.Performance
management is a powerful means of ensuring that the organizations
strategic goals are achieved. It contributes to the achievement of culture
change and it is integrated with other key HR activities, especially human
capital management, talent management, learning and development and

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reward management. Thus performance management helps to achieve

horizontal integration and the bundling of HR practices so that they are
inter-related and therefore complement and reinforce each other.
Performance management can also play an important part in increasing
levels of employee engagement.
Evolution of Performance Management Process
The term performance management gained its importance from the times
when the competitive pressures in the market place started rising and the
organizations felt the need of introducing a comprehensive performance
management process into their system for improving the overall productivity
and performance effectiveness.
The performance management process evolved in several phases.
First Phase: The origin of performance management can be traced in the
early 1960s when the performance appraisal systems were in practice.
During this period, Annual Confidential Reports (ACRs) which was also
known as Employee service Records were maintained for controlling the
behaviors of the employees and these reports provided substantial
information on the performance of the employees. Any negative comment or
a remark in the ESR or ACR used to adversely affect the prospects of career
growth of an employee. The assessments were usually done for ten traits on
a five or a ten point rating scale basis. These traits were job knowledge,
sincerity, dynamism, punctuality, leadership, loyalty, etc. The remarks of
these reports were never communicated to the employees and strict
confidentiality was maintained in the entire process. The employees used to
remain in absolute darkness due to the absence of a transparent mechanism
of feedback and communication. This system had suffered from many
drawbacks.
Second Phase: This phase continued from late 1960s till early 1970s, and
the key hallmark of this phase was that whatever adverse remarks were
incorporated in the performance reports were communicated to the
employees so that they could take corrective actions for overcoming such
deficiencies. In this process of appraising the performance, the reviewing
officer used to enjoy a discretionary power of overruling the ratings given by
the reporting officer. The employees usually used to get a formal written
communication on their identified areas of improvements if the rating for any
specific trait used to be below 33%.

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Third Phase: In this phase the term ACR was replaced by performance
appraisal. One of the key changes that were introduced in this stage was that
the employees were permitted to describe their accomplishments in the
confidential performance reports. The employees were allowed to describe
their accomplishments in the self appraisal forms in the end of a year.
Besides inclusion of the traits in the rating scale, several new components
were considered by many organizations which could measure the
productivity and performance of an employee in quantifiable terms such as
targets achieved, etc. Certain organizations also introduced a new section on
training needs in the appraisal form. However, the confidentiality element
was still being maintained and the entire process continued to be control
oriented instead of being development oriented.
Fourth Phase: This phase started in mid 1970s and its origin was in India
as great business tycoons like Larsen & Toubro, followed by State Bank of
India and many others introduced appreciable reforms in this field. In this
phase, the appraisal process was more development driven, target based
(performance based), participative and open instead of being treated as a
confidential process. The system focused on performance planning, review
and development of an employee by following a methodical approach. In the
entire process, the appraisee (employee) and the reporting officer mutually
decided upon the key result areas in the beginning of a year and reviewed it
after every six months. In the review period various issues such as factors
affecting the performance, training needs of an employee, newer targets and
also the ratings were discussed with the appraisee in a collaborative
environment.
This phase was a welcoming change in the area of performance
management and many organizations introduced a new HR department for
taking care of the developmental issues of the organization.
Fifth Phase: This phase was characterized by maturity in approach of
handling peoples issues. It was more performance driven and emphasis was
on development, planning and improvement. Utmost importance was given
to culture building, team appraisals and quality circles were established for
assessing the improvement in the overall employee productivity.
The performance management system is still evolving and in the near future
one may expect a far more objective and a transparent system.
Scope of Performance Management Systems

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Identify the parameters of performance and stating them very clearly.

Setting Performance Standards

Planning in Participative Ways where appropriate, performance of all

constituents;

Identify competencies and competency gaps that contribute/hinder to

performance.

Planning performance development activities

Creating ownership.

Recognising and promoting performance Culture.

Concerns of Performance Management

An effective performance management process sets the foundation aligning
the individuals efforts with the organizations goals.
By linking individual employee work efforts with the organizations
mission and objectives, the employee and the organization
understands how the job is contributing/contributes in the long run.
By
focusing
attention
on
setting
clear
performance
expectations(results+ actions+& behaviours),it helps employees know
what needs to be done to be successful on the job.
Through the use of objectives,standards,performance dimensions and
other measures it focusses effort.This helps the department get done
what needs to be done and provides a solid rationale for eliminating
work that is no longer useful.
Through regular check in discussions,which include status updates,
coaching and feedback it promotes flexibility, allowing employer and
the employee to identify problems early and change the course of a
project or work assignment.

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By emphasizing that an annual review should be a summary of the

conversations held between the employer and employee during the
entire cycle, it shifts the focus away from performance as an annual
event to performance as an on going process.

Historical Developments in Performance Management

In a formal sense,performance appraisal of an individual began in the Wei
dynasty(A.D. 261-265) in china,where an Imperial Rater appraisal the
performance of members of the official Family.In the 1800s, the Newyork city
civil service in USA introduced a formal appraisal program shortly before First
World War.However, formal appraisal of employees performance is believed
to have been started for the First time during the First world war when at the
instance of Walter Dillscott, the US Army adopted man to man rating
system for evaluating military personnel.This early employees appraisal
system was called merit rating.From the army this concept entered the
business field and was restricted to hourly-paid workers.During 1920s
relational wage structures for hourly-paid workers were adopted in industrial
units and each worker was used to be rated in comparison to others for
determining wage rates.In the 1940s behavioural methods were developed
using a motivational approach. These included behavioural anchored rating
scales (BARS), Behavioural observation scales (Bos),Behavioural evaluation
scales(BES),Critical incident and Job Simulation.All these judgements were
used to determine the specific levels of performance criteria to specific
issues such as customer service and rated in factors such as excellent,
average, need to improve or poor.Post 1945 developed into the
results-oriented approaches and led to the development of management by
objectives.
In the 1960s the development of self appraisal by discussion led to specific
time and opportunity for the appraise to evaluate their performance
reflectively in the discussion and the interview developed into a conversation
on a range of topics that the appraise need to discuss in the interview.In the
1990s 360 degree appraisal developed,where information was sought from a
wider range of sources and the feedback was no longer dependant on the
manager subordinate power relationship but includedgroups appraising the
performance of line managers and peer feedback from peer groups on
individual performance.
PERFORMANCE MANAGEMENT VS. PERFORMANCE APPRAISAL

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The distinctive feature of performance management and performance

appraisal emerged so far is hence represented by their different nature: PA is
seen as a system, whereas PM is seen as a process. Moreover, whilst PA is
episodic, usually carried out once a year in occasion of the annual
performance review meeting, PM is intended to establish a constant link
between managers and individuals. PM hence actually aims at building
between manager and employees a relationship based on mutual respect,
trust and understanding; whereas PA is based on a top-down relationship.
Appraisal is carried out by managers, usually annually, whereas the design of
the system and the documentation habitually filled during the performance
review meetings held by managers is prepared by the HR Function. Since PA
is usually associated with pay, this is the occasion in which managers are
supposed to play the role of judge, accounting for the process to be deemed
as a top-down process.
Performance management, by contrast, is considered as a management
process enabling managers to constantly stay in contact with individuals in
order to clarify and eventually modify, according to the business and
organisational development needs and requirements, their mutual
expectations. As such PM is and has to be intended as a means enabling
managers to play the role of their reports coach and guide, rather than of
judge. PM hence essentially represents a forward-looking process, in contrast
to PA which basically represents a retrospective-based system.
Whilst PM is indeed intended to establish and nurture a continuous
relationship between manager and individuals, PA is based on forms, whose
layout is designed and developed by the HR function, which more often than
not are destined to be forgotten in some remote organisational
archive.Differently from PA, PM ultimately aims at combining individual and
organisation wants and objectives and at finding a common point where
these two different needs can meet and be met.
The difference between PM & PA is as follows.

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PERFORMANCE MANAGEMENT VRS HUMAN RESOURCE

MANAGEMENT
Human Resource decisions establish competency standards for each job
role. Then, performance management systems measure employee
achievement relative to that model. Managers use performance
management systems to assess and reward the behavior of their employees.
Additionally, a human resource management function handles the recruiting,
interviewing, hiring and development of all personnel required to ensure your
company can achieve its goals. The relationship between performance
management and strategic planning links day-to-day operations with the
companys vision.
Performance Management
Performance Management includes activities related to human
resource which ensure that goals are consistently being met in an
effective and efficient manner.

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Wheras Human resource Management involves all management decisions

and practices that directly affect or influence the people,or human resources
who work for the organization.
Performance Management is concerned with performance centric
issues in management. Whereas Human resource management is
concerned with people centric issues in management.
The performance management is a part of HRM.HRM includes PM,and
various other things like T&D,Career Planning and so on.
Performance management is owned by line managers,HRM Owned by
HR deppt.
The purpose of PM is to meet the performance requirement of the
organization.the purpose of HRM is to manage & develop the human
capital of the organization.
Pm looks into present time whereas HRM looks into present and future
both.
Advantages and disadvantages of performance management systems
The advantages of a well-run performance management system versus a poorly
conceptualised and managed performance management system are summarised in
the table below
TABLE 2: EFFECTIVE VS INEFFECTIVE PERFORMANCE MANAGEMENT SYSTEMS
Advantages of an effective performance
management system

Implications
of
a
poorly
run
performance management system

Managers
employees;

their

Process is perceived as unfair and

discriminatory leading to increased
employee turnover;

Increased clarity around job descriptions

and task criteria;

Inaccurate information leading to

misleading evaluations;

Motivation to perform is increased

especially when linked to development
planning;

Poor feedback leading to lowering

of self-esteem;

Opportunities to increase self-esteem are

created;

Poor design and inefficiencies

leading to wasted time and money;

Employee

gain

insights

self-insight

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into

and

own

Deficient

systems

leading

to

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development opportunities are increased;

damaged
relationships;
between
management and employees (often
permanently);

Opportunities for fairer and more

appropriate
administrative
actions
are
increased;

Perceived mismatch between

increased
performance
and
reward/recognition
leading
to
decreased motivation to perform;

Organisational goals and divisional

objectives are made clear;

Unrealistic demands leading to

employee
burnout
and
job
dissatisfaction;

Increased likelihood of improvements in

range and depth of employee competences;

Unfair appraisals increasing the

risk of litigation;

Employee misconduct is minimised (shared

understanding of expectations);

Unjustified demands on managers'

and employees' time or resources;

Better protection from lawsuits;

Unfair standards and ratings in

general leading to loss of confidence
in
management's
ability
to
implement the system;

More accurate distinctions between good

and poor performers;

The replacement of organisational

standards with personal values,
biases and favouritism; and

Organisational change is facilitated

Poor communication especially in

terms what the ratings are used for

Employee retention is increased as a result

of increased motivation and commitment;
Employees are encourage to voice their
suggestions which creates improved
knowledge sharing and innovation;
Employee engagement is enhanced
(empowerment and passion).

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PROCESSES FOR MANAGING PERFORMANCE

At the centre of the system are the values and culture of the organisation,
which transcend into each component of the performance management
system. For example, an organisation that values an innovative culture will
reflect these values in the processes that make up the performance
management system (eg onboarding will have an innovation requirement,
etc).
From a strategic perspective, the performance management system must be
aligned to the strategic choices made by the organisation. This means that
employees must know the overarching objectives of the organisation. They
must also know how these objectives cascade to their division (team), and
how each team member, is expected to individually and corporately
contribute toward these. Similarly, they must also know how they will be
measured.
Onboarding means the transitioning of new employees from outsiders to
participants in the sustained performance of the organisation. The

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performance management system must provide the catalyst for change, ie

to behaviours and results that are valued and rewarded in the organisation.
This, in turn, would lead employees to understand the organisation's culture
and what it values.

Administrative purposes include all those processes that relate to

remuneration, rewards,promotion, retention, or termination. The link to
administrative processes is to ensure fairness (eg avoid favouritism) and
evade unethical practices such as corruption and bribery. It
is fuelled by legislative demands and ethical considerations.
At the heart of a performance management system is communication it
tells employees how
they are doing and how they can improve. The expectations are set by the
job description and
prioritised in terms of the strategic objectives.
Aguinis' (2013) term "developmental purpose" refers to the combination
of feedback and
coaching by using a culture of support (non-threatening) that is focused on
helping employees to interpret the feedback both in the context of their jobs
(ie organisational performance) and in terms of their career paths (ie shortand long-term).
Organisational maintenance refers to the planning efforts required to
ensure that the
organisation has the right people, in the right place, doing the right things, at
the right time. This includes the knowledge and skills required in terms of the
strategic objectives and the processes to nurture these (ie sustained
competitive advantage derives from internal resources and capabilities). An
effective performance management system will alert management to
training initiatives. Organisational behaviour will, where necessary, change
requirements.
Documentation purpose refers to data collection that informs other
systems. For example,
performance data can facilitate decisions around the selection of new
production systems, or new employment selection criteria. The performance
management system proposed by Aguinis (2013) demonstrates the need to
step back and critically reflect on the reasons why a performance
management system is required and how each element contributes to the
whole.

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Essence and Implications of Performance Management Critical

Appraisal
Companies sometimes do not realise benefits from performance
management.
Reasons include:
1. Effective performance management is a mix of design and
implementation. Companies spend time and money designing the
perfect system (the interesting part), but then implement it without
proper communication, explanation, training or on-going evaluation
(the boring part). It is unsurprising that it does not produce the desired
results. Even a simple paper based system can work with the right
attitude, approach, commitment and ownership. The trick is achieving
this;
2. Poor implementation requires companies to moderate
performance ratings to bring them into line with where they should
be. This perceived arbitrariness undermines credibility of the system
and destroys employees trust;
3. Unclear roles cause confusion. Performance management is a
business improvement tool owned and used by all employees. Line
managers are responsible for making it work in their departments.
HRs role is to provide training and admin support and to monitor
compliance. If employees see performance management as an HR
requirement, it is unlikely to succeed;
4. It should not be assumed that managers and employees are
competent in objective setting, providing feedback, managing poor
performance, constructively appraising performance and developing
employees.Training must be provided;
5. Employees sometimes misunderstand performance ratings. They
feel they should get a five out of five rating for fully achieving their
objectives. This misunderstanding arises if standards for superior and
outstanding performance were not defined upfront;
6. A performance management system is only part of a companys
armoury for managing performance. It will not succeed in isolation but
should be integrated with other business processes such as strategic

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planning; talent management and succession planning; budgeting;

remuneration strategy and variable pay;
7. Performance management is often seen as a two event process
objective setting and evaluation. The essence of performance
management is what happens in between. Managers and employees
resist this part because it is seen as difficult and time consuming. They
must be trained to overcome this.
8. Peformance management aligns organizational activities and
processes to the goals of the organization PMidentifies organizational
goals, results needed to achieve those goals,results needed to achieve
those goals ,measures of effectiveness or efficiency (outcomes)
towards the goals, and means (drivers) to achieve the goals. This chain
of measurements is examined to ensure alignment with overall results
of the organization.

Chapter -2 : PERFORMANCE MANAGEMENT PROCESS

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PERFORMANCE PLANNING

Performance planning is used to provide a structured approach to the

attainment of the desired level of performance for both individuals and
teams.Performance Plans are created for team and its members.
Performance planning should occur as:

An Initial Performance Plan

A Performance Improvement Plan

Initial Performance Plan:

An Initial Performance Plan is a detailed plan for either an individual or

a team and is used to:

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Identify the desired performance levels

Identify how these performance levels will be achieved

Provide guidance and direction

Measure progress towards the desired performance levels

Although there are no strict rules as to the format of a Performance

Plan they normally contain the following information:

Specific goals for development

Performance measures

Actions required to achieve goals

An indication of how long goals will take to achieve

Individual and team Performance Plans should align with the

organisation's overall objectives. This can be achieved by aligning the:

Performance Plans with the Team Operational Plan

Team Operational Plan with the Team Purpose

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Team Purpose with the organisation's Strategic Plan

Performance Plans might include the following types of goals:

Key Performance Indicators (KPIs)

Goals to improve competency levels

Team building goals

Whenever the performance levels of an individual or team are found to

be below the levels indicated in the Performance Plan then a planning
process to improve performance should be undertaken.

Performance Improvement Plan:

Inadequate or poor performance can have a number of negative

impacts on individuals and teams. As a Team Leader you may
experience decreases in team productivity and cohesiveness and an
increase in conflict and dissatisfaction.

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When a performance deficiency is noted, it should be dealt with as

quickly as possible. The following steps outline a process for handling
poor performance.

Collate the information regarding poor performance

This information may be in the form of feedback, customer complaints,

error rates, statistics and/or informal observation.

Meet with the relevant team member(s) and discuss the issues

During this meeting you will need to discuss the deficiency or

inappropriate behaviour and identify the causes.

Inadequate performance does not always indicate a problem on the

part of the individual. Key Performance Indicators (KPIs) may be
unrealistic or the resources required to achieve the performance
standard may not be available.

Develop a Performance Improvement Plan

A Performance Improvement Plan provides an outline of what is

required by both the individual and their Manager.

You may find that your company or organisation has an existing

process for implementing Performance Improvement Plans. You should
consult with your Human Resources department or your Manager to
determine if this is the case.

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Follow up

Ensure that you monitor, follow up and evaluate the performance

improvement as set out in the plan.

A Performance Improvement Plan should clearly convey:

The area of performance that requires improvement or development

The action(s) to be taken

Any parties required to assist in the achievement of the set actions

The timeframe for achieving each action

How performance improvement will be reviewed

When performance improvement will be evaluated

Performance Improvement Plans can be implemented when:

A formal Performance Appraisal indicates performance improvement is
necessary

Informal feedback, observations and statistics indicate that

performance is not satisfactory

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You need to evaluate the progress of a new initiative, for example a

new system or sales method

A plan is required as part of an individual development plan to prepare

a team member for promotion or the attainment of a new skill or
competency

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