Linking Performance Management System (Pms) to Business Strategy

A business strategy establishes specific goals to meet the requirements of customers, shareholders and stakeholders and fulfil legislative and executive mandates. The business strategy explains the expected results to be achieved in a 5-year period and defines measures that facilitate the organization to manage program performance to achieve those results.

All organizations does planning on an annual basis, which is turned into a strategic plan or financial plan. They do this to review their relevance to their 5 year business strategy, their constituencies, the result of their work on the customers and stakeholders that are being serviced and the quality of what that service has achieved.

The Business Strategy can be phased into implementation, by integrating identified performance factors with strategic initiatives and projects designed to develop and optimize departmental and individual potentials.

The following benefits can be measured from using a performance management system that is integrated to a business strategy and an annual strategic plan:

• Employees performance will be aligned to the organisation’s strategic and operational goals.
  
  
• A systematic framework for performance planning, performance monitoring and review and performance appraisal will be provided.
  
  
• A shared sense of responsibility amongst staff for the achievement of strategic goals and objectives will be promoted.
  
  
  
• A culture of transparency and participation through open dialogue about goals and the achievement thereof, personal development, and performance improvement will be promoted.
  
  
• Managers will be optimistic to effectively create conditions for staff to perform optimally therefore providing excellent, empathetic and motivational leadership.
  
  
• A framework of assessment for identifying good and poor performance and to act appropriately through development and the recognition and rewarding of good performance will be provided.

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Features of Performance Management System (PMS)

Performance management is a practice for establishing a shared indulgent about what is to be achieved as well as how it is to be achieved. It is an approach of managing people that enhance the probability of achieving success.

Following features of PMS are as follows:

Performance management is a continuous process

Performance management is a continuous process: It is about everyday actions that employees need to display to increase performance. To be effective it must dynamic and operate in real-time, allowing employees to continually adjust and increase performance, as required.

What and how is to be achieved

It is about establishing a shared understanding of what is to be achieved and how it is to be achieved. Managers and employees need to have a mutual understanding about what success looks like for the employee, which in turn is linked to the organization’s core strategy and business goals.

An approach to managing people

It is about individuals and teams working together to support each other and achieve shared goals, and about a collective responsibility between superior and employees. Superiors must effectively manage those for whom they are accountable, for example through coaching and motivating, and help them in achieving their goals.

Increases the probability of success

Performance Management is an on-going process that delivers clarity, support, feedback and recognition. The goal is to achieve success in the workplace for individuals and the organization in which they work. By integrating these common principles into the performance management process, every company will be well on the road to achieving greater productivity, better performance and better supervisor – employee relationships.

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Performance Management System and Business Strategy

To be effective, the performance management process must be firmly connected to and rooted in the organization’s core strategy and business goals. Strategy involves the formulation of the organization’s mission, goals, objectives and action plans for achievement. Every employee must participate in this.

The key is to clearly articulate each employee’s goals, objectives and competency requirements in a way that will influence the successful achievement of the organization’s strategy.

How to Design a Performance Management System

The form or software delivery tool simply enables and guides participants in the process. In this respect then, system design becomes very important.

Engaging Key Stakeholders

Engaging key stakeholder groups in the design of the system is critical to the success of the system. If the major stakeholders are concerned, they are far more likely to support the system and encourage others to engage in the process in a constructive positive way.

Employees also must recognize the value of the system – how it will help in understanding the performance requirements of their jobs, and how it will sustain their growth and development. Customer perspectives interests are also often incorporated, since they are the recipient or your organization’s services or products.

Goals / Purpose for Management

There should be clearly mentioned what you want to accomplish through the system. It is essential to be able to discriminate diverse levels of performance (e.g., for allocation of incentive pay or bonus schemes), and this is most often done through rating scales that have clear criteria for setting the level of performance.

Guiding Principles

Closely tied to the goals for the performance management process, it is vital to explain the guiding principles for its design.

Some of the guiding principals are:

• Foster joint accountability and continuous partnership between superiors and employees. ‰ Encourage regular two-way feedback.
  
  
• Address both the wh family like “what” and “how” of performance
  
  
• Impact performance positively and sustain development for current and future roles. ‰ Recognize accomplishments and the right behaviours.
  
  
• Be simple and straightforward. ‰

When and How Often to Appraise

Determining who defines feedback on employee performance will vary depending on the nature of the job and the goal(s) of the process The performance cycle can also vary with the type of work being performed: ‰

• Consistent with the business year for the organization: typically for executive, managerial and professional level jobs where the business goals of the organization are designed according to responsibilities and levels within the organization.
  
  
• On the anniversary date of hire for the employee: typical where the employee has a routine or regularized job that is tied to standards for the job that do not tend to vary significantly from one cycle to the next (e.g., customer service).
  
  
• Project cycle: The workers that deliver services/products in keeping touch with the project plan, with milestones, deliverables and a schedule for completion.
  
  
• Monthly / quarterly: design the framework for those workers that need to deliver clear results within shorter timeframes – e.g., sales.

Performance Constraints

Another consideration that needs to be taken into account is that performance can be constrained by factors beyond employee control like shortages of supplies, raw materials, equipment, budget restrictions, shortage of qualified staff, economic conditions, etc. It is essential to determine these constraints, and reduce their impact to the extent possible.

Integration with other HR Processes

Organizations that exercise different competency architectures and models to support the different HR functions won’t be able to realize these efficiencies or other benefits. In order to have a completely integrated system, it is essential to have a common framework.

Training and Instruction

Performance management is generally one of the most complicated processes for managers and employees. Training and instructions on how to participate and gain the best out of the system are essential to survive in a stiff competition.

This includes: ‰

• Instructions and Guidebooks: There should be clear instructions targeted to both managers and employees about how to participate effectively in the process.
  
  
• Training and Information Sessions:
  • For Managers – to ensure that they know the process and have the skills to coach and give fair and accurate feedback to employees.
  • For Employees – training sessions are necessary to understand their role in the process and build skills in receiving and gaining the most from the feedback they receive.

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Performance Management Cycle

Performance management is the systematic process consist of number of employees at every level, to improve organizational effectiveness in the accomplishment of agency mission and goals.

The performance management cycle has an important part to play in the implementation of motivation in the workplace. It involves much more than just assigning ratings. It is a continuous cycle that involves:

Planning

The first stage of the performance management cycle is to plan, this will involve getting together with an employee and evaluating expectations for a particular period of time. Plans must also address the alignment of priorities, including those of the individual, their team and the organization as a whole.

It also includes the measures that will be used to determine whether expectations and goals are being met. Plans should be flexible so they can be adjusted for changing program objectives and work requirements. Plans should be made in consideration of what needs to be done, why it needs to be done, and how well it should be done.

Developing

The second stage of a basic performance management cycle is the development of the individual’s expertise and potential. In an effective organization, employee developmental needs are evaluated and addressed.

Developing in this scenario means increasing the capacity to perform through training, giving assignments that introduce new skills or higher levels of responsibility, improving work processes, or using other developmental methods.

Performing

There are various factors which consider the way, how employee perform. This can be helpful for looking at and comparing performance over time or among various employees. Organizations need to be familiar with who their best performers are. In a work-based performance management cycle, this must relate to the needs of individuals, their teams and their organizations. Permit and persuade your employee to do what they do best, preferably on a regular basis.

Reviewing

Review is acting on the information provided by the rest of the cycle – so an assessment of progress and achievements, giving feedback or altering the plan. It means recognizing employees, individually and as members of groups, for their performance and acknowledging their contributions to the agency’s mission.

Performance management will not work very well if it’s only seen as an annual process. The performance management cycle works best if it’s used as a series of mini-cycles, throughout the year. Regular performance review keeps you in constant touch with what is happening, and helps build a more effective performance management process.

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Dimensions of Performance Management System (PMS)

Performance is what is estimated to be delivered by an employee or a set of employees within a time frame. Such performance expectation can be defined in terms of results or effort, tasks and quality, within specified criteria under which it is to be delivered. Performance Management Systems have many dimensions as follows:

Output or Result Dimension

Results and outputs are the observable and assessable dimension of performance. These give the information about the finished and semi-finished products and services. They set the benchmark for their competitors and depict the results in terms of the measurable standard. Example: For example, achieving 99 percent of the standard output in a automobile manufacturing unit engaged in production of tyres and other supporting equipment.

Input Dimension

The other dimension namekey input consists of tasks and actions accomplished by the individual. Broadly, this is concerned with the nature of activities to be undertaken, the time frame, the quality of inputs to be used, etc. Input dimensions of performance can be improved when the envisaged inputs are correctly used, properly planned and implemented.

Time Dimension

This dimension of performance is defined in terms of time specific tasks, that is, tasks to be performed hourly, daily, weekly, monthly, annually, etc. Here the time factor is significant, as achieving the desired performance level within specified time frame is considered to be the target. Focus Dimension

Focus dimension of performance is evaluated in terms of the performance focus, which could vary from employee to employee depending on the nature of job responsibilities.

Quality Dimension

Quality is a perceptual, conditional, and somewhat subjective attribute which defined differently by different viewers. Perceived Quality is the quality attributed to a good or service based on indirect measures. customer satisfaction and service delivery rate are the few examples of this.

Cost Dimension

As organizations move from cost to performance, the PMS in all stages of maturity always remains servant to a higher liege. Performance management systems evaluate the cost of business partners, suppliers, venture alliances, and potential merger/acquisition people.

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Four Pillars of Performance Management System (PMS)

It is an gradually acknowledged fact that a company’s human talent is its most precious and sustainable competitive asset. But an organization’s appreciation of its talent can’t stop with this basic understanding. It is crucial for organizations to proactively employ effective performance management systems that stress on both individuals and teams.

Some of the most important performance measurement systems are those that focus on groups or teams that are responsible for a particular business process, customer or geographical location. Human capital are important to find out an organization’s overall potential or capacity, but the ability to manage performance often is the major differentia tor between organizations that produce adequate results and those that truly excel.

Executives responsible for designing an effective performance management system need to focus on accomplishing four things:

• Define performance
• Develop Employee skills and knowledge
• Manage Motivate
• Effective feedback ‰

With these four pillars firmly in place, individuals can successfully manage performance, ultimately influencing the company’s bottom line and overall success.

Pillar One: Defining Performance

Evaluating what needs to be done and how to do it is the bedrock of a performance management system. Every performance management system should clearly made his objectives and its measurement criteria.

Since many knowledge-based organizations don’t have bureaucratic control structures and detailed job descriptions, thorough performance management systems are necessary to avoid confusion about what each individual should do and what constitutes individual and overall effective performance.

Pillar Two: Develop Employee Skills and Knowledge

KSA (knowledge, skills and abilities) is an inimitable assets of an organisation. A performance management system also must help employees to develop KSA to perform effectively. Without knowing this, managers cannot fully realize the type of performance employees are capable of.

Identifying competencies also shows how individual workers can contribute to the organizational talent strategy, how much training is required and what kind of hiring is required for further growth. KSA assessments can help employees understand which skills they need and help managers create a development and reward plan to facilitate employees acquiring those skills.

Pillar Three: Manage Motivation

Motivation is the capstone to performance and crucial element in setting and attaining goal. The research shows you can influence your own levels of motivation and self-control. The most skilled individuals in an organization tend to perform at high levels and exceed expectations only if they are well motivated.

High levels of motivation needs directly linking success to employee-valued rewards. When discussing motivation, it is important to distinguish between internal and external rewards. Intrinsic rewards are the internal rewards like personal gratification of solving a problem, achievement and self-esteem while extrinsic rewards are the external rewards or the tangible rewards like trophies, money, social recognition or praise.

Pillar Four: Effective Feedback

When managers set goals, they need to keep in mind the difficulty of the goal is a key determinant of performance. When goals are set too low, individuals settle for low levels of performance; conversely, when goals are set too high, people give up because they do not believe they can achieve or they cheat to give the impression of success. Goals that are attainable but challenging should be the objective as they are the most motivating and produce the highest levels of performance.

An essential factor in effective performance measurement and management is immediate feedback. All too often, this major piece is missing from organizations’ efforts to manage their employees’ performance. Too many managers wait until the annual appraisal to give employees feedback.

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Integration of Performance Management System With Other HR Activities

One of the most significant tasks for a human resource leader is to support the establishment of an organization-wide performance management system that connects strategic and operational plans with performance measures for organizational units and for individuals. This method will help employees to know how their work contributes to the success of the organization, which may help them feel more motivated and be more productive. When implemented in an efficient way, performance management has the potential to influence both group and individual performance and make organizations more successful.

Strategy sets the direction and also explains the scope of an organization. Strategic human resource management (SHRM) is a competency-based approach ‘that is made as per the demands of the business strategy’. It is the pattern of planned human resource activities intended to enable an organization to achieve its goals.

The competency assessment also supports career development and succession planning by providing an assessment of how strongly the employee matches the competency requirements of other jobs in the organization. By incorporating the competencies in the performance management process, the organization has the data and information to examine the supply of available talent to meet the current and future business needs of the organization (Strategic HR Planning).

Performance Management System is one of the most significant HR strategy factors. HR strategy factors largely include six areas: recruitment and selection, career development, performance appraisal, training and development, compensation designing and HR planning.

Performance management systems serve as an essential ‘feeder’ to other personnel and development activities. For example, consider the relationship between performance management and training. Performance management gives information on developmental needs for employees. In the absence of a good performance management system, it will not be clear that how organizations will use their training resources in the an optimal way (i.e., to train those who need it and in the areas needed most).

Also, there is a clear relationship between performance management and compensation systems. Compensation and reward decisions are likely to be arbitrary in the absence of a good performance management system. Therefore, Performance management system reinforces strategic HR management principles as it supports an organization to achieve its strategic intent, i.e. goals and objectives by ensuring and developing the desired set of competencies in the organization through different strategic interventions.

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Performance Consulting

Performance consulting is a process where a client and a consultant do partnership to accomplish the strategic outcome of optimizing workplace performance in support of business goals. High-Impact Learning Organizations (HLOs) grow their profits three times faster than their peers by using the performance consulting method.

Performance consulting can be explained as a process where learning organizations are partner with clients to achieve strategic results through the optimization of workplace performance in support of business goals.

These clients can be of two type, i.e. internal or external. The process uses a systematic approach to analyse and diagnose the performance problems, and then recommends solutions in both training and non-training and thus resolve the diagnosed root causes of performance problems.

Performance consulting is a practice in which a trainer (either internal or external to the organization) and the organizational client work together to decide how to improve organizational and individual results. That may or may not include training.

Performance consulting takes a broad approach by:

• Focusing on identifying and addressing root causes of performance problems;
  
  
• Recognizing that the interaction of individual and organizational factors influences employee performance;
  
  
• Documenting the actions and accomplishments of high performers and comparing them with actions of more typical performers.

Performance consulting is a series of steps with an entry and an exit. It is a systematic and data driven process that aids consultants and business managers to make sound decisions abut individuals and their performance in an organization.

Regardless of whether the trainer is an internal employee or an outside consultant, a performance consulting approach recognizes that training alone cannot automatically solve every employer performance problem. According to Jim and Dana Robinson, “Performance consulting is a process in which a client and consultant partner to accomplish the strategic outcome of optimizing workplace performance in support of business goals”.

Need of Performance Consulting

Performance consulting is needed for the following reasons:

• Organizational assessment
• Change management
• Performance improvement
• Process improvement
• Performance measurement
• Strategy implementation ‰

Performance consulting provides middle and upper management with the tools and techniques they require to enhance company and human performance. Performance consultants have the skills to lead company assessment, change management, performance improvement, process improvement, re-engineering, and performance measurement projects.

Role of Performance Consultants Performance consulting is the updation of new skills and competencies acquired through on-the-job training, focusing on the performance needs of employees. The concept behind is to increase the overall performance.

Few responsibilities of performance consultants are defined as follows: ‰

• To attain a equity between the needs of the organization and the employees.
  
  
• To develop synergy and teamwork.
  
  
• To discuss and solve the conflicts of the employees.
  
  
• To review and measure the actual performance of the employees.
  
  
• To recognize and improve the internal and external factors affecting the performance of the employees.
  
  
• To motivate and sustain the employees performance.
  
  
• To review and give performance feedback to facilitate performance improvement.

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Important Terms

• Performance Management: Performance management is the systematic process by which an agency involves its employees, as individuals and members of a group, in improving organizational effectiveness in the accomplishment of agency mission and goals.
  
  
• Planning: Planning means, setting performance expectations and goals for groups and individuals, to channel their efforts toward achieving organizational objectives.
  
  
• Monitoring: Monitoring well means consistently measuring performance and providing ongoing feedback to employees and work groups on their progress toward reaching their goals.
  
  
• Developing: Developing in this instance means increasing the capacity to perform through training, giving assignments that introduce new skills or higher levels of responsibility, improving work processes, or using other developmental methods. ‰
  
  
• Rating: “Rating” means evaluating employee performance against the elements and standards in an employee’s performance plan and assigning a summary rating of record.
  
  
• Rewarding: Rewarding means recognizing employees, individually and as members of groups, for their performance and acknowledging their contributions to the agency’s mission. ‰
  
  
• Strategic Human Resource Management (SHRM): Strategic human resource management (SHRM) is a competency-based approach ‘that is tailored to the demands of the business strategy’. ‰
  
  
  
• Output or Result Dimension: Output or result dimension are the visible and measurable dimension of performance. ‰
  
  
  
• Input Dimension: Input dimension consists of tasks and activities accomplished by the individual. ‰
  
  
  
• Time Dimension: Time dimension is the dimension of ‰ performance is defined in terms of time specific tasks, that is, tasks to be performed daily, weekly, monthly, yearly, etc.
  
  
• Focus Dimension of Performance: The Focus dimension of performance is measured in terms of the performance focus, which could vary from employee to employee depending on the nature of job responsibilities.
  
  
• Performance Consulting: Performance consulting is a process in which a client and consultant partners to accomplish the strategic outcome of optimizing workplace performance in support of business goals.