Performance Management and Performance Appraisal

Performance Management is Not Performance Appraisal

Performance management involves planning, appraisal and developmental actions. It is a continuous process. Performance management is a more complex system.

Performance appraisal is part of the performance management sys- tem. It is annual in nature and helps provide evaluative feedback – feedback on actions that are already taken.

Performance management is a holistic process that exists throughout the employee lifecycle.

Performance management plays a key role in all human resource related activities as follows:

• Developing Job Description (JD) and Job Specification (JS) for various roles
  
  
• Hiring right talent
  
  
• Setting performance expectations
  
  
• Defining SMART goals
  
  
• Conducting performance appraisal – monitoring, reviewing and evaluating performance ‰‰ Performance improvement or development plan
  
  
• Building performance culture

Performance management focuses on encouraging results is the foundation of performance excellence. In an organisation, effective performance management is an ongoing process and is performed in three phases, which are explained as follows:

• Coaching: It is an on-going process wherein employees are motivated to identify and overcome obstacles hindering their performance; thereby letting them excel at their jobs. During the coaching phase, the main aim of a supervisor is to guide each member of his/her team to achieve his/her best job performance. Employee coaching requires interactive conversations. However, some coaching opportunities and communication can be conducted through emails, telephonic conversations, videoconferencing, etc.
  
  An ideal coaching process involves the following:
  • Establishing expectations Communicating standards of work performance clearly and frequently
  • Listening to employees and addressing their queries
  • Working together towards the accomplishment of goals
  • Providing periodic feedback
    
    
    
• Corrective Action: A supervisor needs to adopt a corrective action approach if any of his/her team members fail to meet job expectations. Corrective actions provide a reasonable opportu- nity to employees to work upon their weaknesses and improve overall work performance. It is crucial for a supervisor to maintain confidentiality throughout the corrective action process.
  
  
  A corrective action can be oral or written. An oral correction action is informal in nature wherein a discussion takes place between an employee and the supervisor regarding improvement in job performance.
  
  On the other hand, a written corrective action a formal, documented discussion that is more serious in nature and requires approval from the HR before it is presented to the employee.
  
  
• Termination: It is the last resort for a supervisor in case coaching and corrective action plans fail to improve the performance of an employee. It is all about discharging the employee from his/her duties. Although it is a difficult decision for an organisation to make, termination offers a chance to the organisation to improve at that position, which, in turn, boosts team morale.

As you can see from the points above, performance appraisal is just one part of the whole performance management system.

As seen in earlier chapters, performance appraisal is an annual process that has following steps:

• Setting SMART goals
• Defining performance standards
• Developing action plan
• Documenting goals and performance standards
• Monitoring performance
• Reviewing performance and making goal and action modifications as required
• Evaluating goal achievement

Important role of performance appraisal to identify high performers as well as poor performers. This helps the organisation to take com- pensation, employment and learning related decisions for employees. Documentation done during performance appraisal generates employee record and can be used for other decisions.

Thus, performance appraisal ends at the evaluation of performance, whereas the performance management system ends at development plan and action.

It is important to remember following differences between performance management and performance appraisal as shown in Table 1:

If an organisation has only the performance appraisal system, then its focus will remain limited on annual performance and day-to-day tasks. However, if the organisation needs to grow in the long run, then the focus should be on process and performance improvement, competency development and building a performance culture. A wholesome performance management system can help an organisation achieve the same.

Psychological Contract With Performance Management

A psychological contract means the mutual beliefs, perceptions and informal obligations between an employer and an employee. Psychological contracts are defined by the relationship between an employer and an employee where there are unwritten mutual expectations for each side.

It is believed that the concept of psychological contract was first introduced by Argyris in 1960. Foremen want their employees to work optimally and they realised that if ‘passive leadership’ is provided, then they work best. Employees also agree and perform better when there is no interference by the foremen. Employees will ensure high production; low grievance and the foremen will ensure adequate wages and minimal interference in day-to-day operations. It is considered the first example of a ‘psychological contract between the employer and the employee’.

Employees are more likely to perform better in certain work environments. Throughout employee lifecycle, psychological contracts happen between the manager and the team members as well as between peers. Positive psychological contracts help with overall performance management system and its ethical principles.

Employees are more likely to perform better in certain work environments. Throughout employee lifecycle, psychological contracts happen between the manager and the team members as well as between peers. Positive psychological contracts help with overall performance management system and its ethical principles.

To a great extent, overall HR processes of an organisation, determine the relationship between the employer and the employee. Performance management processes, in particular, play a key role in creating a framework within which the psychological contract between employer and employee is determined.

Some of the key features of psychological contract with performance management are as follow:

• Understanding the role (starts even before the written contract of employment is signed) ‰‰ Committing to achieving results (seeking support, identifying problems and solving them) ‰‰
• Evaluation of performance (expected to be fair, unbiased and timely)
• Constructive feedback
• Reward and recognition (expected to be fair, unbiased and timely)

In unchanging conditions, the psychological contract will be reinforced by repeated contribution by the employee and reciprocity from the management over time. There will be a cohesive understanding between employer and employee concerning their understanding of the nature of the contract as the relationships mature.

However, in today’s VUCA (Volatility, Uncertainty, Complexity, Ambiguity) world, organisation face newer challenges every day. With this changing environment, the organisations, its performance management system and the psychological contracts need to adapt too.

Employer and employees experience this psychological contract at 2 levels – relationships level and task level. If the employer is able to provide a trusting, transparent and open work environment then the employee may stick around the organisation for a longer duration. At the same time, at task level if the employer provides growth and learning opportunities, then it holds back the employee too.

And such positive work environment can be built through constructive psycho College was one of the first to bring in the VUCA acronym, subsequent to the 9/11 terrorist attacks in 2001. Military planners were anxious about the radically different and unfamiliar international security environment that had surfaced. logical contracts of mutual trust and respect.

The psychological contracts may become toxic too. A manager may be biased toward an employee and some peers may be biased towards one-another. In this situation ‘you scratch my back; I will scratch your back’ kind of groupism may be seen. And this may not be conducive to the performance culture of the organisation.

Also, if the psychological contract ensures job safety and security and fair compensation, then the performance management system must fulfil the same. If an organisation is going through downsizing, then the performance management system must communicate the situation to the employees openly. This helps keep the trust built through psychological contracts or otherwise. According to a number of theorists Rousseau (1990) and Sims (1994), breaking the psychological contract (particularly one which was relational in character) will lead to diminishing trust and commitment levels.

The research also suggests that a major element in changing the psychological contract in the organisations has been the renewed focus on performance management that has been revised and implemented to effect new organisational objectives. The organisation, however, should not ignore the presence of mixed messages and employee perceptions of fairness and accuracy!

If the performance management system is fair, then it should allow employees to participate in goal setting, raise concerns, ask for resources and support, receive constructive feedback, get opportunities to learn and develop, get rewarded fairly and most importantly, receive trust and respect. Managers must not deceive employees by sharing half information. Managers must also ensure to provide constructive feedback, coach and help the employee perform better.