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This essay identifies some common difficulties in performance management schemes. Firstly, we will analyse root cause of these
problems so as to gain a deeper insight into its complexity. This is followed by some suggestions for solving these problems.
The problems are selected from various stages of the performance management cycle so as to provide an overview of the functioning
of the performance management scheme.
The six problems discussed are as follows:-
- The problem of employees' opposition and rejection to the performance management scheme.
- The problem of non-involvement of the CEO during implementation of the scheme.
- Difficulties caused by unstable strategic goals in employees' appraisal and reward determination.
- Difficulties in the operations of performance appraisal.
- Weakness in the feedback mechanism.
- Weaknesses in the performance-related pay scheme.
Various forms of performance management schemes are commonly prescribed for the modern organisation with the objective
of effecting continuous performance improvement. However, the studies of Bevan and Thomson (1996) as well as Guest and Peccei
(1994) have failed to show conclusive evidence that the use of performance management schemes have actually resulted in performance
improvement. Granted it is difficult to demonstrate the cause-effect between performance management and performance improvement.
Other factors, both intrinsic and extrinsic, exert their influences on the organisation's performance. However, the lack of
verifiable results does cause one to question the theory. Another possibility for the lack of clear success could be the faulty
or half-hearted implementation of the scheme in the work place.
A common difficulty encountered during the introduction of performance management scheme is the employees' opposition
and rejection of the performance management scheme.
The introduction of performance management scheme represents a radical change to the organisation. Not only does it seek
to change the organisational culture, it also alters the employee's psychological contract. In practice, performance management
schemes which are hastily introduced often fail because of lack of cooperation from the employees.
Cummings and Worley (1993) tells us that generally most employees do not support change as it entails moving from the
known to the unknown. However, the employees may support the change if they perceived there are good reasons for them to do
so.
To ensure effective integration and acceptance of the performance management scheme into the organisation, there is a
need to prepare the mindset of both management and employees before launching the scheme. Firstly, senior and middle management
should invest sufficient time to research and understand the full intricacies of the scheme. A study on the potential effects
of the scheme on the workforce and also operations would be useful for anticipating problems later. Ultimately, the management
team, especially the CEO, must be truly converted to the benefits of the scheme, or else they would be unable to convince
the rest of the organisation.
As the employee dislike moving into the unknown, providing them information on the scheme through training and seminars
will allay their fears and doubts. The training for both management and employees should cover skills such as setting objectives,
measuring performance, appraising performance, giving feedback, motivating, coaching and counseling.
Another difficulty faced by some organisations is the non-involvement of the CEO during traumatic period of implementation.
As the performance management scheme changes the work culture and the psychological contract, the employees may feel disorientated
and demoralized.
Studies conducted by Sparrow and Hiltrop (1994: p.565) showed that 90% of senior management have not received performance
appraisals in the last two years. The non-participation of senior management in the process, which supposedly they endorsed,
sends out the wrong signal to employees on the importance of the scheme.
In practice, the CEO may moot the idea of a performance management scheme. However, the personnel department (sometimes
with the assistance of an external consultant), are often given the task of designing the scheme. Therefore, ownership of
the performance management scheme remains solely with the personnel department. Implementation of the scheme is delegated
to line managers, who lack the know-how, commitment, authority and enthusiasm to get the scheme to work.
The employee's perception of the CEO's commitment is vital for the acceptance of the scheme within the organisation. The
CEO should be highly visible in his role as champion of the scheme. The emphasis on performance should continually be reiterated
in the CEO's daily dealings with his employees. If the employees sense that their CEO is uncertain about the scheme, some
of them will attempt to undermine its implementation.
Most employees are not naturally motivated toward high performance as it entails much effort. Therefore, if performance
is to become ingrained into the work culture, the CEO must lead the rest of the organisation towards improvement.
The CEO, due to his privileged position at the top of the organisation hierarchy, can inspire, motivate, assure and move
his followers to accept difficult changes. He is able to silence sceptics, promote speedy adoption of the scheme and instil
the required discipline for the maintenance of the scheme.
The unstable nature of strategic goals can cause difficulties in employee's appraisal and reward determination
To ensure alignment of an individual's performance objectives with the overall organisation strategic plans, Beardwell
and Holden (2001) propose that performance objectives be cascaded from overall business strategy.
Stiles et al. (1997)'s research shows that linking performance objectives to strategic goals can result in performance
objectives having a short-term focus. Strategic goals are becoming increasingly unstable as the organisation responds to the
changes in the external environment. Therefore, performance targets or even the objectives themselves may be changed midpoint
due to the change in business strategy.
Appraising the employee's performance and calculating the reward becomes complicated. The employee may have put in effort
to achieve the obsolete performance objective. However, as the business strategy has changed, his effort did not contribute
to organisational performance. In practice, many organisations will not pay out reward for the employee's effort.
I believe that fair play must always prevail, or the employees will be disillusioned and loose faith in the scheme. Before
setting new performance objectives, the manager should make an assessment of the employee's achievement thus far in relations
to the obsolete performance objective. A fair amount of incentive should be paid to the employee in recognition of his effort.
The manager should then re-negotiate the new performance objectives, targets and expected rewards.
In my opinion, senior management should realize that there are costs incurred whenever the business strategy is changed
midpoint. It would not be fair to ask the employee to bear even a small portion of this cost
There are difficulties in the operation of performance appraisal.
Lawler et al. (1984) described performance appraisal as an unpleasant activity, which is despised by managers and supervisor.
While Napier and Latham (1986) suggested employees often see no value in the performance appraisal interview and feel that
it does not have a significant influence on their performance or development.
I consider the above-mentioned perceptions to be overly severe. In contrary, performance appraisal continues to be the
most popular method of assessing employee's performance. Most managers and employees approach it with a sense of anticipation
and high expectation as it effects the pay packet.
However, due to a major flaw in its construct, many managers and employees alike may have some doubts about its effectiveness.
The performance appraisal has two main objectives which are in conflict. The performance appraisal's first objective is to
assess the employee's past performance for the purpose of determining rewards or promotions, while the second objective is
to plan for the development and improvement of the employee. McGregor (1957) rightfully pointed out that the appraiser is
often unable to resolve the conflicting roles of "disciplinary judge" and "helpful counsellor".
It is difficult to perform the first role (disciplinary judge) well without affecting the other. In his first role, the
appraiser may have to give a negative but fair assessment of the employee's performance. However, he risks ruining the good
working relationship he has with the employee. A good working relationship build on trust is vital for the appraiser to be
effective in his second role of "helpful counsellor". Additionally, most employees are reluctant to report serious
problems at work during the appraisal. Understandably, there is genuine fear that the work problems may be construed as the
employee's weaknesses or poor performance. In practice, appraisers often compromise on the evaluations in a futile attempt
to fulfil both objectives.
I concur with Randell (1973) who argues that the reward review should be separated from the performance review in terms
of operation and documentation. Therefore, the solution is a re-design of the performance appraisal. Two separate reviews
with a different focus to resolve the appraiser's dilemma of conflicting roles.
The developmental review focuses on improving the work performance of the employee. It should be held regularly, at least
once a month, between the employee and his direct manager. During the review, the manager will provide the necessary coaching
and counselling to the employee. Feedback on the work performance is both requested for and given to the employee. Training
and developmental issues are discussed with the employee. The employee's performance targets and successes to date are reviewed.
Notable accomplishment are recognized and recorded in the meeting. A small incentive payment can be made immediately to motivate
the employee.
The reward review may be held less frequently or once a year. It is held to decide on the employee's annual increment,
bonuses or promotion. I propose that the appraiser for the reward review be the manager's immediate superior. The manager's
presence in the reward review shall be to support the employee's case for the reward. He confirms the accomplishments of the
employee during the previous year. The manager's new role placed him on the same side as the employee. This arrangement promotes
openness, strengthens working relationship and increases mutual respect between employee and manager.
There is an inherent weakness in the feedback mechanism of a performance management scheme.
Feedback is an indispensable control mechanism for performance management. In practice, Folger and Cropanzano (1998) pointed
out that most managers dislike giving negative feedback during the performance appraisal interview and are not skilled in
providing it.
The lack of skill in giving feedback causes the following problems in the workplace. Feedback is often too positively
biased and therefore inaccurate. Work problems remain unsolved as managers avoid passing negative feedback to the employee.
Consequently, the employee remains unaware of his own weaknesses and mistakes. On the other hand, a poorly delivered criticism
can cause the employee to be severely de-motivated. Disagreement over the feedback can result in tension or poor working relationship
between the manager and the employee.
There are contradictory views on feedback and its effect on the motivation. Hackman and Oldham (1980) suggest that performance
feedback increase job satisfaction and motivation. However, Bratton and Gold (1999, pp. 215) disagree and state that feedback
has a definite influence in the de-motivation of employees. In my opinion, both the perspectives can be correct depending
on the circumstances. However, I am an optimist leaning more towards Hackman and Oldham's perspective.
My suggestions for improving the feedback mechanism are as follows. Training in effective communications, motivation and
human relation skills should be given to all managers. Additionally, there should be two separate reviews, which is the reward
review and developmental review (see discussion above). Feedbacks given during developmental reviews are more likely to be
received positively, as the manager is playing the role of "helpful counsellor".
Lastly, I wish to suggest a few practical methods on giving feedback. One way is to re-phrase the feedback as suggestions
for improvement. Another method is to guide the employee using non-threatening questions to discover the problem by himself.
However, if the manager's relationship with the employee is excellent, the direct approach would always be preferred.
Performance-related pay scheme in its most common form has the following weaknesses: long time delay between performance
and reward, unable to reinforce positive behaviour patterns and non-sustainable use of pay rise as reward.
Performance-related pay seems to be the most common remuneration scheme for an organisation implementing performance management.
In performance-related pay the employee's financial rewards are link to the achievement of performance targets. In the ensuing
paragraphs I will suggest some practical improvement to this remuneration scheme.
In practice, most organisations mete out rewards (such as promotions, salary increase or bonus payment) or punishment
(such as demotion, salary freeze, no bonus or reprimand) after the annual performance appraisal.
Although significant accomplishments and critical failures are recorded throughout the year, reward and punishment are
delayed until the end of the year. My criticism is that this delay weakens the employee's perception of a link between measured
performance and reward. According to Mabey and Salaman (1995), the employee's perception of the link between measured performance
and reward are crucial to the success of the performance management system.
The reward or punishment meted out reinforces the overall contribution of the employee, which is an aggregation of both
accomplishments and failures for the year. My criticism is that this arrangement is unable to provide the direct link between
positive behaviour patterns to the reward.
According to Torrington and Hall (1998), an organisation using pay rise to motivate employee may be facing an escalating
financial burden. The organisation faces the danger of an "inflationary spiral" as it takes an ever-increasing quantum
of pay increase to maintain the same level of high performance. My criticism is that the use of pay rise as reward is not
sustainable in the long term. An organisation cannot afford to pay high staff overheads in a sluggish economy.
In most schemes, even poor performers will get a pay adjustment to counter inflation. The employee is often not told the
percentage of the pay rise, which is inflation related. My criticism is that the link between performance and pay rise (reward)
becomes obscured. The problem is compounded by the fact that each employee's pay and quantum of pay rise are considered private
and confidential information. Therefore an employee is unable to justify or compare his reward against that of his colleague.
I would like to suggest some changes to the performance-related pay scheme. In the re-designed scheme, the manager is
allocated an annual budget for his department's reward payments. The manager and his superior shall negotiate the amount of
the reward budget during the setting of the department's performance objectives. The manager shall be given the authority
to disburse the budget amount with the intention of motivating performance in his department.
However, the amount that is eventually utilized for the year must correlate to department's success in meeting its performance
objective. If the department is deemed to have achieve 50% of the set target, then 50% of the budget can be disburse as rewards
to the employees. Amount not used at the end of the year may be distributed as bonus payments to deserving employees.
When an employee accomplishes significant success, the manager shall record the accomplishment in the developmental review
and immediately reward the employee with an incentive payment. Applying Thorndike's Law of Effect, the immediate reward will
reinforce the employee's positive behaviour pattern.
Of several responses made to the same situation, those which are accompanied or closely followed by satisfaction (reinforcement)
. . . will be more likely to recur; those which are accompanied or closely followed by discomfort (punishment) . . . will
be less likely to occur.
(Thorndike, 1911:244)
The re-designed performance-related pay scheme offers the following advantages. Firstly, since reward is given immediately
upon recording performance, a clear link between performance and its corresponding reward is established. Secondly, correct
behavior patterns that lead to success are positively reinforced. Thirdly, the financial costs for the reward scheme are pre-determined
and non-escalating. Fourthly, it can be assumed that the manager will ensure effective distribution of the incentives so as
to achieve the best possible performance. Fifth, the autonomy given to the manager to reward will increase the manager's authority
and control over his department.
However, the re-designed scheme is not able to remove the subjectivity that is inherent in performance-related pay schemes.
The manager's decision on the distribution of reward can be subjective. Therefore, some employees may complaint of favouritism
and unfairness. A possible solution is to have the manager's superior verify any reward decision. Ultimately, the manager
is forced to demonstrate fairness, as a demoralized department will not meet its performance targets.
From our analysis above, we have learnt the following. Firstly, the employees' rejection and opposition to the introduction
of a performance management scheme can be reduced by providing training and seminar before the launch of the scheme. Secondly,
the CEO plays an important role during the implementation of the scheme. Thirdly, the employee should be rewarded for his
effort should the performance objectives be changed midpoint. Fourthly, the effectiveness of the performance appraisal can
be improved by having separate reviews for reward and employee development. Fifthly, training in effective communications,
motivation and human relation skills can improve the effectiveness of the feedback mechanism. Lastly, the performance-related
pay scheme can be improved by paying immediate reward when achievement is recorded. Cash incentives are more viable as reward
compared to pay rise which is not sustainable over the long term.
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