Role of Performance Management System

In enhancing organizational performance

SOHAIL AHMED
Department Of Public Administration, University Of Sindh, Jamshoro

SAEED REHMAN
Department Of Public Administration, University Of Sindh, Jamshoro

ABSTRACT

Managing human resources in today's dynamic environment is becoming more and more complex as well as
important. Recognition of people as a valuable resource in the organization has led to increases trends in
Employee maintenance, job security, etc.

Performance management is a process of delivering

sustained success to organizations by improving capabilities of individuals and

teams. Every organization, be it small or large and be it for-profit or not-forprofit, wants to outperform its competitors through maintaining sustained success
in the relevant industry. Human resource acts as a catalyst in achieving such a
unique status in the industry. Once an organization becomes complacent with its

performance and stops moving on a road to continuous improvement, it begins to

decline. Main factors responsible for downfall of an organization are either lack of
commitment or nonconformity to established standards procedures. Organizations
operate through well organized and universally agreed upon systems, among those
systems is the Performance Management System (PMS).

INTRODUCION
Nowadays, in a contemporary world organizations seeking issues like lack of
appraisal, lack of reward and the most important among them is managing the
performance of employee as well as organization. Performance management is a
broad concept that involves understanding and acting on the performance issues at
each level of organization, from individuals, teams and departments to the
organization itself. These issues include leadership, decision making, motivation,
encouraging innovation and risk taking among others. Performance management is
a continuous process of identifying, measuring and developing the performance of
individuals and teams and aligning performance with the strategic goals of the
organization. It is the systematic description of an employees strengths and
weaknesses. Performance management may be undertaken at various levels of
government and its purpose may differ depending on the level at which is it
implemented. For example, it can be used to improve the performance of

individual units (such as particular schools, hospitals, police forces). This may or
may not be linked to best practice exercises, in which the best performing units
are used as an example for others to follow. It can be used as part of an attempt to
improve the performance of the overall organization. A definition of performance
management given by the Second Administrative Reforms Commission is as
follows,
Performance management is the systematic process by which the organization
involves its employees, as individuals and members of a group, in improving
organizational effectiveness in the accomplishment of organizational mission and
goals
An effective human resource management (HRM) function is generally perceived
as the one that has a positive impact on the performance of employees in an
organization. Similarly managing performance of the employees has always been a
challenge for the employers and indeed a matter of prime concern for all key
position holders (KPH) in the organizations both for profit and not for profit
enterprises. Even at a private family level, parents are always in great want for
distinguished performance of their children, in sports, studies, research, careers etc.
The need for higher performance has gained more prominence in the
organizational set up, since survival of average performing firms is always at stake,
especially in the prevalent global context. It is equally true whether it is a
commercial financial institution, a marketing campaign, a production plant or a
battle field. Despite extensive technological advancements, which have replaced
people with electronic and IT gadgetry, importance of HR cannot be

underestimated, as mentioned by DeCenzo (2005). Since human resource has been

viewed critical to organizational success, many organizations have realized that it
is the employees who can provide an enduring competitive advantage to a firm.
Achievement of competitive advantage, through human resource, has been, indeed,
the main tool at the disposal of those aspiring for excellence. It is also a well
known reality that, in the prevalent global tough competitive market conditions,
only those firms will stay in the run who can maintain a sustained excellent
performance in the relevant industry. An enduring 3 competitive edge is not easy to
maintain; it is very challenging to first achieve a distinguished level of
performance and then continue to sustain it for considerable duration. Every
market player is trying hard to outperform the others close in competition but the
factors which are responsible to ensure the survival of a firm are becoming
uncontrolled. Since competitive position in the market can be established only with
the help of well groomed, highly motivated, suitably skilled and committed human
resource, it is quite a difficult task both for the functional managers and the HR
department to keep the employees satisfied and loyal. Although latest equipment,
top of the line processes and high quality raw material are also important
ingredients of the high quality products and services, all these components shall
fail if employees are not competent and loyal. It is due to this reason that
organizations pay more attention to its human element by building their capacity
before induction of new technology. Leading organizations make it a continuous
feature and never divert their attention away from this developmental activity,
since they believe that survival lies in excellence and employee development is a
key to acquire it and maintain it for long time. In addition to the skill development,

motivation is another strong force that can drive the employees to do what is best
for the organization. Gary Dessler (2004) has highlighted that the most effective
management of human resource is increasingly seen as positively affecting
performance in organizations - both large and small. A workforce that is properly
trained, developed and, above all, suitably motivated through equity-based
rewards, can get the organization to lofty heights.

Role of Performance Management System

Performance management system is a key mechanism, which exists in almost all
leading organizations, PMS plays a pivotal role in harnessing the talent for current
and future needs of the organizations and beyond. Through this tool, organizations
gauge the overall ability of the individuals and teams and identify the areas
needing improvement. It also helps in determining the level of employees
motivation and commitment. An effective PMS has built-in capacity to identify
developmental and motivational needs of the organization. According to equity
theory of motivation, if compensation and rewards are perceived to be paid on the
basis of inequity and bias, employees will get demotivated and reduce their
performance. Successful implementation of PMS can help in managing both the
components i.e. employees development and compensation, leading to enhanced
performance at individual, departmental and organizational level. The industries, is
undergoing rapid diversification and technological changes both at national and
international level which have placed a strong demand for its transformation. Due

to these changes, operating and managing a industry is a unique challenge.

performance management through HR development and fair compensation can
prove to be an effective tool to enhance both competence and motivation of the
employees, in order to maintain a respectful status in the present competitive
environment, While PMS driven development enables employees to improve
existing skills and learn new skills, fair compensation maintains higher motivation
standards necessary to ensure appropriate level of organizational commitment and
loyalty. At international level, almost all leading organizations of developed
countries are spending a lot of financial resources for continuous development of
employees. Keeping above in view, an effort has been made to find out, in detail,
the existing performance management system, being followed in the organizations.

Aim of The Study

The basic aim of study is to understand the strong Cultural, developmental and
motivational tool, i.e. Performance Management System (PMS) through reviewing
different articles, visiting different organization meeting employees asking about
their perception about PMS. This is the one of the suitable way to contribute in
development of human resource.

The Research Objectives

 To study the process of performance management system.

To analyze the awareness and satisfaction level of employees towards PMS.
To study the impact of PMS on performance of the employee.
To study the effects of PMS on career development of employees.
To examine why an appraisal system is important for organizations.
To study motivational impacts on employee performance.
To determine the compensation level of the employee.

LITERATURE REVIEW
This section comprises of in-depth discussion on Performance Management
System (PMS) and related knowledge produced by researchers in the field. In
addition to the generic material on the subject, efforts have been made to study the
available material on PMS. It is not just a descriptive list of the material available,
or a set of summaries, but also an anarchically review of the past research on the
topic and its correlation with present environment.
Sharmistha Bhattacharjee and Santoshi Sengupta (2011) studied that employees are
the most valuable and dynamic assets of an organization. For achieving the
strategic objective of sustained & speedy growth, managing human resource has
been featured as a vital requirement in all organizations.
The research paper of Mohammad Tanvi Newaz (2012) provides an analysis and
evaluation of the role of performance management system in shaping

psychological contract at Sainsburys UK by a case study approach. Sainsburys

has adopted the performance management system to utilize the potential of their
employees but result of data analysis indicates that line managers have failed to
achieve the objective of the performance management system. This research
analysis reveals how the line managers of Sainsburys focus on short term goal i.e.
financial success instead of long term goal i.e. employee development. However,
the performance management system of Sainsburys comprises all the necessary
components to play a significant role in developing employees as well as
facilitating the formation of a positive psychological contract. But partial and
inattentive implementation of the system makes the situation unfavorable for the
psychological contract to develop at Sainsburys UK.
The paper of Akua Asantewaa Aforo and Kodjo Asafo-Adjei Antwi (2012) shows
that academic libraries have a performance appraisal system comprising setting of
goals, feedback, participation and incentives for performance. This study aimed at
evaluating the performance appraisal system in the KNUST and GIMPA libraries
in Ghana and give recommendations on improving the system.

Research of Leena Toppo, Twinkle Prusty (2012) informs that performance appraisal and performance
management were one of the emerging issues since last decade. Many organizations have shifted from
employees performance appraisal system to employees performance management system. This paper has
focused to study the evolution of employees performance appraisal system, critics the system suffered and
how the performance management system came to the practice. The main purpose of this paper is to
differentiate these two systems, employees performance appraisal and management system. This paper uses a

review of the literature to evaluate the development of appraisal system and argues the critic areas of appraisal
system. Performance management eliminates the shortcomings of performance appraisal system to the some
extent.

This paper of Jawaria Andleeb Qureshi, Asad Shahjehan, Zia-ur-Rehman and Bilal
Afsar (2010) notifies that many organizations install Performance Management
Systems (PMS) formally and informally in their organizations, with the motivation
to achieve better organizational results. In practice, organizations have difficulty in
implementing a performance management system because its different dimensions
are not taken into considerations enough. This article describes the findings of a
comparative analyses conducted between a standard performance management
model and performance management systems as applied by Local Development
Organization (LDO). Data was collected from 50 employees of the organization
with a Cronbach Alpha (0.935). Results identified barriers to implementation of
effective PMS, also recommendations and viable solutions are presented.

The performance budget.

Lack of clarity regarding purpose and objectives of Action Plans.
Inability to measure performance in the absence of appropriate indicators.

Performance Management Indicators

Organizations, whether commercial or not-for-profit, have long been obsessed with

managing and measuring performance and there is little sign of this easing up. It is
therefore unsurprising that a recent global survey of over 3000 organizations found
Key Performance Indicators (KPIs) to be the most widely used tool for
managing performance, with a usage rate of about 75%. (The figure below shows
the top ten tools). With some respondents preferring to name dashboards, benchmarking or Balanced Scorecards (which require a substantial metrics components)
we can safely assume that the actual number of KPI users is even higher (and
almost universal).
Although KPIs can be a powerful performance management tool, organizations
should heed a cautionary note. An old US Army saying goes, if it moves measure
it, if it doesnt paint it. Amusing perhaps, but in many organizations I look at this
adage can be readily applied and the KPIs end up adding little value whilst
consuming vast amounts of time and effort.
The primary value of KPIs is not in measurement per se, but in enabling rich datadriven performance conversations and better decision-making. Measuring
everything that moves provides little more than an illusion that performance is
being managed. Ask these simple questions: what goal will the KPI help my
organization achieve or what problem will it resolve; and what decisions will the
KPI help drive.

With 60% of usage amongst survey respondents, performance appraisals were

the second most commonly used performance management tool. A potentially very
valuable tool for aligning the goals of the individual with the strategic aims of the
enterprise, again cautionary words are aplenty. The Father of Total Quality
Management, and master statistician, Dr W. Edwards Deming refused to even
countenance individual evaluation. The reason, he claimed, was that there was no
way to make such appraisals, statistical valid. Unless employees believe that the
appraisal process is fair, equitable and with much of the subjectivity removed, it is

typically a poor tool for motivating performance but can be an extremely

powerful de-motivator. The behaviours the organization wishes to drive through
appraisals and the behaviours they might drive must be fully considered in the
appraisal design process. Something that also holds true when designing KPIs.
In third place, also used by slightly more than half of respondents are mission and
vision statements. The overriding purpose of such statements is to ensure that all
efforts to improve performance (at strategic, operational and individual levels) are
pointing in the same direction: so usage should be encouraged. Once more, there
are potential pitfalls for the unguarded. Too often missions and visions are poorly
described, and there is much confusion about the role of each. A mission describes
the reasons why an organization exists - and might remain stable over many
decades. For instance, Googles mission is to, Organize the worlds information
and make it universally accessible and useful. The mechanisms by which it does
this are not relevant to the mission. Products and technological delivery
mechanisms will change.
Vision statements should be inspirational, aspirational and explain where the
organization will play and should be time-bound. For instance, too many visions
are something akin to, we will be a leading company in our markets. Compare
with John F. Kennedys famous vision of 1962: We will put a man on the moon
and bring him back safely by the end of the decade.
The fourth most popular performance management tool is management
dashboards, which bring together performance information (often in graphs,
charts and traffic lights) in a concise display so that performance levels are easier
to communicate and understand. Dashboards are popping up everywhere in
organizations right now, and with data management and analytical capabilities
continuing to develop apace, we can expect usage to grow. But note, dashboards
should monitor operational performance and not strategic performance -which is
the world of Strategy Maps and Balanced Scorecards, see below). Again, avoid the
mistake of measuring everything that moves.
In fifth place we find lean management approaches. Compared to previous studies
usage of lean approaches has increased, which might reflect the current state of the
world economy and the need to improve efficiencies and cut costs. Lean

management provides a simple set of tools for easily identifying and removing
waste from organizations. The main advice here is to focus on what needs to be
improved (and will deliver tangible, and measurable, benefits) and not what is easy
to improve (which might deliver little, if any benefit, and might be better off not
being done at all).

The Performance Management Cycle.

Figure 1.1
Organizations can envision performance management as a cycle of continuous
improvement with no starting point and no ending point. The components of this
cycle include the planning stage where organizations may engage in strategic
planning processes, determine the objectives for their programs and create a vision
of the future of their communities. During the executing stage, organizations carry
out programs and services that align with the strategic plan and help the
organization to accomplish its objectives and mission. For many nonprofits, the
monitoring stage is often rutted in the track of simply measuring outputs (i.e.,
How many meals did we serve? or How many youth attended our classes?).

Instead, more useful monitoring would measure positive changes in skills, attitudes
or behaviors. The analyzing and sharing stage helps nonprofit organizations to
make sense of the data that they are collecting. This stage allows nonprofits to
learn what is going well, how they are/are not meeting their objectives, and what
other impacts are occurring in the community. By sharing this data publicly,
nonprofits demonstrate transparency and accountability to their funders and their
community stakeholders. Finally, the adapting stage occurs when nonprofits learn
from the data and use it to build stronger and better programs that meet the
organizational mission.

The proposed model of employee Performance.

Figure 1.2
These above factors are responsible and have a great impact on the performance of
employees, on the basis of these factors the performance of individual or group can
be more effective and efficient towards the goal of organization.

CONCLUSION
There is an increased emphasis on performance management through the use of
strategic outcome indicators. The greater linkage between financial settlements and
performance against targets set for each indicator places the selection of these
indicators under the microscope. The overall purpose of this study was to identify
the key variables that are having Strong influence on performance management
system. we are also going to figure out the performance management process,
awareness level and satisfaction level of employees and how the PMS affects the
performance and career development of employees. Rather than arguing for a
move away from the performance management regime that exists, we have set out
to select indicators that cover the full Majority of employees are well aware about
the PMS, the employees have complete idea about the various aspects of
performance evaluation in the company expect those elements which are kept
confidential , employees have a common thinking that the rating given should be
revealed to the respective employees.

Performance management has the potential to reform

public organizations in ways that allow managers to manage more efficiently and achieve greater outcomes for
their constituencies. An effective performance management system for Minnesota should include strategic
planning, performance budgeting, employee objectives and learning, continuous improvement of program
operations, customer feedback, and program evaluation components. Using performance measures, these
fundamental performance management components can inform managers and other stakeholders as to the
results or public value created.

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