UNIT 2

performance management
 Functions of PM
Performance management is mainly concern with the performance of the people, systems and organisation. To achieve this objective
performance management performs a variety of functions.
• Function # 1. Create Healthy Work Environment:
HR or performance manager works with the people. Their objective is to create an environment of openness, trust, mutual understanding,
team-spirit and cooperation. In this environment only the manpower can be utilized more effectively to contribute to organisational goals.
They create environment with the help of HR policies, day-to-day dealing, rules and regulations regarding leaves, welfare, promotion,
discipline, incentives, training, etc. It creates confidence in persons to work without worry.
• Function # 2. Develop Performance Plans:
Management goes for planning of the job, competencies required for performing the jobs and standards required for performance of the jobs.
It includes job description, job specification and fixation of job performance standard. Through these plans only the type of person required
can be ascertained.
• Function # 3. Selection of Appropriate People:
To carry-out the various types of jobs in the organisation manpower is needed. The required type and number of people are to be selected
from the aspirants. So they may be made available at right place in right time for accomplishment of the tasks at required time. This is
possible through proper recruitment and selection of employees.
• Function # 4. Decision Regarding Performance Standard:
Performance management as a function of human resource management. The management takes decision regardiFunctional Management –
Prof. (Dr.) Parimal H. Vyasng the required standards of the performance in consultation with top level management, head of departments and
experts or consultants. They consider the lowest, highest and average performance of the people at work. After detailed discussion the most
realistic standards are fixed by the management.
• Function # 5. Plans for Development of Employees:
Performance management is interested for development of both employees and organisation. With the development of one is the
development of both. He conducts orientation of the persons, provides education, and finds out the need for training and cond uct
training programme for development of skills, knowledge and competencies. This can contribute in improvement of the performance of
persons and company.
• Function # 6. Measurement of Performance:
After planning and development activities the next task of performance management is to measure the performance of the people at
work. For measurement of performance the different criteria has been fixed such as output per hour/shift quality of work, behaviour,
discipline, level of commitment, etc. This helps to find out the poor and good performers out of the lot. On the basis of it further
remedial action can be taken.
• Function # 7. Conducts Performance Feedback:
After measurement of performance of all employees the management finds the slow moving persons. The objective of performance
management is to find out the reasons for slow going. They conduct coaching session for such people and give feedback to them . They
suggest ways to improve their performance also. This clarifies many doubts of the employees. It helps a lot the persons to un derstand
their calibre and difficulties. Through the coaching and counselling session the attitude of the employees is changed positive.
• Function # 8. Design Compensation, Recognition and Reward System:
Through performance appraisal system the slow and fast working persons are identified. As per the output the management desig ns the
compensation, recognition and reward system. For good performers the incentives are designed as per the output.
They are given better incentives, whereas slow working persons may be given less incentives or may be denied. Good performers ’ tasks
are recognized by giving appreciation letter, prizes or rewards. Sometimes they may be considered for further promotion also. This
keeps on motivating the people whether a slow or fast working person.
• Function # 9. Contributes in Developing Goodwill:
By performing the functions like creating good working environment, planning for performance, measuring performance, providin g
performance feedback, designing suitable compensation, recognition and reward system the management helps in improvement of the
performance as a whole. The work-related employee’s problems are sorted out.
It gives a sense of confidence and motivation among persons. These persons create publicity by words of mouth inside and in t he public
outside. It contributes a lot in creating high goodwill of the company. Provide promotional/career development opportunities for staff.
Determinants of Performance
A combination of three factors allow some people to perform at higher
levels than others.
• Declarative knowledge – information about facts, label, principles,
goals. Understanding of task requirements.
• Procedural knowledge – knowing what to do and how to do.
Interpersonal skills required(cognitive, physical, perceptual, motor,
interpersonal)
• Motivation – choices about expenditure of effort, level of effort,
persistent of effort. Deliberate practice leads to excellence.
Factors Influencing the determinants of
performance
• Individual characteristics
• HR practices
• Work environment
 Dimensions of Performance
• Input dimension: This dimension deals with the activities to be accomplished by the employee. Performance can be achieved if the nature
of inputs can be managed without mistake, because performance is a function of three sets of factors – ability, motivation and
organizational support. If anyone among these three factor is less the performance is to be poor.
Employee Performance = Employee Competence + Employee Motivation + Organisational Support
• Output dimension: The most acceptable and measurable dimension of performance is result and output. It describes the conditions of
inputs which included raw material, working conditions, process capabilities and talent of employees in the final form of product or service.
It is necessary to plan all the performance activities in a scientific and systematic manner so that the desired result or ou tput may be
obtained.
• Time dimension : Time is precious and very important dimension of performance. In the current scenario of world, the performance
management is time bound otherwise the survival of organisation is not possible in the future. Performance of an employee in relation to a
given role during particular period of time under the set of circumstances operating at that point of time. Therefore, time may become the
target.
• Focus dimension : Performance also has a focus dimension. For example in case of sales, profits and new areas. Focus means attention, not
only on own activities but should also keep close watch on related activities.
• Quality dimension : Quality is not destination but a journey’. Quality refers to doing the things right from the first time rather than making
and correcting mistakes in order to achieve total customer satisfaction. It means quality is conformance to customer requirements, not
goodness. Higher is the quality greater is the satisfaction of customers. It is the responsibility of each and every employee as well as
management to build a quality standard which provides reasonable customer satisfaction at economical cost. Quality is the cor e dimension
of performance management.
• Cost dimension : The ultimate principle of purchasing is the low cost with best quality. Therefore cost effectiveness is another dimension of
performance management. It implies the capacity of a business unit to produce a given commodity at a lower cost through more effective
utilization of existing resources. It is the process of cost reduction by improving efficiency of operations.
Approaches for measuring performance
• Measuring the performance of employees is the backbone of any organization’s management.
Business owners usually measure employee performance by assessing how much contribution
the employee is making to the firm’s growth. This is conveyed to the employee at the time of
their performance appraisal. Performance appraisal refers to the evaluation of employees,
providing them with valuable feedback, and creating a positive effect on future performance.
Employee performance depends upon a number of factors such as:- conducive work
environment, work profile, compensation, bonus system, job satisfaction, company policies,
technology
• Organizations can use different strategies and approaches for the purpose of measuring the
performance of their employees. The five major approaches are:
1. Comparative approach:- The comparative approach involves ranking an employee’s performance
with respect to that of others in the group. Individuals are ranked on the basis of the highest to
the lowest performer. There are several techniques for a comparative approach such as the forced
distribution technique, paired comparison, and graphic rating scale. A comparative approach is
undertaken in the case of firms with a small group of employees with similar job profiles.
2. Attribute approach:- In this system, the employees are rated on the basis of a specific set of
parameters such as problem-solving skills, teamwork, communication, judgment, creativity and
innovation. The graphic rating scale entails rating the employee on a scale of 1 to 5 (lowest to
highest). A mixed rating scale is a more layered form of measurement.
3. Behavioural approach:- This is one of the oldest performance measurement techniques. The Behavioural
approach consists of a series of vertical scales for different dimensions of the job. This can be done using the BARS
technique or the BOS technique. The Behaviourally Anchored Rating Scale (BARS) technique consists of five to ten vertical
scales. These scales are based on parameters (called “anchors”) which are decided consensually by all employees.
Employees are then ranked on each of the anchors according to their performance.
4. Result Approach:- This approach is a simple and straightforward concept, wherein organization rate employees
on the basis of employee performance results. The first type of result approach is the Balanced Scorecard technique. This
technique focuses on four perspectives namely: financial, customer, internal & operations, and learning & growth. The
second approach is the Productivity Measurement and Evaluation System (ProMES). It is very effective in motivating
employees for enhanced productivity and measuring feedback. It consists of four steps. The first step is to identify the
objectives which the organization wants to achieve. The second step measures how well these objectives are made. While
the third step involves how effective are they in evaluating employee performance. Finally, the last step gives feedback to
the employees. Organizations calculate an overall productivity score as a summation of the performance scores of all these
factors. The main advantage of the result-based approach to performance measurement is that it converts strategy into
operations with a more holistic view. It takes into consideration the external environment of the job such as customers and
learning and growth. It does not simply rely on financial indicators of job performance.
5. Quality approach:- This approach focuses on improving customer satisfaction by reducing errors and achieving
continuous service improvisation. This approach takes into consideration both personal and system factors. Also, employers
take regular feedback on the personal and professional traits of the employee from managers, peers, and clients to resolve
performance issues. The Quality Approach mainly focuses on the use of the Kaizen process in order to continuously
improve business processes. The advantages of this approach include:
• assessment of both employee and system,
• problem-solving through teamwork,
• use of multiple sources to evaluate performance and
• involvement of both internal and external factors
 Benefits of using performance measuring
approaches
Organizations can use all these approaches together effectively to evaluate
employee performance. This has a positive impact on employees’ motivation
and they tend to perform better. They can identify their strengths and
weaknesses and work on improving their skill sets. Since the employees are
well aware of the organizational goals, they can also work on improvising their
skills further to achieve them. Employee performance enhances the
communication between an employee and the supervisor to discuss job duties
and work-related issues for a healthy work environment. With the changing
trend, more recent techniques and approaches are being formulated to
measure employee productivity and organizational performance.
 Causes of poor performance
• Lack of knowledge or Awareness
• Lack of skill or ability
• Lack of motivation
• Lack of resources
• Obstacles
• Personal issues
 Performance Dimensions: Types of
Multidimensional Behaviours
• Since performance is multidimensional, we need to consider many different types
of behaviours to understand it. Two types of behaviours to particularly important:
• Task performance:- it is defined as activities that transform raw materials into the
goods and services that are produced by the organisation. It help with the
transformation process by replenishing the supply of raw materials; distributing
its finished products; or providing important planning, coordination, supervising,
or staff functions that enable the organisation to function effectively and
efficiently.
• Contextual performance(also called prosocial behaviours or organisational
citizenship behaviours):- it is defined as behaviours that contribute to an
organisation’s effectiveness by providing a good environment in which task
performance can occur. It includes behaviours such as persisting with enthusiasm
and exerting extra effort as necessary to complete one’s own task activities
successfully. Helping and cooperating with other coworkers. Following
organisational rules and procedures.
 Difference between Task and contextual
performance
Task Performance Contextual Performance
• Varies across jobs • Fairly similar across jobs
• Likely to be role prescribed • Not likely to be role prescribed
• Influenced by abilities and skills • Influenced by personality.
Why include task and contextual performance
dimensions in a PM System?
• Global competition is raising the level of task and contextual performance
required of employees for an organisation to be competitive.
• Customer service – global competition is also raising the need for
outstanding customer service.
• Teamwork – many organisations have formed employees into teams.
• Employee perceptions of PM – Employees are more satisfied with the PMS
and believe it is fairer if contextual performance is measured in addition to
task performance.
• Supervisor views – since the contextual performance has an impact on
ratings of overall performance even when only task performance is
measured, it makes sense to include contextual performance more
explicitly.
 Process of Performance Management
1. Setting/Establish performance standard: performance standards serve as benchmarks against which
performance is measured. Standards should relate to the desired results of each job.
2. Communicate the Standards: performance appraisal involves at least two parties, the appraiser who does
the appraisal and the appraisee whose performance is being evaluated. The appraiser should prepare job
descriptions clearly. Help appraisee set the goals and targets. Analyse results objectively. Offer coaching
and guidance to appraisee whenever required and reward good results. The appraisee should be very
clear about what he is doing and why.
3. Measure the Actual Performance: Performance measures, to be helpful must be easy to use, reliable and
must report on the critical behaviours that determine performance. Performance measure can be
objective or subjective. Objective performance measure are indications of job performance that can be
verified by others and are usually quantitative. Subjective performance measures are ratings that are
based on the personal standards or opinions of those doing the evaluation and are not verifiable by
others.
4. Compare actual performance with the standards and discuss the appraisal: Actual performance may be
better than expected and sometimes it may go off the track. Whatever be the consequences, there is a
way to communicate and discuss the final outcome.
5. Taking Corrective Action: corrective action is of two types. One puts out the fires immediately and others
strikes at the root of the problem permanently.