Performance management is a means of getting better results by managing performance within an agreed framework of goals, standards and competence requirements. It is a process to establish a shared understanding about what is to be achieved, and approach to managing and developing people in order to achieve it.

It enables the manage to oversee different outputs from each department simultaneously, helps the employees to set their goals for future as wel well encourages communication and facilitates company to grow in future. It is a continuous process that helps business achieve its objectives that fall under the umbrella of the business plan.

performance management

Process Of Performance Management:

  1. When a new year is about to start, managers and workers sit down and draw a couple of objectives from the business plan that are required to be achieved. 
  2. A performance management agreement should be drawn up where managers should have a clear set of expectations from their subordinates and documenting these goals is better to get back to them from time to time.
  3. Managers and employees should make a plan of action and lay down a process on how the employees will refurbish their skills, and what areas they need improvements in.
  4. Managers should offer their opinion on employees performance from time to time throughout the year. The feedback can be motivating for employees and also deals with any problems and issues the company is falling behind on.
  5. After the period ends, high performance is praised for, problems are dealt with, work plans are updated and changes are reiterated.

Performance Appraisal:

Performance appraisal is a component of performance management, it is an opportunity for organisation to recognise the areas they slack back on so they work on those by giving necessary training and identify their potential strengths which they can make stronger to develop a core competence 

Components Of Performance Appraisal:

  1. Reward review: At the end of the year, employees are appreciated for their hard work and efforts in the form of bonuses and increments.
  2. Performance review: Employees performance is measured against the benchmark established at the beginning of year and their areas of flaws and strengths are identified.
  3. Potential review: it is a medicine to turn employees flaws into their strengths by providing specific training programs and establishing an action plan.

Objective Of Appraisal:

  1. Establishing key points of what employee has to do to achieve objectives.
  2. Identifying problem areas that need improvement. 
  3. Validating the good work of employees by giving them promotions.
  4. Updating the system for bugs and improving technology that could enhance the performance.
  5. Promotions: Identifying candidates for promotion.
  6. Assessing organizational competencies to aid HR planning.
  7. Improve communication between managers and their subordinates.

Types Of Appraisal:

  1. Self-appraisal: It is when employees assess their own performance and identify their strengths and weaknesses and how they have performed throughout the year. It enables employees to reflect on their performance and also aves manager’s time doing appraisals. And reconciles goals of individuals with organisation
  2. Upward appraisal: When employees are not rated by superiors but their subordinates
  3. Customer appraisal: When company’s products are evaluated by clients
  4. 360 review: It provides manager with review from multiple sources such as superiors, subordinates, customer and self appraisals. The benefit of doing this is that it provides manager with an overall picture on where its employees stand.

Approaches To Performance Appraisal : 

Maier’s approach created a breakthrough in how we view performance appraisal. It incorporates a comfortable environment where the subordinate can confront their shortcomings on their own. There are 3 approaches:

  1. Tell and sell: The employer tells the subordinate about his observations from his work and makes a natural assumption that employee is willing to improve and embraces his flaws. 
  2. Tell and listen: This is more like a chitchat between employees and manager, where employees express their own concerns and dissatisfaction from the work. Manager provides a lending ear to employees to vent about their work amd they discuss necessary amends.This makes employees feel that their opinion matters and it leads to motivation among workers.
  3. Problem-solving style: In this approach, instead of critising the work of employee, managers coach them and focus on the development of employees. This is a two way street and the results are beneficial for the entire organisation.

Limitations To Effective Appraisal : 

  1. Different department hae different ratings of the work done. What is rated as 9 by HR department might be a 4 for marketing department. And managers are often accused of ‘tunnel vision’ as they try to talk actions according to what is best for their department and not for the benefit of entire organisation.
  2. Appraisals based on quantitative value may not provide full insights into the work done by employees as they as subjected to interpretation. 
  3. Self appraisal can not be a sole evaluator of performance as employees tend to overestimate or underestimate themselves. 
  4. Managers may make irrational judgement and have a bias towards certain employee which may create barriers to promotion for well deserved employees.
  5. Mangers may not look back at objectives set at the beginning of the year and this may lead to procrastination and feeling of laying back among employees as they are aware that their performance will not be checked. 
  6. Many managers think that positive appraisals should be rewarded in forms of bonuses which leads to burden on shareholders
  7. Appraisal is a continuous process, it can’t be finished one it has started, and if not updated from time to time, the old data can become outdated quickly and can not be relied upon.

In conclusion, performance appraisal is much more than just providing employees feedback. It helps manager analyse where the company stands, on both larger scale and zoomed scale. This helps them curate ways for the betterment of organisation in which all of its long term goals are achieved.

All of ths content is covered in Sir Owais’BT classes in detail crafted to perfection. His lectures are something you not only stream to cover your academic course but where you come to get lifelong lessons, learn about the ups and downs of life and how to cope with difficulties. He also covers the exam practice in his lecture which makes Mirchawala Hub Of Accountancy a one stop solution with a meticulously crafted work of excellence from it very experienced teachers.

Written by Roha Shahid, a student at Mirchawala Hub of Accountancy

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