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|Management of a business|
Performance management (PM) is a process of ensuring that set of activities and outputs meets an organization's goals in an effective and efficient manner. Performance management can focus on the performance of an organization, a department, an employee, or the processes in place to manage particular tasks. Performance management standards are generally organized and disseminated by senior leadership at an organization and by task owners, it can include specifying tasks and outcomes of a job, providing timely feedback and coaching, comparing employee's actual performance and behaviors with desired performance and behaviors, instituting rewards, etc.
Performance management for business is defined as a "strategic and integrated approach to increase the effectiveness of companies by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors."
Performance management principles are used most often in the workplace and can be applied wherever people interact with their environments to produce desired effects—schools, churches, community meetings, sports teams, health settings, governmental agencies, social events, and even political settings.
Managers use performance management to align company goals with the goals of teams and employees in an effort to increase efficiency, productivity, and profitability. . Performance management guidelines stipulate clearly the activities and outcomes by which employees and teams are evaluated during performance appraisal.
To apply performance management principles, a commitment analysis is completed first to create a mission statement for each job. The mission statement is a job definition in terms of purpose, customers, product, and scope. This analysis is used to determine the continuous key objectives and performance standards for each job position.
Following the commitment analysis is the work analysis of a particular job in terms of the reporting structure and job description. If a job description is not available, then a systems analysis is completed to create a job description. This analysis is used to determine the continuous critical objectives and performance standards for each job.
Werner Erhard, Michael C. Jensen, and their colleagues developed a new approach to improving performance in organizations. Their model is used to stress how the constraints imposed by one's own worldview can impede cognitive abilities that would otherwise be available. Their work delves into the source of performance, which is not accessible by mere linear cause-and-effect analysis. They assert that the level of performance people achieve correlates with how work situations occur to them and that language (including what is said and unsaid in conversations) plays a major role in how situations occur to the performer. They assert that substantial gains in performance are more likely to be achieved by management understanding how employees perceive the world and then encouraging and implementing changes that make sense to employees' worldview.
Benefits of performance management
Managing employee or system performance and aligning their objectives facilitates the effective delivery of strategic and operational goals. Some proponents argue there is a clear and immediate correlation between using performance management programs or software and improved business and organizational results. In the public sector, the effects of performance management systems have differed from positive to negative, suggesting that differences in the characteristics of performance management systems and the contexts into which they are implemented play an important role to the success or failure of performance management.
For employee performance management, using integrated software, rather than a spreadsheet-based recording system, may deliver a significant return on investment through a range of direct and indirect sales benefits, operational efficiency benefits and by unlocking the latent potential in every employees work day (i.e., the time they spend not actually doing their job). Benefits may include:
- Direct financial gain
- Grow sales
- Reduce costs in the organization
- Stop project overruns
- Aligns the organization directly behind the CEO's goals
- Decreases the time it takes to create strategic or operational changes by communicating the changes through a new set of goals
- Motivated workforce
- Optimizes incentive plans to specific goals for over achievement, not just business as usual
- Improves employee engagement because everyone understands how they are directly contributing to the organizations high level goals
- Create transparency in achievement of goals
- High confidence in bonus payment process
- Professional development programs are better aligned directly to achieving business level goals
- Improved management control
- Flexible, responsive to management needs
- Displays data relationships
- Helps audit / comply with legislative requirement
- Simplifies communication of strategic goals scenario planning
- Provides well documented and communicated process documentation
In organizational development (OD), performance can be thought of as Actual Results vs Desired Results. Any discrepancy, where Actual is less than Desired, could constitute the performance improvement zone. Performance management and improvement can be thought of as a cycle:
- Performance planning where goals and objectives are established
- Performance coaching where a manager intervenes to give feedback and adjust performance
- Performance appraisal where individual performance is formally documented and feedback delivered
Other organizational development definitions are slightly different. The U.S. Office of Personnel Management (OPM) indicates that Performance Management consists of a system or process whereby:
- Work is planned and expectations are set
- Performance of work is monitored
- Staff ability to perform is developed and enhanced
- Performance is rated or measured and the ratings summarized
- Top performance is rewarded
Many people equate performance management with performance appraisal. This is a common misconception. Performance management is the term used to refer to activities, tools, processes, and programs that companies create or apply to manage the performance of individual employees, teams, departments, and other organizational units within their organizational influence. In contrast, performance appraisal refers to the act of appraising or evaluating performance during a given performance period to determine how well an employee, a vendor or an organizational unit has performed relative to agreed objectives or goals, and this is only one of many important activities within the overall concept of performance management.
At the workplace, performance management is implemented by employees with supervisory roles. Normally, the goal of managing performance is to allow individual employees to find out how well they had performed relative to performance targets or key performance indicators during a specific performance period from their supervisors and managers.
An organization wide 360 process that is integrated into its culture can be a powerful tool for communicating and instituting change, rapidly touching all members of the organization when new markets, strategies, values and structures are introduced into the system
Organizations and companies typically manage employee performance over a formal 12-month period (otherwise known as the formal company performance period).
The results of performance management exercises are used in:
- Employee development planning to select the most appropriate and suitable development intervention to improve employees' knowledge, skills and behavior
- Factual basis for compensation and rewards (pay raise & bonuses being the most common)
- Factual basis in consideration with other factors for mobility (Example: transfers and promotions)
- Behavioral systems analysis
- Operational performance management
- Organizational behavior management
- Performance measurement
- Stack ranking
- Strategy Markup Language and particularly StratML Part 2, Performance Plans and Reports
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- The Values-Based Safety Process: Improving Your Safety Culture with Behavior-Based Safety, Terry E. McSween. John Wiley & Sons. 1995.
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- Managing for Performance, Alasdair A. K. White. Piatkus Books, 1995