A model of performance management
While we cannot tap into a universal model of performance management, most models depict it as a cyclical process with a common set of elements.137 These elements (figure 6.2) include:
• setting clear performance objectives derived from the organisation’s strategy and the department or business unit’s purpose
• conducting informal and ongoing management of performance, using a range of appropriate management styles such as mentoring, coaching, directing and providing feedback
• formally monitoring, measuring and reviewing outcomes and providing feedback on results to employees, often using a performance appraisal and management system
• identifying training and development needs, and rewards linked to individual or team outcomes, to reinforce new behaviours.
• setting new objectives and activities
• feedback loop into the strategic and change objectives.
FIGURE 6.2: The performance management process
To ensure a performance management system operates effectively to leverage a desired change, its objectives should be clearly communicated. Effective performance management requires total commitment from senior management from its development through to imple¬mentation and use of the system. To engender ownership of the-system, all levels of the organisation should have input into the planning, design and implementation. Acceptance of any performance management system is more likely when employees understand the need for its introduction, participate in its development and are aware of how it will affect them, and are trained in its use. It is important that employees representing a variety of functions, including HRM professionals, legal representatives, union representatives, senior and line management and system users, are involved so the essential strategic and operational issues are addressed, These issues may include the business strategy, employee involvement and equity, workplace technology and work design. Furthermore, the performance management system must suit the culture of the organisation. It is not possible to design ‘a one size fits all’ system, especially in larger and more complex organisations. Different solutions are required for different groups of employees and must be integrated with the way in which employees actually work, the way in which work is managed and the value that those employees produce.
Performance appraisal
The appraisal of individual performance is a central component of the performance man¬agement process. Performance appraisal is the assessment or review of an individual’s past performance, usually against set objectives, and the setting of future performance objectives. It should include the identification of development/training needs. It may be used as a basis to determine rewards or bonuses. This process usually involves conducting appraisal interviews on a regular basis, at which staff have the opportunity to discuss their performance ratings and related issues (such as training or career development needs) with their immediate line manager.138 To enhance both ownership of the system and the employees’ commitment to its goals, the formal appraisal interview or review should be a participative process, with both the employee and the employer involved in appraising performance and setting future goals. Information on performance needs to be accurate so employees can determine whether their performance is above or below set targets. Fur-thermore, the performance measures and decisions need to be accepted by the people who use them, to assist commitment to the system. Locke and his colleagues assert that know¬ledge of the results is likely to motivate employees towards higher performance and acceptance of goals.139 To ensure they retain their motivation potential, goals should be challenging but realistic and achievable. Goals also need to be specific rather than general, and employees should have access to the appropriate resources (such as time and equip¬ment) and the appropriate context in which to achieve the goals.140
When a performance management system is operating effectively, communication regarding performance is an ongoing component of day-to-day management. Informal individual performance feedback should occur on a regular basis where necessary, and con¬tingencies affecting performance should be addressed as they arise, through counselling, coaching or other communication with supervisors. Further, when performance feedback is continual, the discussions of pertormance levels and achievement in the formal part of the appraisal or review process should present no surprises for either the appraiser or the appraisee. The success of these activities will depend on the commitment and competency of the manager to handle the range of complex issues involved in people management.
Traditionally, performance appraisal and the review process have involved one-to-one communication between the subordinate and their superior. Apart from the errors that can occur when one person rates another, many researchers comment on the tension between the manager's role in judging the employee’s contribution, value, capability and potential, and providing counselling and support for developmental purposes.141 A move towards a participative discussion based on the employee’s self-review has the advantage of enhancing the counselling component and reducing the judgemental aspect of the appraisal.142 This approach can help to deliver behavioural and cultural change where the desire is to create a more open and trusting and committed workforce. But these systems must be implemented and managed appropriately. The quality of the management is an important variable in the success of their operation. Purcell argues that doing appraisals badly is much worse than having no appraisal system at all.143 And without acceptance of the system, the change objectives for the system are dissipated. As levels of employee autonomy and discretion increase, however, there has been a rise in the use of performance appraisal as a control mechanism.144 A number of researchers warn against an excessive focus on control or manipulation of the use of the system to reinforce power over employees.145 (This issue of the use of power and control is addressed in later chapters.)
Some organisations have introduced new approaches to complement the measure¬ment and evaluation of performance to alleviate the criticisms of perceived negative feedback and possible bias as well as providing depth of information. These include a balanced scorecard approach to measuring the performance of human resources, 360-degree feedback, used at the Victorian Department of Justice and for senior manage¬ment at Coles Myer, and the open approach used by Sinclair Knight Merz Group (illustrated in the ‘Perspectives’ box, page 210).146
360-degree feedback
Multirater or 360-degree feedback is based on multisource feedback on the perceptions of a person’s behaviour and the impact of that behaviour. This feedback can be gleaned from subordinates, peers, supervisors, internal and external customers, and the employees themselves. These systems can be used as a tool in leveraging participation and involvement in a move towards high performance and other behavioural change efforts. This approach is premised on the view that the challenges facing today's employees and organisations can be better met through more complete feedback from a wide range of people who interact with the employee. It can lead to higher quality per¬sonal and professional development, enhanced learning and personal behavioural change. In addition, multirater systems are intended to help change the culture of the organisation, achieve goals, clarify requisite behaviour, enhance team effectiveness and provide assessment beyond the normal hierarchical relationship.147 Successful use of 360-degree feedback requires an open, participative and supportive environment, how¬ever, rather than a command-and-control environment.148 Many Australian companies use this approach as part of their performance management systems and to support their human resource development and succession planning objectives.149 Other organisations use the process with a much more specific change agenda. Following a merger with Caltex, Ampol introduced a 360-degree feedback system as one of several steps to reinforce organisational core values and develop a new ‘one company’ culture.150 As with other appraisal systems, 360-degree feedback is not without its critics. Some writers warn that these systems should be used for feedback for development and motivation purposes only, not for making judgements for rewards such as pay.151
Finally, it is vital that a pilot test and evaluation of any new system, employing feedback from all users, regardless of its type, is conducted before it is fully adopted or amended. Training in the use of the performance management system and its components, for both appraisers and appraisees, also is essential. Furthermore its use must be consistently mon¬itored to ensure its relevance, to ascertain that there is a balance between the costs and the benefits of the system, that results are fair, accurate and related to performance — that is, to ensure the system is achieving its stated objectives for change.152