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Comprehensive Overview of Key Methods Used in Performance Management

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Grades are an essential part of almost every university class. What would happen if there were no grades ? Would your individual performance improve or decline? Similar issues take part between employees concerning their performance. Performance management involves assessing and communicating employee contributions. Rating employees’ performance is similar to giving them grades. In the employment context, important questions include the following : Do employees improve their performance when their contributions to the organization are measured? Is it helpful to give feed- back so that employees know how they are doing? Does effective measurement of individual contributions help in improving organizational performance?

Measuring performance and giving feedback does indeed improve employee performance. And improvements in individual performance trans- late into better organizational performance. Organizations have higher productivity when top management encourages supervisors to set goals, assess performance, and provide feedback to employees.One reason is that trust in management increases when performance is accurately measured and adequately rewarded. It can, in fact, play a major role in providing for an integrated and coherent range of human resource management processes which are mutually supportive and contribute as a whole to improving organizational effectiveness.

Performance Management Systems

Performance management systems involve numerous activities, much more than simply reviewing what an employee has done. These systems must fulfill several purposes. Moreover, they’re often constrained by difficulties in how they operate. It is a way to get better results by understanding and managing performance within an agreed framework of planned goals, standards and competency requirements. A system that helps in measuring and evaluating the connection between the efficiency of the work performance and the duties and responsibilities of the job it occupies , in a way that helps to identify the strengths and weaknesses in the past performance and determine how it’s possible to avoid the weaknesses and invest the strengths at the present and in the future .

Aims of performance management

Monitoring and evaluating individuals and organization performance is an essential part of handling human capital . It has several key aims.

  1. Identifying the learning/development and performance enhancement needs of individuals
  2. Identifying challenges or performance obstacles which require intervention
  3. To identify people with potential for future promotion, supporting succession planning
  4. Providing the basis for incentive decisions: qualifications for results-related rewards, competency-related promotions, merit awards and so on.
  5. Improving contact between managers and team leaders on job problems, success and growth opportunities.

How Is Performance Management Strategic?

Although identifying high and low performers is an important part of performance management , it might not be the best approach for other organizations. In some cases, encouraging people to stand out from the crowd may discourage teamwork and harm employee motivation. Like other HR practices, then, performance management practices are most effective when aligned with an organization’s competitive strategy.

Emphasizing Either Merit Or Parity

Organizations tend to follow one of two approaches in measuring performance . Some organizations create a merit-based climate that emphasizes performance differences among employees. In other organizations, the system encourages parity, or a sense of equality, among employees.

Merit-Based Systems

The basic objective of a merit-based system is to create and recognize high performance in order to achieve superior outcomes. This is the approach with the underlying purpose of performance management being to encourage employees to perform at the highest possible level. Employees who produce the highest outcomes, or results, are given high marks. this is usually done through the use of relative measures that compare employees with each other. Success at work is defined not just as meeting a certain standard but as doing better than others. With a merit-based system, managers are also frequently required to place a certain percentage of employees in each rating category, which is called a forced distribution. Only a few can be given the highest rating, and at least some must be given the lowest rating. In summary, merit-based systems focus on bottom-line results and use relative measures and forced distributions to ensure that high and low performers are clearly identified.

Parity-Based Systems

The basic objective of a parity-based system is to encourage cooperation and allow everyone who meets a certain standard to be classified as a high per- former. Parity-based performance measures frequently focus on processes rather than outcomes. High performance is defined as following guidelines and performing behaviors assigned by supervisors. This usually involves absolute measures that compare employees with an established benchmark rather than with each other. Most parity-based systems also adopt a free distribution, which allows any percentage of employees to be placed in a particular category. For example, any employee who assembles a certain number of cell phones without error can be given a top performance rating, regardless of how many cell phones others assemble. Every employee can thus be a top per- former. In general, parity-based performance systems do not separate people into categories of high and low performance but rather encourage all employ- ees to perform above a certain standard.

Functions of Performance Management

The performance management is especially concerned with individuals , processes, and organizational performance . To achieve this objective performance management performs a spread of functions.

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• Create Healthy Work Environment:

HR or performance manager works with the employees, Their aim is to create an environment of openness, trust, mutual affection , team spirit and collaboration . In this environment only the manpower can be utilizing more effectively to contribute to organizational goals. They create environment with the support of HR policies, day to day dealing, welfare, promotion, discipline, incentives, training etc. It creates confidence in individuals to work without worry.

• Develop Performance Plans:

Management goes for planning of the job, competencies needed to perform the roles and standards required for performance of the jobs. It includes job description, job specification and fixation of job performance standard. Through these plans it is possible to determine the individual’s type required can be ascertained.

• Selection of Appropriate People:

It is important to carry out the different styles of people to do various types of jobs in the organization . The required type and number of people are to be selected from the aspirants. In order to perform the tasks at the appropriate time, they should be at the right location in the right time. This can be accomplished by proper training and selection of employees.

• Decision Regarding Performance Standard:

Performance management as a function of human resource management, management takes decision regarding the appropriate standards of the performance in consultation with top level management, head of departments and experts or consultants.

• Plans for Development of Employees:

Performance management is involved in the development of both employees and organization. It conducts orientation of the persons, provides education, and finds out the need for training and conduct training program for development of skills, knowledge and competencies. This can help in improvement of the performance of employees and company.

• Measurement of Performance:

After planning and development activities the following 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, behavior, discipline, level of commitment etc. This helps to find out the poor and good performers out .

• Conducts Performance Feedback:

After measurement of performance of all employees the management finds the slow moving persons. The aim of performance management is to figure out why they’re going slow. They hold coaching sessions for these individuals and give them feed back. They propose ways of improving their performance, too. It helps the individuals a lot to understand their abilities and difficulties. Through the coaching and counseling session the attitude of the employees is changed positive.

Methods of Performance Appraisal

There are a number of methods that are used to evaluate employee’s performance. It may be evaluated on the basis of his traits and attributes as well as on the basis of his work or results and objectives achieved by him. Thus his performance may be measured in terms of standards of his traits and general behavior on the job or in terms of results and goals. Some of the common techniques are given below:

Individual Appraisal Methods

  1. Rating scale
  2. Checklist method
  3. Forced choice method
  4. Critical incident method
  5. Field review method
  6. Performance test and observation method
  7. Annual confidential reports (ACR)

Group Appraisal Methods

  1. Factors and points method
  2. Ranking method
  3. Paired comparison method
  4. Forced distributions

Other Methods Including MBO System

  1. Self-appraisal
  2. Appraisal by results or management by objectives (MBO) approach
  3. 360o Performance appraisal
  4. Behaviorally anchored rating scales (BARS)
  5. Cost accounting method

Traditional and Modern Methods:

  1. The traditional methods are almost similar to individual and group appraisal methods.
  2. Outcomes of Performance Management:

Financial Gains: Financial gains from performance management are following:

  1. Improve productivity and production of the company.
  2. Reduce costs due to honest and skilled employees .
  3. Complete the projects well in time because everyone is giving his best performance at work.
  4. Align the priorities of the company and individuals that avoids all delays in performance.
  5. Through proper and timely communication, the objectives are clarified , and desired action can be accomplished by employees .

Non-Financial Gains: Non-financial gains from performance management:

  1. Healthy working atmosphere avoids work stress of the employees .
  2. Optimizes incentive plans to reach specific targets, not just business as normal.
  3. Employees feel satisfied when the working environment is friendly.
  4. Employees get opportunities for further career development, training and promotion etc.
  5. A sense of belongingness, attachment and commitment develops among employees.
  6. It leads to a high degree of motivation in employees and also generates a sense of commitment towards the organization.
  7. Individuals recognize the value of their positions, and are committed to contributing to the organizational objectives.
  8. Create transparency in approach and dealing among employees.
  9. High confidence in organization and its different processes like salary, bonus, promotion etc.

Effective Management Control

  1. Responsiveness to management needs and performing the tasks.
  2. Displays better data relationships
  3. Helps comply with inspection, audit and other regulatory requirements.
  4. Simplifies communication of strategic goals and gets involvement of lower level employees too.

Effects of Positive and Negative Feedback.

Positive feedback increases motivation when it is linked to future goals. Positive feedback, then, creates a sense of accomplishment that encourages sustained effort as long as employees have goals that provide them with the opportunity to further excel. Employees who perceive negative feedback as criticism become less motivated and more likely to experience conflict with others. The basic problem is that people become defensive when they hear that they are not performing as well as expected.

The initial reaction of employees who have received negative feedback is to increase their effort. But they will continue to put forth greater effort only if they experience success or believe that success is likely. In other words, negative feedback only improves performance when people are confident that they can do what is necessary to improve.Building confidence and helping people see that they have the skills necessary to improve is therefore one important consideration in making sure that negative feedback improves performance.

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Comprehensive Overview of Key Methods Used in Performance Management. (2023, February 01). Edubirdie. Retrieved September 22, 2023, from
“Comprehensive Overview of Key Methods Used in Performance Management.” Edubirdie, 01 Feb. 2023,
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Comprehensive Overview of Key Methods Used in Performance Management [Internet]. Edubirdie. 2023 Feb 01 [cited 2023 Sept 22]. Available from:
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