Performance Management for Business Strategies
The corporate world is defined by processes and tools that help manage every aspect of a business in a bid to ensure that common goals are met. For most businesses, it’s either profits or productivity that outline the common goal which everybody is pursuing. And in all cases, both profits and productivity solely result from what we call ‘performance’.
Managing performance is key to ensuring that all stakeholders are responsible for meeting the company’s common goals of being productive and profitable. In simple terms, the business world calls this performance management.
What is Performance Management?
Performance management is a corporate management tool or philosophy, or it can even be a process that helps managers monitor and evaluate an employee’s work. Performance management aims to create a working culture that promotes performance among employees and encourages them to perform to the best of their abilities. Performance management is a way to ensure employees produce high-quality work every single time, repeatedly.
Some may say that performance management can also be described as a process to ensure that a set of activities and outputs are at par with the company’s goals. The term can also mean managing the performance of the entire organisation, certain departments, groups of people, or teams.
Why is Performance Management Important?
Apart from the fact that performance management is directly responsible for productivity and profits, it also plays a very key role in determining correct employee compensation based on their performance levels! This is because another aspect of performance management is also determining how much should an employee be paid after analysing all aspects of the work they delivered.
How is Performance Managed?
As previously mentioned, performance management is a process, a science, a philosophy, and in order to ensure that performance is correctly and fairly managed, companies regularly employ a performance management implementation cycle. This performance management implementation cycle is a framework that allows HRs to correctly implement and track the progress of managing employee, department or team performance across the organisation.
Performance Management Cycle
Define Roles
The first step in a performance management cycle is to define the roles of an employee. In this stage, the employee learns about their deliverables and is aided by their manager in setting up a clear performance path that is expected from them. Think of it as a roadmap that talks about how an employee is expected to match or improve their performance with every passing month.
Build Skills Needed
The next step in the performance management cycle is to help employees build their skills. These are the skills needed to perform at the highest level, and they need practice and guidance in order to totally be leveraged.
Monitor Performance
Once employees understand their deliverables and are armed with the skills needed. They can start off on their journey to deliver and perform. At this point, managers monitor employees' performance and provide them with real-time feedback in order to reduce wastage of time and resources.
Analyse Outcomes
Once a task is completed, managers then assess the overall performance of their subordinates. Sometimes the results are compared to previously set benchmarks, other times, the results are themselves used as benchmarks for future evaluation activities.
Reward
Finally, in order to ensure that employees keep performing at a pace that is beneficial to the company, they need to be fairly compensated. This is where rewards determination comes in and plays a key role in ensuring future performance levels as well. This step is also called performance appraisal, and most modern HRs depend on an HRMS to assist with this step.
Types of Performance Appraisals
Self-Appraisal
Self-appraisal, as the name suggests, requires employees to fill out a form rating themselves. These ratings can be spread on a scale of 1 to 10 and include questions that ask for the employee’s feedback about their own performance. Some questions can also be directed towards understanding how the employee feels working under their manager.
Peer Reviews
In this method, a survey conducted by the company involves peers rating each other on a range of topics. Peer reviews usually work to solve the problem of coordinated working or teamwork scenarios. Such reviews work well for team-based departments like insurance, banking, and manufacturing.
Manager’s Appraisal
In the manager’s appraisal methodology, a rating list is sent out to the manager, who then rates each employee individually. The manager also suggests areas of improvement and areas in which the employee excelled. The review is then sent to the employee to assess and make changes accordingly.
Appraisal By Objectives
Under this methodology, the manager and employee together define a set of objectives after both parties have deliberated over objectives that are achievable and challenging or profitable at the same time. The employee is then assessed against how many objectives they completed in a given timespan.
Behaviour Ratings
Behaviour ratings are a group of behaviour analysing ratings that are tagged under one umbrella. These ratings are used to classify an employee based on their behaviour. In some cases, these ratings are also used to determine if an employee is worth being promoted to a managerial position.
Cost to Value Ratio
Some departments are purely cost centres, like the learning and development department of a company. Appraising them against objectives or the revenue they generate is not possible since they are not directly involved in working under such functions. In such cases, companies use the cost to maintain such a department vs the value they are deriving from them. The value can be anything that the management deems fit.
Mediator Supported Appraisal
Finally, we have mediated appraisals. In such a scenario, a manager, a mediator, and the employee meet to discuss both the manager and the employee’s performance. The mediator is the true judge in such a scenario who also ensures there are no biased reviews being passed. Generally, such techniques are used to manage feuding employees and their managers.
Concluding
Managing employee performance can actually be a very time-consuming and tedious task. This is why most modern companies are using an HRMS to simplify the workflow. Hoshi HRMS is one such software that works by simplifying the workflows needed to record and manage employee performance on an HRMS. Reach out to us to know more.
Hoshi by Neural IT is a cloud-based software helping simplify daily HR tasks. Digitise your HR function & let Hoshi empower HRs to easily onboard new hires, track employee progress, and analyse data to support employee development and organisation.
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