8.1 Performance Management Systems

A performance management system is an integrated set of processes aimed at helping employees contribute to organizational effectiveness. At their core, these systems involve the assessment of individual performance.  A good plan aligns the company goals with the employee goals. To ‘manage performance,’ the first thing to do is find out who does what and how well they do it. After this information is collected, HR managers can feed the data in various systems to help the employee and improve the organization in general. Some of these processes include compensation, employee development, and employee records.

Performance management is an important HR process because it goes to the essence of HR (employee performance) and relates to every other HR process. For example, to understand whether or not the design of a job is efficient you use the performance of employees as data. If you want to see whether your new interview protocol is suitable you look at whether candidates who score well on it also become superior employees. For training, you can base your needs analysis on performance appraisal data to target who requires training. Performance data is essentially the bloodline of HR—it flows through every HR system.

Some researchers suggest that the performance appraisal system is perhaps one of the most important parts of the organization (Lawrie, 1990), while others suggest that performance appraisal systems are doomed and should be abolished (Derven, 1990), making them worthless. One of the most interesting (and thorny) facets of performance management systems is that, while very important, they are also very much disliked by employees and managers. The reality is that not everyone likes to be evaluated and ‘judged’. As a result, managers are often not comfortable evaluating (and judging) their employees because it can strain relationships. This makes performance management difficult for HR managers to manage: it is very important, and the organization needs the information, but people hate it! In a survey of the Society of Human Resource Management (2014), HR Professionals’ Perceptions About Performance Management Effectiveness, HR professionals were asked their opinions on their organizations’ performance management systems. These professionals almost unanimously agreed that this process was a top priority for their organizations, but at the same time, more than half rated their own system ‘C+ to B.’

This is not to say that successful performance management is not possible, just that it requires careful consideration, design and implementation. In this chapter we will explain how to design such a system in order to maximize the contributions of employees and raise the effectiveness of the organization.

“8.1 Performance Management Systems” from Human Resources Management – 3rd Edition by Debra Patterson is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.