The Impact of Performance Management on Employee and Organizational Performance

 

 

(Chirantan, 2020)

Given the highly competitive global market in which organizations operate, the need to develop and retain highly skilled employees has become paramount to survival and success. One approach highly advocated to develop employees is performance management (PM) (Brown et al., 2018)

Performance management is defined as identifying, measuring, and developing the performance of employees and teams and aligning it with the organizational goals and objectives (Aguinis, 2013). According to Samwel (2018), performance management is a process of directing and ensuring that organizational processes are directed toward the maximization of employees' productivity. Furthermore, Briscoe & Claus (2008) say that performance management is the system through which organizations set goals, determine performance standards, assign and evaluate employees' work, determine training and development needs of employees, and distribute rewards to employees.

The focus of performance management is recognition, constructive feedback, personal development, and career opportunities (Armstrong & Baron, 2005). According to Costello (1994), the objective of performance management is to support the organizational goals by linking the work of each employee or manager to the overall mission of the work unit. Regardless, PM is a vital factor for the success of an organization as it clearly conveys to employees their desired goals, objectives, and targets and helps them achieve them (Qureshi & Hassan, 2013). It shifts the focus away from an annual event to an ongoing process (Bruce, 2014). A study conducted by Newstrom (2011) stresses that performance management systems should be reviewed regularly to keep them in line with the international trends of being more responsive to clients' needs. Performance management systems typically include performance appraisal and employee development, involve multiple levels of analysis, and are clearly linked to strategic human resource management and performance appraisal (Hartog , et al., 2004)

 

Performance Management and Employee and Organizational Performance

From an organizational point of view, performance is defined as the extent to which an employee contributes to achieving the organizational goals and objectives. Performance management and employee performance are correlated. According to Qureshi & Hassan (2013), performance management systems motivate employees to perform well, improving their performance and productivity. Another study conducted by the Institute of Personnel Management (1992) state that many managers agree that performance management makes a significant difference at individual and team level and helps interpret and evaluate organizational roles. Furthermore, a study conducted by Vignaswaran (2005) concluded that performance appraisal positively impacts work performance and organizational commitment while negatively influencing turnover intention.  

By improving employee performance, performance management can also improve overall organizational performance. A study conducted by Campbell & Garfinkel (1996) found that organizations that have effective performance management processes outperform those without such systems on several fronts, including profits, cash flow, and stock market ratings. Similarly, Bernthal et al. (2003) discovered that organizations with strong performance management systems in place are 51% more likely to outperform their competitors on non-financial fronts, such as customer satisfaction, employee retention, and quality of products and services. Furthermore, a study conducted by Idemobi & Onyeizugbe (2011) discovered that the absence of performance management systems would lead to higher rates of business failure.

 

Conclusion

Effective performance management is crucial to align employees, resources, and systems to meet organizational goals and objectives. It also helps boost employee motivation, performance, and productivity. Thus, many organizations in the current competitive business environment rely on effective performance management systems to review the performance of their employees and determine their position in terms of performance.

 

References

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Bernthal, P., Rogers, R. & Smith, A., 2003. Managing performance: building accountability for organizational success. Development dimensions international.

Briscoe, D. B. & Claus, L. M., 2008. Employee performance management: policies and practices in multinational corporations, performance management systems: a global perspective.

Brown, T. C., O'Kane, P., Mazumdar, B. & McCracken, M., 2018. Performance management: a scoping review of the literature and an agenda for future research. Human resource development review, 18(1).

Bruce, J. R., 2014. Risky business: how social psychology can help improve corporate risk management. Business Horizons, 57(4).

Campbell, R. B. & Garfinkel, L. M., 1996. Performance management strategies for success. Human resource magazine, pp. 41-98.

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Hartog, D., Boselie, P. & Paauwe, J., 2004. Performance management: a model and research agenda. Applied psychology: an international review, 53(4).

Idemobi, E. I. & Onyeizugbe, C., 2011. Performance management as an imperative for effective performance in Delta State of Nigerian public-owned organizations. Sacha Journal of Policy and Strategic Studies, 1(2).

Institute of Personnel Management, 1992. Performance management in the UK: an analysis of the issues. London: Chartered Institute of Personnel & Development.

James O. Samwel, 2018. An assessment of the impact of performance management on employee and organization performance - evidence from selected private organizations in Tanzania. International journal of human resource studies, 8(3).

Newstrom, J., 2011. Organizational behavior: human behavior at work. 14 ed. Boston: McGraw Hill.

Qureshi, A. & Hassan, M., 2013. Impact of performance management on the organizational performance: an analytical investigation of the business model of McDonald's. International journal of academic research in economics and management sciences, 2(5).

Vignaswaran, R., 2005. The relationship between performance appraisal satisfaction and employee outcomes: a study conducted in peninsular Malaysia. [Online]
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