1 Introduction
Equitable Construction has recently seen expansion rise rapidly over the last few years. As a result, the Managing Director has expressed concern to the present practiced informal management systems within the workplace, as they are no longer fit for purpose within the larger facilitating organisation. In particular, there is no structured performance management system. The MD has also noted that a presumed impression of informal networks and favouritism resulting in others gaining rewards and promotions is tainting employee’s motivation & output. (Describe what the company model is)
This report is of the request of Equitable Constructions Managing Director to OM Construction Consultants (OMCC) to propose a Performance Management & Appraisal system.
OMCC will overview the difficulties and disadvantages that may be encountered & how they could be overcome, provide academic theories to practices & submit a fully considered Performance Management & Appraisal system suited to Equitable Construction requirements.
2 Performance Management
2.1 What is Performance Management
In accordance to Armstrong & Baron (1998), Performance Management is both an integrated and strategic approach to delivering positive results in a company though the improvement of performance and development of the capabilities of an individual or team.
Performance Management (PM) is a goal-orientate process that structures an organisation to maximise the productivity of individual employee’s, teams and thus the organisation. It is an essential attribute to the improvement and measurement of the workforce. Additionally, PM includes incentives through the accomplishment of set goals and corresponding incentive values so that the achievement can be understood and communicated (Giannetto, 2009).
Everyone within a company is involved within the PM system. Each part of the system, such as training, appraisal and rewards is integrated to support the continuation of company effectiveness & align with into overall vison and values. With this system, strategic goals are to be the focus of all the workers. In the event of an employee or team failing to achieve these goals, the requirement for rectification & support is alerted and documented (Pedersen, Smith & Austin, 2012).
The efficient performance management system supports motivation through the crystal-clear goal setting process, fair feedback provided by managers and by a strong consequence management.
Motivational theories such as Vroom’s expectancy theory are said to be incorporated within a PM system to positively motivate employees. (Iowa State University, 2003).
Robert J. Greene, CEO of Reward Systems Inc., said, “Performance management is the single largest contributor to organizational effectiveness. If you ignore performance management, you fail,” (Tyler, 2005).
2.2 The Psychological Contract
The Psychological contract can be reflected upon Equitable construction employee’s lack of trust and motivation between different parties due to pay rises. As said by Storey & Sisson (1993), a performance management & appraisal system helps construct the psychological contract to where it can be measurable through goal setting & align a group or individual focus so that it supports the core vison and value of the organisation.
The Psychological Contract, first identified by Argyris (1960) as the governed employment relationship to be more than just the formal contract. It is a hidden agreement been incorporated within the normal working contract for forever. It is not a written agreement between an employer and an employee but of an undisclosed list of actions that may be expected. Table 1 below describes some differences between a Formal & Psychological contract.
Table 1: Formal Contract & Psychological Contract Summary
As seen above, the formal contract details factual items, terms to which are agreed by the writing and signing of a contract. These items will have a set figure or description to what the employee will receive in return for working at that organisation. Whereas, the Psychological contract are built on mutual obligations, not agreed by both parties, unmeasurable and unwritten. Table 2 below shows the element of the Psychological contract.
Table 2: Elements within the Phycological contract (REF BELOW)
2.3 Performance Management Cycle
Figure 1: Performance management cycle
The PM cycle is split into five different segments. These segments are shown above and detailed below.
2.3.1 Planning
The ‘Planning’ segment within the PM cycle involves the setting of group and individual performance goals and expectations. This helps focus their efforts to align with the achievement of company objectives. It also predetermines the measuring technique that will be used to determine if the set goals / expectations are being met. General measures for planning a PM system can be seen in table 3 below.
Table 3: General Measures to be Accounted for in a PM System
2.3.2 Monitoring
‘Monitoring’ is the ongoing process to which the performance of an individual or team is fed back to them. It will incorporate their progress towards the set goals made within the planning process. The ongoing approach allows employees or work groups to work harder to achieve that goal but also alerts and identifies problems early so that they can be resolved.
2.3.3 Developing
This segment of PM is to increase the ability to perform through training, increased responsibility, the introduction of new skills through different tasks & improvement of work processes. The development of an individual or group can encourage and strengthen a performance and help employees be inline and comfortable with changes within the workplace. Whilst considering development, it should be noted that the performance is the result of capacity & commitment.
Capacity is made up of competencies, resources and opportunities. If an employee is missing or lacking these, the PM programme set will be unachievable. Table 5 below breaks down the makeup of capacity.
Table 5: Makeup of Capacity When Regarding Development
In terms of commitment, an employee must also want to meet or exceed the assigned work that gives value to the company. Methods of gaining employee commitment can be seen overleaf:
- Create goals that are reachable but require effort.
- Communicating to employee’s / teams on how they fit into the wider organisations vision and intermittent goals.
- Get the employee’s / representatives involved in the decision-making process
- Measure the performance and results through a credible measuring system that the employees understand and agree to.
- Involve employees when developing their performance plans
- Ensure a work climate that entails employees feeling valued
- Recognise achievements and formally / informally reward employees
Only after both the commitment from the individual and capacity is met, can the development of the team / employee improve.
2.3.4 Rating
‘Rating’ is the evaluation of a group or individual’s performance against the set performance plan. This section is also known as a performance appraisal. A performance will be summarised and recorded for review when planning the next performance plan. There are many ways a performance can be rated; each method generally has a different purpose and should be selected for each organisation. Table 6 below identifies some of the main rating methods.
Table 6: Performance Management Rating Methods
360-Degree Feedback Evaluation Method This rating method is one of the more popular methods within organisations. It is unlike the traditional appraisal system where feedback only comes from initial supervisors (22), and instead provides a multi-level evaluation from an internal and external view. A rating can come from senior managers, the individual themselves, team members, internal customers and external customers. This in effect immediately reduces or completely mitigates many of the common appraisal errors. (REF)
Rating Scale Method The Rating Scale Method is a performance rating method that rates employees against defined factors. All rating methods provide an overall rating but in the Rating Scale Method, more than one criterion is measured. The measurement of performance is done so against a scale, typically between 1-5. Each number will be associated to an adjective such as; 5 – outstanding, 3 – meets expectations & 1 – Needs improvement. The criterion considered are generally either job-related (performance goals) and personal characteristics.
Critical Incident Method This method will
Ranking Method
2.3.5 Rewarding
The last segments of the performance cycle provided the incentive and recognition of employees. As a group or an individual, their performance, using a reward shows their contribution to the companies’ mission. This can be done through a simple thank you or a financial incentive. The award programme set in the PM will dictate this.
2.4 PM Advantages, Disadvantages & Difficulties of Implementation
A PM system is used by some of the largest companies in the world e.g. Adobe, Tesco & Kellogg’s (Hearn, 2016), as it provides a company with huge benefits. However, a PM system can also induce some disadvantages to a company and be difficult to implement. Table 8 below outlines the advantages, disadvantages & difficulties in actioning a PM system.
Table 9: Advantages, Disadvantages and Difficulties of Implementation of a Performance Management System
Advantages / Disadvantages
- Performance Based Conversations Time Consuming
- Targeted Staff Development Discouragement
- Motivator for Staff Inconsistent Message
- Remuneration for successful employees Biases
- Under-performers Identified Flawed Conditions and Standards
- Document History of Employee Performance Deficient in management expertise
- Progression of Employees
- Enhances company and individual performance
3 Performance Appraisal
3.1 What is Performance Appraisal
Whereas PM is a dynamic, ongoing, continuous process, Performance Appraisal (PA) occurs at a specific time. The PA system is a formal review and evaluation of a team or individual on their performance. The formal review process is diff