The purpose of this paper is to review how management have an impact on employee performance. To do so, I will first review the performance management system, employee performance, its measurement and examine the relationship between performance management system with employee performance. I will conclude with the effectiveness of performance management on employee performance.
Employees are the resources and assets of an organization. According to Chan and Lynn (1991), the performance criteria should include profitability, productivity, market effectiveness, customer satisfaction and employee morale whereas talent management of Millar (2007) consists of planning, recruiting, performance, learning, career development, succession planning, compensation, measuring and reporting. The above perspective links employee performance to the organizational performance whereas Millar’s (2007) view argues the effectiveness of the company which should follow a proper hiring, training and rewarding process for the employees. (Gungor, 2011) says that organizations are finding ways to develop, motivate and increase performance of their employees. Therefore, organizations often invest in employees for effective performance management.
Organization’s need to figure out ways to identify, encourage, measure, evaluate, improve and reward employees at work. Therefore, according to Steves and Joyce (2000), performance management and appraisal systems plays an indispensable role in helping employees work at their best and organizations to reach their goals. Not only this but the impact of performance management depends on employees’ commitment and perception (Guest, 1999). Thus, performance management is a process for ensuring that employees be focused on their work and get engaged fully.
To build a comprehensive and complete performance system, it is necessary to comprehend employees’ experience and perception of performance management and appraisal system. If the employees are not happy with the performance management system, they would not see any value in it which would lead to decrease in organizational performance. Performance management is important as it makes sure that employees are working hard to achieve the organization’s goals and objectives. It sets expectation for employee performance and encourages them to work hard in accordance to the organization’s expectations. Macky and Johnson (2000) emphasizes that the importance of performance management system is on continuously improving organizational performance.
The relationship between performance management system and employee performance lies in three stages of performance management. Firstly, developing and planning which includes mission and individual objectives. Business needs to set up mission and objectives and then clarify individual responsibility and duty. The purpose of mission statement is to motivate staff towards some goal as Grant (2008) says motivation is a drive that holds one to act because human behavior is directed toward some goal. Motivated employees are found to be self-driven and independent in comparison to those who are less motivated. Besides this, individual targets and objectives allows one to be inclined with the organizations mission statement which would make the employees more engaged. Thus, the first stage of developing and planning performance is setting mission and objectives which would motivate employees to act by direction and thus, motivated employees are more engaged and involved in their jobs which is also called absorption. In addition to this, motivated employees are found to be more independent and better decision makers. Thus, leading to better employee performance.
The second stage involves managing and reviewing performance which involves a lot of activities. It involves observing and recording efforts and accomplishments followed by providing feedbacks and then training employee regarding performance. This stage involves and encourages the increase in communication within the organization so that employees become aware of not only the policies in the organization but also the rewards attached to successfully completing the given task. The increase in communication would help the employee become more adjustable and feel more comfortable in the working environment, thereby helping the employee contribute their own formulation. However, Cameron and McCollum (1993) found that employees tend to prefer interpersonal form of communication when they need more information on the ongoing process in the organization. According to Ainspan and Dell (2000), favorable communication has shown to increase job satisfaction and performance which would further lead to better performance of the whole organization.
Providing feedbacks qualitatively and quantitatively for judging individual and organization performance are imperative part in managing performance. Performance reviews can be regarded as learning events in which individuals can be encouraged to think about how and in which ways they want to develop (Teke, 2002). A lack in evaluation can lead to a diversion in effort because of the inaccurate self-evaluation. Thus, effective performance evaluation has the potential to enhance job satisfaction, engagement and motivation. The goal of performance evaluation is to improve performance of the employees and increase job satisfaction which is also further dependent on job training and development. Coaching improves an individual’s skills and knowledge so that it improves its performance leading to the achievement of organizational objectives .Employees feel more confident and comfortable when they know their duties and learn the materials that would be needed, how it must be collected and understood in performing the job. Thus, communication, collecting feedback and job training are the three factors in managing performance which done accordingly would improve employee performance and activity.
The third stage involves rewarding the performance which happens on the end of the performance period which include evaluating the employee performance based on accomplishments and skills and a discussion with other employees which is followed by the effectiveness of the whole process and its contribution to the whole organizational performance to allow changes and improvements to be made. An effective performance evaluation system is important in this process as it provides data needed for the administrative process. This system plays a key role in motivating people to utilize their abilities in pursuing the organization’s goals. Rewards represent important factor when it comes to influencing the behavior and the minds of the employees especially when it comes to financial appraisal. Basically, monetary incentives is a reward practice that links performance with pay and therefore could be used to alter less motivated behaviors and direct it with that of organizational goals and objectives. Thus, it consists of personnel development, evaluation and finally the rewarding activity. Incentives encourages the positive emotion of employees such as satisfaction and commitment. The impact of rewarding the performance has a direct influence of high levels of productivity and desirable working attitudes leading to an improved employee performance.
In conclusion, performance management is not only limited to making employees more focused towards their work to achieve company’s goals but also having an impact on employees’ performance. Moreover, each stage within the performance management have an impact and influence employee performance in a specific way respectively. Setting up clear goals for organization and employees could guide and give a way for the staff to work efficiently and effectively. In addition, it could motivate and make employees more committed to the job. Feedbacks and evaluation could point out the problems and solutions for the employees. Furthermore, continuous communication and training between manager and employees would bring more comfort to the employee making the employee more confident and more engaged. Communications bring the necessary updates to the employees so that performance quality is increased. Besides this, coaching helps build skills so that the problems would be minimized. Performance appraisals could be assumed as a tool to reward employees for their hard work as a method of appreciation.
To sum up, performance management system will lead to better employee performance