ADVANTAGES AND DISADVANTAGES OF PERFORMANCE MANAGEMENT SYSTEMS . 18

The advantages of a well-run performance management system versus a poorly conceptualised and managed performance management system are summarised in the table below (Aguinis, 2013).

TABLE 2: EFFECTIVE VS INEFFECTIVE PERFORMANCE MANAGEMENT SYSTEMS

Advantages of an effective performance management system

Implications of a poorly run performance management system

• Managers gain insights into their employees;

• Increased clarity around job descriptions and task criteria;

• Motivation to perform is increased especially when linked to development planning;

• Opportunities to increase self-esteem are created;

• Employee self-insight and own development opportunities are increased;

• Opportunities for fairer and more appropriate administrative actions are increased;

• Organisational goals and divisional objectives are made clear;

• Increased likelihood of improvements in range and depth of employee competences;

• Employee misconduct is minimised (shared understanding of expectations);

• Better protection from lawsuits;

• More accurate distinctions between good and poor performers;

• Organisational change is facilitated;

• Employee retention is increased as a result of increased motivation and commitment;

• Employees are encourage to voice their suggestions which creates improved knowledge sharing and innovation; and

• Employee engagement is enhanced (empowerment and passion).

• Process is perceived as unfair and discriminatory leading to increased employee turnover;

• Inaccurate information leading to misleading evaluations;

• Poor feedback leading to lowering of self-esteem;

• Poor design and inefficiencies leading to wasted time and money;

• Deficient systems leading to damaged relationships;

between management and employees (often permanently);

• Perceived mismatch between increased performance and reward/recognition leading to decreased motivation to perform;

• Unrealistic demands leading to employee burnout and job dissatisfaction;

• Unfair appraisals increasing the risk of litigation;

• Unjustified demands on managers' and employees' time or resources;

• Unfair standards and ratings in general leading to loss of confidence in management's ability to implement the system;

• The replacement of organisational standards with personal values, biases and favouritism; and

• Poor communication especially in terms what the ratings are used for.

(Aguinis, 2013:4-10)

© Regenesys Business School 19 The most significant differences between effective performance management systems and poorly conceived performance management systems centre around the concepts of:

• Congruency (compatibility) and integrity (reliability) of the whole;

• Clarity and transparency;

• The focus on engagement (commitment) of the employees; and

It could also be argued that performance and engagement are inseparable – when employees are engaged they are performing and vice versa?

Read the next journal article, in which the authors research practical ways to overcome specific performance measurement challenges.

Jääskeläinen, A., and Laihonen, H. 2012, 'Overcoming the specific performance management challenges of knowledge intensive organisations', International Journal of Productivity and Performance Management, 62 (4), 350-363.

Task Questions

1. Based on Davenport's (2008) definition of a knowledge worker given in the opening paragraph of the journal article, identify examples of knowledge workers in your organisation.

2. Discuss why the performance of knowledge workers is a key challenge particularly in relation to measurement.

In this opening section we have attempted to point out some of the competing views on performance management. We have also highlighted some of the dangers of ill-conceived performance management systems. However, significant advantages may be achieved through a strategically effective and efficient system. Sustained competitive advantage is possibly derived from above-average performance and at the heart of this are the employees.

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7.1.5 Thinking Systemically about Performance Management

To understand the performance management system you cannot look at each part in detail because some properties only emerge when they are combined together. For example, if we want to understand performance appraisal (eg the effect of this activity) we can only understand this by considering all the constituent parts. We need to look at the job description, the coaching and feedback that have taken place, in other words the whole employee tenure (across all his or her responsibilities) for the period under review.

Also consider that every employee in the system brings to the system their understanding of its purpose and their view of the world. This view consists of several elements – rational, emotional and cultural perspectives. To understand these views requires an understanding of organisational behaviour. We encourage you to draw, and reflect, on learning from your other modules, specifically from organisational behaviour and leadership.

The components of the system continually interact and create a reciprocal flow of influence. We could say that if an employee receives poor or inappropriate feedback (eg not consistent with the culture of the organisation), his or her motivation to perform may be impaired. This, in turn, will induce poorer performance and detachment from the purpose of the organisation.

• A performance management system is a complex and dynamic combination of several factors, which should not be seen in isolation;

• Systems nest within systems and these interrelationships should be understood (eg the performance management system is nested within the cultural system of the organisation and those of its employees); and

• To be effective, the purpose of the system (whole) must be evident (even though the system is dynamic).

Given the importance of systems thinking it is useful to identify common parts of performance management systems in terms of their purpose. It is important to reflect on the interplay of these parts. This is shown in Figure 1 below.

Each of the parts (seven in this particular framework) has a purpose or plays a role in the system:

• Strategic

• Onboarding

• Administrative

• Information

• Development

• Organisational maintenance

• Documentation

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FIGURE 1: PERFORMANCE MANAGEMENT SYSTEM – PURPOSES

(Adapted from Aguinis, 2013)

At the centre of the system are the values and culture of the organisation, which transcend into each component of the performance management system. For example, an organisation that values an innovative culture will reflect these values in the processes that make up the performance management system (eg onboarding will have an innovation requirement, etc).

From a strategic perspective, the performance management system must be aligned to the strategic choices made by the organisation. This means that employees must know the overarching objectives of the organisation. They must also know how these objectives cascade to their division (team), and how each team member, is expected to individually and corporately contribute toward these. Similarly, they must also know how they will be measured.

Onboarding means the transitioning of new employees from outsiders to participants in the sustained performance of the organisation. The performance management system must provide the catalyst for change, ie to behaviours and results that are valued and rewarded in the organisation. This, in turn, would lead employees to understand the organisation's culture and what it values.

Performance Management System (Values/culture)

Organisational objectives

purposes

Onboarding purposes (new employees)

Administrative purposes

Information purposes Developmental

purposes Organisational

maintenance purposes

Documentation purposes

© Regenesys Business School 22 Administrative purposes include all those processes that relate to remuneration, rewards, promotion, retention, or termination. The link to administrative processes is to ensure fairness (eg avoid favouritism) and evade unethical practices such as corruption and bribery. It is fuelled by legislative demands and ethical considerations.

At the heart of a performance management system is communication – it tells employees how they are doing and how they can improve. The expectations are set by the job description and prioritised in terms of the strategic objectives.

Aguinis' (2013) term "developmental purpose" refers to the combination of feedback and coaching by using a culture of support (non-threatening) that is focused on helping employees to interpret the feedback both in the context of their jobs (ie organisational performance) and in terms of their career paths (ie short- and long-term).

Organisational maintenance refers to the planning efforts required to ensure that the organisation has the right people, in the right place, doing the right things, at the right time. This includes the knowledge and skills required in terms of the strategic objectives and the processes to nurture these (ie sustained competitive advantage derives from internal resources and capabilities). An effective performance management system will alert management to training initiatives. Organisational behaviour will, where necessary, change requirements.

Documentation purpose refers to data collection that informs other systems. For example, performance data can facilitate decisions around the selection of new production systems, or new employment selection criteria.

The performance management system proposed by Aguinis (2013) demonstrates the need to step back and critically reflect on the reasons why a performance management system is required and how each element contributes to the whole.

© Regenesys Business School 23 Task Questions

1. Think systemically about the framework (adapted from Aguinis, 2013) in Figure 1. What would happen if there were competing values or and an ill-defined culture at the centre of the framework?

2. What would happen if the performance information was not passed through to administration (eg not reflected in remuneration, rewards, promotion opportunities, etc)?

3. Read Chapter 1, Section 1.6, "Characteristics of an ideal performance management system", in Aguinis, H. 2013, Performance Management, 3^rd ed., Cape Town: Pearson Education, and then use these fifteen points to evaluate the performance management system in your organisation.

Aguinis's 15 elements include:

1. Strategic congruence 2. Context congruence 3. Thoroughness 4. Practicality 5. Meaningfulness 6. Specificity

7. Identification of effective and ineffective performance 8. Reliability

9. Validity

10. Acceptability and fairness 11. Inclusiveness

12. Openness 13. Correctability 14. Standardisation 15. Ethicality

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