Performance management as a system which constitute tools for effective management of organisational performance is grounded in many theories but here the focus is on goal setting and systems theories because they also provide a useful framework for managing performance (Locke & Luthans 1990). Goal setting theory predicts that employees will be motivated to work harder if:
• The organisation provides challenging but attainable goals.
• If goals and objectives are made specific enough for the employee to understand. • If the employee participates in setting the goals and objectives.
• If the employee has a benchmark from previous performance objectives to compare with expected performance.
• Employees receive frequent feedback on their performance so they can improve. Systems theory analyses employee performance in terms of a process that involves in- puts, process, outputs and outcomes (Bacal 1999; Marchand & Raymond 2007; Arm- strong 2008).
• Inputs: the skills, knowledge and expertise individuals bring to their jobs (their attributes).
• Process: how individuals carry out their work – the talents and behavioural competencies they use in order to fulfil their responsibilities.
• Outputs: the measurable results achieved by individuals according to the level of performance they demonstrate in carrying out their tasks.
• Outcomes: the impact of what has been achieved by the performance of individuals on the results of their teams, departments, units or functions and ultimately the organisation. This is their contribution, which is the ultimate measure of their effectiveness in their jobs.
However, despite guidance on the main principles of performance management, every organisation has to introduce performance management systems of their own to suit their needs. The framework the theory stipulates will only help to form the basis on which managers, individuals and teams should enter into performance agreements and evaluations. The theories help to form the logical link between corporate strategic plans and how individuals fit in realising the same through operational, annual action plans and activities. Thus, performance management system will cover:
1. Aspects of corporate vision, mission and values as they are linked to strategic busi- ness objectives and to the desired performance management system.
2. The establishment of performance agreements and plans. Agreement of account- abilities, tasks, objectives, knowledge, skill and competence requirements as part of goal setting, within the context of employment contracts. See Appendix 6.1 on the open performance appraisal form for the Tanzania public service. Agreement on work plans and personal development and performance improvement action plans (these can form part of a performance agreement).
3. Continuous management of performance throughout the year. This is a process of getting regular feedback daily, weekly, and monthly.
4. Formal performance reviews. This covers the preparation by the manager and the individual for the formal review at the middle of the year (usually in January) and the annual performance review (at the end of June). The mid and annual perform- ance appraisals are technical activities which require thorough preparation on the part of the employee and immediate supervisor.
5. Development and training. This involves formal development and training pro- grammes prompted by the performance review. Less formal development through- out the year should take place in the form of coaching, counselling, on-the-job train- ing and self-development activities (self-managed learning)
6. Rating. Although rating or ranking performance is common in any formal perform- ance appraisal, in which different measurement instruments including the likert scale of 1-5 points or grading ranging from A - D are used, this is not an ideal per- formance management method because the subjectivity of the technique may over- shadow the importance of focusing on performance improvement more than on measurement.
7. Performance related pay. Performance related pay (PRP) – is again not always asso- ciated with performance management, but because an increasing number of organi- sations are introducing PRP, the link between performance, as measured by a per- formance management process, and pay is becoming more common. However, deci- sions on PRP may be made at a separate time from the performance review so as not to prejudice the essential developmental nature of the performance management process.
8. Performance measurement. This involves any process, which includes the collection and analysis of outcome or performance data, providing comparative information for assessing the progress towards the achievement of specific objectives (Marchand & Raymond 2007). It can be done at the level of the individual task, department, or- ganisation and country. For example, individual measurement may take place through the annual performance appraisal process. Measurement at the country level includes methods such as budget analysis, annual balance of payments figures etc. Performance measurement is an overall description for a wide range of activities and processes, which are used by a huge variety of people for different reasons. Accord-
ingly, there are macro and micro measures; macro measures relate to very high level activities and include things such as the rate of inflation, the balance of payments figures, and the government‘s revenue. Micro measures relate to smaller and more specific activities, such as the turnover of one bank, stock exchange trading for one day and sales of one commodity. The performance measure is the result of the col- lection process in terms of the raw data collected. Examples here include the num- bers of pupils in a primary school, the numbers of hospital beds in a hospital or the number of civil servants in a ministry.
9. Performance indicators/measures. These are the products of the analysis and compa- rison of performance data. They are the indication of trends and changes in perform- ance. For example, there may be a policy objective to introduce universal primary education. A performance management system could be introduced to measure the achievement of this objective. The measure of performance would be the number of pupils in primary education in a given year. A Performance indicator is the com- parative analysis, which can be derived from the performance measure.
10.Continuous improvement. This is a management culture that is based on the belief that improvements in performance can be achieved each year, and standards and targets are adjusted for each year accordingly. This may not be appropriate or realis- tic in many public sector environments where the demand for services is open end- ed, but resources are finite.
11.Results oriented management. These are names of particular techniques, which are used to introduce performance management methods to a process or activity. They are based on defining the levels of desired performance and output.