How Can Organization Implement Effective Performance Management?

Introduction

Organizations are known for practices such as planning, budgeting, sales, and billings. When we talk about performance management, it reminds us that being busy is not the same as producing results. It also points out that training, commitment, hiring the best people and hard work alone cannot produce the best results. It is important to formulate and follow a systematic process that can lead an organization to success. In simple terms, performance measurement is the process of determining the progress toward achieving set goals (Bourne, et al. 15). The effective performance of an organization depends on activities at all levels starting from top management policy development to efficiently run operations by the employees at junior levels.

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Main Part

There are numerous management approaches to increase the performance of an organization. The basic factor in these approaches is that each includes regular and repeated activities to achieve the set goals, monitor and record progress toward the goals, and plan to work towards achieving those goals more effectively and efficiently by improving the system. The following are some of the approaches used to improve organizational performance.

  • Balanced Scorecard: This is an approach that basically focuses on four indicators. These include customer perspective, internal business processes, learning and growth and financials, and monitor progress toward the organization’s strategic goals.
  • Benchmarking: This approach uses standard measurements in any organization or industry for comparison to other organizations which enables them to gain perspective on organizational performance. For instance, there are emerging standard benchmarks for IT industries, service-based industries such as hospitals, etc.
  • Business Process Reengineering: Basically, this is an approach that aims to increase performance by radically re-designing the organization’s structures and processes.
  • ISO9000: There are several organizations that have ISO certification. It is an indication of an internationally recognized standard of quality and includes guidelines to accomplish the ISO9000 standard.
  • Strategic Planning: It is an approach that includes the entire organization process to identify the strategic direction and set specific goals. Additionally, the direction is achieved by implementing associated action plans, including multi-level goals, objectives, deadlines, and responsibilities.
  • Total Quality Management (TQM): It is a common set of management practices followed in the service-based organization to make sure that the organization always meets or exceeds customer requirements.

There are also several other approaches such as continuous improvement, cultural change, knowledge management, program evaluation, etc. These approaches are selected based on the organization’s needs to achieve the set goals (McNamara, C, n.pag).

Depending on the need of an organization, it is important to carefully select the best approach to achieve its set goals. The major contribution of performance management is its focus on achieving results – making use of the best tools to succeed and useful products and services for customers inside and outside the organization. Today, organizations have goals, plans, and resource management. In order to achieve the specific goals of an organization, it is essential that they need to have strategic management.

Performance management eliminates the performance appraisal or annual review and evaluation as it focuses and concentrates on the entire spectrum of performance management and improvement strategies. These include employee performance improvement, performance development, training, cross-training, challenging assignments, 360-degree feedback, and regular performance feedback (About.com. n.pag).

The different organization needs a different set of approaches to have successful performance management. For instance, the set of approaches required for a service-based industry such as a hospital is totally different from an IT industry. Choosing a correct performance management approach is to adequately assess what the needs are and then determining the changes that need to be implemented to either fix a problem or achieve goals.

In recent years, as the competition has increased, organizations have been faced with challenges like never before, and those organizations which make use of performance management approaches are in general more effective and successful than those that do not. Further, with the advent of globalization, increasing competition from businesses across the world has meant that all businesses must be much more careful about the choice of strategies to be the best among the others. Therefore, small and large organizations put more focus on effectiveness to put systems and processes in the right way to the right things to achieve the predetermined results. This is the only way to claim that the organization and its various parts are really performing (McNamara n.pag).

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In simple terms, performance management is the process of specifying an organization’s aims and objectives, developing policies and plans to achieve them, and allocating resources so as to implement the plans. Strategic management is the highest level of managerial activity, which is generally performed by the top leaders of an organization. It provides an overall direction to the whole organization, leading them all to achieve a set goal/s. An organization’s strategy must be best suited for its resources, circumstances, and to achieve its objectives. The process involves matching the company’s strategic advantages to the business environment the organization faces. Training each and every individual to perform the individual targets is also an important step in this process. In general, the goal of corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently. Hence a good corporate strategy should combine an organization’s goals, policies, and action into a complete package of success (Wikipedia n.pag, 2007).

There are several challenges faced by organizations in implementing performance management, however, these can be generalized into seven categories. Organizations frequently identify one or more of seven elements as the most “challenging” when implementing performance management systems. It is important to note that these are not unsolvable obstacles, but are areas that require more attention and action. Unfortunately, if these aspects are not taken care of, they can cause the performance management system to fail. The following are some of the challenges – Measuring or evaluating dimensions in dimensions (or competencies) is generally the most difficult part of performance management; Keeping leaders focused is another difficult task; Linking job descriptions to performance management; Implementing performance management for staff; Linking compensation to performance management; Matrix management; and Keeping the system alive (Sunline n.pag).

The design of a good performance management system will enable the organization to manage the performance of its employees, and also be able to motivate and develop them in line with the organization’s goals. Effective performance management systems can only be formed with the set of good focused leadership in an organization. In the absence of such a system, employees may be unclear as to the organizations’ expectations especially on standards and targets. This can eventually lead to low productivity, economic loss, de-motivation, and conflict.

Conclusion

During the past few decades, quality management has emerged as a major competitive edge in business and a source of long-term profitability. Different techniques and concepts have evolved to improve product or service quality, including Zero Defects, Six Sigma, quality circles, TQM, Quality Management Systems (ISO 9001 and others), and continuous improvement. Essentially, it means setting up performance management systems that ensure product or service quality and that people are rewarded for doing the right thing, thus keeping their highest-quality performance strong and accurate. Statistics point out that a good performance management system can take an organization from zero to top position both in terms of quality and quantity.

The application of performance management systems and processes in organizations has provided an organized framework to examine their financial conditions; understand the strengths and weaknesses; identify the development problems and strategic issues, and develop action plans to implement their development programs that can result in effective and efficient management. It has also given an opportunity to measure performance in a systematic form. The emphasis on strategic management also helps organizations to adopt a systematic approach to all-around development, which includes such benefits as being proactive, improving coordination, and promoting balanced and long-term development. It is essential that in today’s world of competition, organizations have individual strategic management programs. This is the only way that any organization can survive in a long run.

Work cited

  1. About.com. Performance Management, Evaluation, Review, Improvement (2007) About, Inc., A part of The New York Times Company. Web.
  2. Bourne, M., Franco, M. and Wilkes, J. Corporate performance management. Measuring Business Excellence (2003); 7, 3; p. 15.
  3. McNamara, C. Performance Management: What Do We Mean by “Performance”? (1997) Free Management Library.
  4. Penrose, E. The Theory of the Growth of the Firm, Basil Blackwell, (1959) Oxford.
  5. Wikipedia, Strategic management. Wikimedia Foundation, Inc.2007. Web.
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