Module 5.1
Module 5.1
Introduction
The first module introduced the aims of HRM, namely to attract, engage, develop, and retain an
effective and sustainable workforce to achieve the organisation’s strategies and business goals,
both now and into the future. The previous module dealt with attracting and selecting the right
people for the organisation to fulfil the required roles. This module looks at engaging all
employees, facilitating their performance, and retaining them through the use of the
engagement process.
Many companies say that human resources are the most important asset in their organisation but
do they really live up to this claim? A company’s productivity and profitability depend on making
sure that every employee is focused on doing the right things in the right way and at the right
time. A manager of people is required to align the team and individuals to the company’s
business plan on an ongoing basis, to facilitate team synergy, and to support the effective
management of change. Many organisations realise that the ongoing performance management
of their human resources is one of the primary ways an organisation can both create and
maintain its competitive advantage and remain agile.
A study of high impact performance management practices, conducted with more than 750
global organisations by Bersin by Deloitte, identified the talent practices that have the most
impact on managing and retaining talent. Talent is defined as the key employees who have the
skill sets required to play a vital role in the success of the organisation. Of the top 20 highest
impact talent practices, eight are related to performance management. This underlines the critical
nature of performance management as a foundation for managing and inspiring talent and all
other employees in an organisation. Surprisingly, the results of the study suggested that fewer
than 26% of organisations have effective company-wide performance management processes in
place.
Explore further:
Learn more about some of the important changes that are taking place in performance
management by exploring this article.
Agile performance management is designed for the new world of work, which is more
collaborative, social, faster moving, and chaotic. This article explores how so-called ‘smart
managers’ implement agile performance management.
Note:
Performance management can be defined as “the ongoing process of identifying, measuring,
managing and developing the human resources in an organisation” by linking each employee’s
role and goals to the organisation’s overall mission and objectives (Lussier & Hendon, 2017:190).
2. Strategic importance of performance management
Managers can use the performance management system and process to win over the “heads and
hearts” of their people. This means facilitating employees to clearly understand the organisation’s
plans and their role in achieving them (i.e., “head”) while feeling included and respected as an
essential part of the organisation (i.e., “heart”). The “head and heart” concept was originally
mentioned in the Corporate Leadership Council’s ground-breaking employee engagement survey
research. A line manager can use a number of performance management tools and skills in
different contexts and combinations to engage, challenge and focus teams and individuals on
what needs to be done to achieve the organisation’s strategic goals. The role of the HR
professional is to support the design and implementation of these performance management
systems and processes. Technology has become a vital component of these systems to facilitate
collaboration, create transparency, and save time.
Performance management became popular in the 1980s and replaced the former, and less
impactful, performance appraisal processes that were practised in many organisations at that
time. Performance appraisal is only one part of the overall performance management process
and is defined below.
Definition:
Performance appraisal is the process of evaluating employees and communicating to them how
well they perform in their roles as measured against a set of standards. Goal setting is typically
the start of the appraisal process, and many approaches include a two-way process of giving and
receiving feedback.
Be consistent in its application across the organisation (be it local, national or global); and
Be regularly reviewed, evaluated and updated in line with the organisation’s shifting
strategy.
There are a variety of definitions for the concept of performance management, although most
share similar themes, such as process, organisational success and collaboration. Here are some
examples:
A process which significantly affects organisational success by facilitating managers and
employees to work together to set performance expectations, measure and review
results, and reward performance.
The ongoing process of identifying, measuring, managing and developing the human
resources in an organisation, by linking each employee’s role and goals to the
organisation’s overall mission and goals.
The process through which managers or supervisors and their employees derive a shared
understanding of role expectations and goals (a performance promise), exchange
performance feedback, identify learning and development opportunities, and evaluate
results achieved as measured against the organisation’s overall goals.
Many performance management systems consist of the following processes that are scheduled in
organisations throughout the business year. These processes are often managed through a
module of the organisation’s HRIS. The traditional performance management processes are:
Development planning;
Ongoing performance discussions between managers and employees, and among team
members, as well as ongoing performance coaching;
It is through the above processes that organisations can create and sustain a workplace
environment that:
Encourages teamwork;
The following case study shows the difference between an engaging performance management
system and the less effective performance appraisal process.
There is something very wrong with the above scenario. Unfortunately, this is an all too common
situation in many organisations. Although Sibu’s HR department calls this process “performance
management”, it cannot be measured against the definitions mentioned previously, in that it
involves limited collaboration from all parties and contributes little to the organisation’s success.
A system that produces employee evaluations once a year – without an ongoing effort to
interact, agree on the role, set and reset goals, agree on development plans, or provide feedback
and coaching so that performance can be discussed and improved on – is not a proper
performance management system. Managers like Sibu, in the above case study, should realise
that performance management is:
A continuous process: Performance management is ongoing and involves the processes
of defining the role, setting goals, observing performance, and giving and receiving
ongoing coaching and performance feedback.
o Embrace the company values and behaviours that are important for all employees
to support.
5. To discuss and agree on specific development plans to help employees meet the
requirements of the job, and to develop their skills so that they can compete for other
jobs (where applicable).
6. To provide a sound basis for performance recognition and reward.
A business case captures the reasoning for initiating a project, process or task in an organisation.
The following section explores the business case for introducing and maintaining an effective
performance management system and process in an organisation.
The performance management process is such an important system and process to implement in
today’s organisations as it is directly connected to employee motivation, turnover rates and
organisational performance. These three issues are discussed in some detail below.
Note:
A business case is a justification for a proposed course of action that highlights the expected
benefits and costs.
Initial research by the Corporate Leadership Council in 2004, and supported in more recent
surveys, shows that three key factors present in a well-designed and effectively-implemented
performance management process serve to drive employee motivation and empowerment. These
three factors are:
2. Learning or development opportunities that stretch employees (in the role), and
The Gallup organisation, after many years of research, has identified 12 factors that motivate
employee engagement:
More than half of these factors can be directly achieved through an effective performance
management process, in particular numbers 1, 3, 4, 5, 6, 7, 11 and 12.
Turnover generally refers to the number of employees who voluntarily leave an organisation and
then need to be replaced. Turnover rates can have devastating consequences on a team’s
performance and it is often expensive and time-consuming to replace employees. The following
five common reasons why people leave organisations once again reinforces the business value of
effective performance management to the organisation:
1. People are not integrated after being selected: Most organisations have an
onboarding programme that is an intensive information overload, or is focused on the
completion of compliance training. The focus of integration should be to enable
employees to connect rationally (what they need to do) and emotionally (how involved
and acknowledged they feel) with the company.
4. The personal touch is missing: A lot of managers shy away from building personal
bonds with their employees, fearing it will make delivering any hard messages difficult.
5. No credible career planning: Many people are not aware of how they can grow in the
organisation. They might not know what they have to do to gain the competencies to
move to different jobs or various levels, in line with their career aspirations.
An effective performance management system and process supports both managers and
employees to avoid many of these reasons for employee turnover rates.
Effective and efficient performance management is key to the success of an organisation. This is
achieved by aligning organisational systems, resources, and employees to the organisation’s
goals. By so doing, “organizations that get performance management right become formidable
competitive machines” (Carpi, Douglas & Gascon:2017). In a 2020 study conducted by Deloitte
Insights, it was found that the two key trends in performance management are well-being and
belonging. The three levels of employee belonging and well-being that organisations should
foster are comfort, connection, and contribution. By investing in and prioritising employee
belonging and well-being, organisations “may find that it reduces the need for remediation of
work’s negative effects, freeing up resources to invest in other areas and increasing individual
and team contributions to organizational outcomes” (Volini et al., 2020). It is these areas that
contemporary performance management design needs to address.
More than half of the organisations in Bersin’s survey indicated that performance management
was already in use in their organisations, yet only 10% said their processes were working
effectively to support the performance of the organisation.
1. Create some standard way of cascading the organisation’s strategy across the globe to
every team and the individual employee;
2. Understand the breadth and depth of the talent within the organisation and where they
were stationed around the world;
3. Raise employee engagement levels through interaction with effective leadership and
management, and
4. Create the opportunity for all employees to have relevant personal development plans to
support their performance and credible, long-term career plans.
There are various online HR systems available that are designed to assist companies in
implementing performance management systems. Watch Video 1 about Hewlett Packard’s
implementation of Workday, an example of a human capital management software.
Explore further:
Learn more about how Deloitte has reinvented its performance management system with the
organisation’s strategy.
For an organisation to design and implement an approach to managing people that will help it to
create a source of sustainable competitive advantage, it must create a system that is flexible
enough to encourage the best performance from every single employee. A performance
management system must motivate the high-performing individual to want to (and continue to)
both give their best and stay with the organisation. A performance management system also
needs to deal quickly and appropriately with the under-performing employee who needs to
improve their level of performance. In addition, performance management must also deal with
the large number of employees in between these two extremes.
The starting point of implementing a performance process is to set a clear context for the people
in the organisation who are related to its strategy and priority goals, and then to cascade this
direction to all levels of the organisation. This process, together with the PEMA process (Plan,
Execute, Measure and Adapt), will now be described.
A company’s broadly stated strategic objectives or goals are usually set at the executive level and
require cascading and alignment throughout the organisation. Team goals need to support the
company’s strategic objectives and business plans. Some companies begin with a bottom-up
approach whereby business plans are initially built up from the question asked of all teams: “How
can your area contribute to the strategies and goals of the organisation during this financial
year?” Once summarised (and often adapted), these goals are cascaded and aligned throughout
the organisation.
The successful execution of the company strategy to achieve organisational goals is reliant on all
employees, business units and divisions, being aligned and working towards common and
complementary outcomes. Figure 1 illustrates how a strategy can be developed and
implemented in a business through the performance management process. This starts with
defining the industry and establishing the company’s vision, mission and values, and ends with
the results (outputs) that the company achieves. During this process, various analyses are
completed (competitive, stakeholder and vulnerability) and strategic issues are discussed.
Line management at various levels must ensure the alignment of the company to the strategy
and business goals, particularly at the outset of the financial year. The aim is to ensure all
divisions, business units, departments, and teams are focused on delivering work that adds value
to the overall company strategy, plans and goals. Figure 2 illustrates the cascading nature of this
alignment, and how, through cascading of goals and strategy, it is filtered through from the top
level, to different departments, teams and finally to the individual.
At the team level, there are three steps to this cascading process that line managers take in
preparing their respective teams and individuals for aligned performance management:
1. Review and understand the company and divisional strategies and goals: Line
managers study any information available and discuss this with relevant senior people,
experts and colleagues to get a comprehensive view.
2. Develop a set of key responsibilities and goals: This should be done together with
team members. Between four and eight key responsibilities and goals should be
developed for the team. Ensure that these responsibilities and goals align with the
company or divisional strategies and goals. Ensure that all team members have clarity on
what is expected of the overall team for the year ahead.
Planning:
1.
Planning is about understanding what you need to do to achieve
Plan
your goals and how this supports the larger plan.
Executing:
2.
Executing is doing what you said you would according to the
Execute
standards and timelines you committed to.
Managers are accountable for cascading the strategy throughout the organisation by continually
reminding employees of the organisation’s strategy and goals, and how each person contributes
to achieving these, by demonstrating an important link between what the individual does and
how this affects the strategy. The performance management process is the formal summation of
this link and starts with the performance promise set for the particular financial year.
Note:
Planning the performance promise includes the following three steps:
1. Agreeing on the role and setting goals that make up the performance promise;
Once the performance promise is in place, clearly defined, understood and aligned to the
strategy, the employee, team, and ultimately the organisation, need to execute what has been
agreed effectively.
During the execution phase of the PEMA process, managers and employees need to define the
activities that drive and support effective execution on an ongoing basis. Coaching is often a
critical function in supporting this execution process. An effective manager understands the
concept of coaching, which is to allow learning and development to occur by being close to the
work of the person and hence being able to give useful feedback. Useful feedback should result
in sustained and improved performance. Different coaching styles need to be used with different
people.
Effective and constant reiteration of what should be done and how it links to the
achievement of goals and the business strategy;
Ensuring that the business, team and individuals have the necessary resources to fulfil
their role and achieve their goals;
3.2.3 Measuring
Measurement is defining how well employees are effectively executing according to the agreed
and defined plan (the performance promise). The line manager should provide regular informal
feedback that should be interactive, specific and immediate. The employee should also engage in
regular self-assessment.
Most performance management systems have two formal review sessions during the year. These
are usually captured in some sort of record system (HRIS) and include:
The mid-year review: A review of the employee’s progress to date, conducted at the end
of the first half of the financial year.
The annual review: A review of the full year’s performance conducted at the end of the
financial year.
These reviews also provide the opportunity to measure progress made on personal development
plans (PDPs) and to update or reformulate these plans if necessary. Details regarding the
components of the performance management process are included in the Unit 2 notes.
3.2.4 Adapting
Effective execution also calls for formal measurement processes to assess execution against the
role, goals and behaviours, as well as to allow for adaptation where necessary. Effective day-to-
day management includes the ongoing search for more effective ways of doing things and
continuous improvement endeavours. Performance review sessions should always end with a
discussion on what can be improved and enhanced further. This process should eventually
become a part of the team and the individual’s culture.
After the COVID-19 pandemic, it is likely that a new focus for performance management will
emerge that enhances the “human experience”.
4. Conclusion
Managing employee performance is rarely a task that should be left to an individual manager.
Instead, a well-designed performance management system should be available to all members of
an organisation as a part of a strategic initiative. The system should not only fit the culture, style,
and strategic goals of the particular organisation, but also provide mechanisms to set clear goals
and expectations of every individual, help to shape people’s behaviour as they go about doing
their work, facilitate relevant development activities to support performance, and finally, provide
a specific means of motivation and reward to enhance employee retention. Additionally, the
system should include input and feedback from the external stakeholders that the organisation
serves or with which the organisation collaborates.
Finally, this article explains the shift from talent management to workforce transformation.
Deloitte (2019: n.d.) defines workforce transformation (WT) as “continuously rethinking the
identity of the workforce, the nature of work, the skills and capabilities needed to accomplish that
work, and where that work can be accomplished in order to lead (not just respond to)
marketplace disruption.”
5. Bibliography
Carpi, R., Douglas, J. & Gascon, F. 2017. Performance management: Why keeping score is so
important, and so hard. Available:
https://www.mckinsey.com/business-functions/operations/our-insights/performance-
management-why-keeping-score-is-so-important-and-so-hard [2020, August 26].
Deloitte. 2019. Crossing the chasm: From talent management to workforce transformation.
Available: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/human-
capital/us-crossing-the-chasm-from-talent-management-to-workforce-transformation.pdf
[2020, September 23].
Gallup. n.d. Gallup home page. Available: http://www.gallup.com/home.aspx [2020, August 18].
Lussier, R.N., & Hendon, J.R. 2017. Fundamentals of human resource management: Functions,
applications, skill development. Thousand Oaks: SAGE Publications Inc.
Volini, E., Schwartz, J., Denny, B., Mallon, D., van Durme, Y., Hauptmann, M., Yan, R. & Poynton, S.
2020. Designing work for wellbeing: Living and performing at your best. Available:
https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2020/designing-
work-employee-well-being.html [2020, August 18].
Wärnich, S., Carrell, M.R., Elbert, N.F. & Hatfield, R.D. 2018. Human Resource Management in
South Africa. Rev. 6thed. Pretoria: South-Western Cengage Learning.
Wilter, J. 2013. StarTools: People Management Tools, Tips and Templates. Randburg: Knowledge
Resources Publishing.
An effective performance management system not only gives a clear direction to facilitate
employees to perform; it also directly contributes to the competitive advantage of an
organisation. So, how is a customised performance management system created? Explore the
following resources that detail the history of performance management and explain how to
develop and implement an effective performance management system.
Resource 1
Resource 2
As the world adapts to the COVID-19 pandemic, it has become increasingly important to rethink
performance management. This resource provides a general overview of how to design a
performance management system for your organisation, both after the pandemic and into the
future.
Resource 3