GHRM5113

Strategic Human Resource

Management
Unit 7: Performance Management
 Unit 7: Performance Management

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 Unit 7: Performance Management

Table of Contents

Learning Outcomes Page 4

Introduction Page 4

7.1 SCOPE OF PERFORMANCE MANAGEMENT IN MALAYSIA Page 5

7.2 PRINCIPLES OF PERFORMANCE MANAGEMENT Page 7

7.3 CHARACTERISTICS OF PERFORMANCE MANAGEMENT Page 9

7.4 BENEFITS OF PERFORMANCE MANAGEMENT Page 11

7.5 THE PERFORMANCE MANAGEMENT PROCESS Page 12

7.4.1 The Human Resource Competency Model Page 14

7.6 AN INTEGRATED APPROACH TO PERFORMANCE MANAGEMENT Page 17

Summary Page 18

Key Terms Page 18

References Page 19

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 Unit 7: Performance Management

Learning Outcomes

By the end of this unit, you should be able to:

1. Explain the concept of performance management;

2. Discus how a company can use performance management to achieve its long-term goals;

3. Explain the performance management process; and

4. Discuss various components of performance evaluation.

Introduction

Performance management is a set of tools that an organisation uses to ensure optimum output of

the available human and non-human resources. Learners will understand the concept of

performance management, its value and importance to the organisation. This unit also introduces

the basic concepts of performance management as practised in Malaysia. An emphasis is put on

the public sector of the country since the government plays a significant role in streamlining human

resource development processes. Furthermore, the unit covers other elements such as

fundamental approaches, principles and methodologies of performance management. The basis

of this unit is to ensure learners can gain a deeper understanding of ensuring consistency in the

quality production of goods and services.

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 Unit 7: Performance Management

7.1 SCOPE OF PERFORMANCE MANAGEMENT IN MALAYSIA

Performance management is a framework that affects all processes across the business units.

One of the purposes is to provide managers and employees with the knowledge, skills and

experiences that have a long-term impact in the company operations.

Performance management introduces the culture of continuous improvement and acquisition of

knowledge and skills. It, therefore, aims at understanding the entire organisation rather than a

single business unit or division. Thus, it is designed to ensure there is an organisational integration.

In the Malaysian public sector, performance management focuses on the following vital

approaches (see Table 7.1):

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Table 7.1: Vital Approaches that Performance Management Focuses on in the Malaysian Public
Sector
Vital Approaches Description
It is the introduction of new processes that ensures organisation-
Productivity improvement wide adoption of quality improvement of goods and services. This
initiative/ total quality concept aims at introducing a culture where every employee
management contributes towards attaining the company goals of quality goods
and services.
It is a set of reforms introduced in the ’90s by the government. In
this case, the aim was to ensure that organisations have a proper
Modified budgeting system
allocation of resources depending on the nature of activities in each
programmes
business unit. It is a solution to criticism of the unequal distribution
of resources during the budgeting process.
It is an employee reward framework that was introduced to ensure
employees are compensated depending on various circumstances
The new employee
and factors as defined in the laws. The primary goal of this policy
remuneration system
was to ensure equality in compensation systems across the public
sector.
Malaysian corporations have adopted a policy of communicating
essential information regarding their commitment to meeting
stakeholder expectations. Major components included in the
Client’s charter
customer charter include the values, scope and purpose of the
business. The management can also define the standards of
operations their dedication to customer satisfaction.
Various government agencies and public institutions have adopted
this approach since the early 21st century. It is a tool that the
Key performance
management can use to measure the effectiveness and efficiency
indicators
of the processes of a company. Malaysian firms also use it in
understanding customer needs.
Integrated results-based It is a framework used by companies in Malaysia to achieve the
management desired goals within a given timeframe.

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 Unit 7: Performance Management

7.2 PRINCIPLES OF PERFORMANCE MANAGEMENT

There are fundamental elements that an organisation should follow when it aspires to have an

effective performance management system. They are set practices that should be adopted in the

daily running of the business, which is elaborated in Table 7.2.

Table 7.2: Practices That Should Be Adopted in The Daily Running of The Business

Practices That Should

Elaboration
Be Adopted
All business processes should be carried out transparently. This
process involves carrying out daily duties in accordance with various
rules and regulations guiding the trade. At the same time, the
Transparency
management should disclose all the essential information regarding
performance management and improvement to the rest of the staff
members.

The management must understand the current trends in the industry.

It must also be conversant with the external forces that affect the
External business business. These are arising issues that the company has limited
environment control over them. Thus, an organisation can develop policies that
help employees to work within the capacity which cannot be affected
by macro-environmental factors.

The company should work towards creating a conducive working

environment for each employee regardless of the job position. The
process involves providing the right equipment for their work and
Working environment regulating supervision activities which may be perceived as unfair
treatment. These efforts are also geared towards creating an
excellent organisational climate where employees are free to interact
ad share their ideas with their colleagues and seniors.

The company must introduce the right values through various

approaches. For instance, the management should, all times, engage
and meet stakeholder expectations. It should also ensure every
Organisational values
employee is accountable to his or her work. In the long run, it will
manage to instil trust in customers and investors through this
approach.

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The management should ensure all employees are involved in the

organisation’s decision-making process. Recognising their views, in
Employee development
this case, will enable the company to develop policies that are
accepted without resistance from the implementers.

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7.3 CHARACTERISTICS OF PERFORMANCE MANAGEMENT

Performance management entails complex organisational processes. It encompasses the whole

system, which includes people and processes. The administration must first define its mission,

vision and objectives before embracing a company-wide of performance management. Some of

the common characteristics of performance management include the following (see Table 7.3):

Table 7.3: Common Characteristics of Performance Management

Common
Characteristics of
Elaboration
Performance
Management
Managers at the top and middle level must ensure that employees
Clarity of understand the goals, vision and mission of the company. Each
organisational goals individual must know the organisational expectations. They must,
and objectives therefore, be aware of what should be done at an individual, group or
departmental level for the company to achieve its long-term goals
The company should develop a system that facilitates a two-way flow of
information between the top management and the operational level.
This framework will facilitate the reporting of employee performance
System feedback
from different business units. It is essential to monitor the system so
that arising issues can be resolved and it can also be enhanced to
ensure efficiency is attained in the process.
An effective performance management system ensures that there is a
continuous process of evaluating an individual, a group, a department
or a company. The system to be designed should be customised to fit
Evaluation into different employee or department. It implies that in some cases,
the performance system cannot be uniform across the corporations,
especially when the company has various outlets distributed across the
global market.
The management must ensure that the various business units are
efficient to contribute towards the production of the final goods and
services. Thus, there should be ways in which these functional areas
Corporation and
interact freely. The initial step, in this case, includes ensuring that each
collaboration
employee understands their or her role in the system. The managers of
each unit must also work together to create the desired leadership for
optimum performance.
The company should always encourage employees to manage their
work. The cases of supervision should be minimised since each person,
Self-management
group, or department is accountable for what they are doing. The
teams
primary goal is to create a sense of responsibility across all functional
areas of the business.

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The effectiveness of an organisational policy depends on the efforts of

the top leadership. The managers must ensure full support to the
company strategies and plans. The support, in this case, includes
Leadership providing the necessary support in terms of resources and being on the
development forefront to adopt changes. At the same time, the management should
introduce a culture of mentoring lower-level employees so that they can
learn more about company processes and be promoted to be active
managers in their respective units.

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7.4 BENEFITS OF PERFORMANCE MANAGEMENT

A company that approaches performance management form a strategic perspective is likely to

achieve its long terms goals. Some of the benefits of using this method include the following (see

Table 7.4):

Table 7.4: Benefits of Using Performance Management

Benefits Elaboration
An evaluation of the organisation’s performance levels helps the management
Improving to determine each unit’s efficiency in the production process. There will be an
productivity increase in production when the employers find better ways of assessing
employee performance and motivating them to do better.
The management can assess various components affecting employee
performance and relate to how they are being compensated for their role in the
Determining
company. An effective compensation system encompasses multiple elements
appropriate
such as rewards for the work done and promotions on merits. At the same time,
compensation
the management can find ways of dealing with poor performing employees
system
which includes introducing training and development programs, transfers or
worst, demotions.
Performance management helps managers to identify weaker areas in various
Identifying the business units. These elements could include poor performing employees or
company’s system redundancy which leads to inefficiencies in the company processes. At
strengths and the same time, performance management helps the company in identifying its
weaknesses strengths which in turn can be enhanced further to ensure they drive the
business towards achieving its long-term goals.
One of the primary goals of performance management in the company is to
Increased increase efficiency at all levels, including individual employee activities. The
efficiency in measures of the performance vary depending on the company policies and
the business preferences. In some cases, the legal framework might direct the companies to
operations adopt a particular approach in measuring performance. This is a common
phenomenon with public sector corporations.
Aligning
Performance management ensures that each activity carried out daily in the
company
company contributes towards achieving the long-term goals of the organisation.
goals and
Thus, managers should undertake performance management to assess how
business
employees, teams and departments are carrying out their activities.
activities
Performance management introduces a culture where the entire organisation
becomes concerned about the well-being and performance of the company in
Long-term
the future. This goal is achieved through the creation of awareness about the
view
organisation’s long-term goals and assessment of individual milestones that
drive the company towards the future.
Performance management enables companies to develop and improve
Proper strategies on how they can make use of the available resources to minimise
utilisation of the costs involved and maximise outputs. This goal is achieved through the
resources introduction of approaches such as total quality management and performance
improvement initiatives.

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7.5 THE PERFORMANCE MANAGEMENT PROCESS

Performance management entails various stages that the leadership must go through to

implement it in the organisation. There are four basic steps that a company can adopt in

performance management. They include the following (see Figure 7.1):

Figure 7.1: Basic steps that a company can adopt in performance management

Source: Pulakos (2004)

However, there are different variations of naming the stages. It depends on the type of

organisations and requirements at each level of the performance management process. This

subunit will cover a six stages type of performance management process which includes the

following (see Table 7.5):

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Table 7.5: Six Stages Type of Performance Management Process

Stages Type of
Performance
Elaboration
Management
Process
Determining
the The management must, first of all, understand the organisation-wide policy and other
objectives that it intends to achieve in the short run. This process also entails creating
organisational awareness to the entire team of employees about similar information which includes
strategy and measurement of performance and employee expectations.
goals

At this level, the management should engage employees from all the functional units
and inform them about the changes and desired response towards the same. An
essential component of the discussion is the organisational behaviour which
employees are supposed to adopt when working. Therefore, behavioural expectations
are like performance standards which everyone should adhere to in the organisation.

Performance Results expectations, on the other hand, include the desired goals that employees or
planning employees should achieve in their daily activities. Such goals not only enable
employees to improve their performance but also prepare them for career
development. The company can adopt the concept of management by objectives
since it entails all the essential approaches to achieving the long-term goals in this
case. MBO emphasises on improving the performance of an organisation through a
proper definition of the company objectives to both management and operational
level employees.

Performance of employees basing on the behavioural and results-based expectations

should be discussed and feedback provided for decision-making. However, it is also
necessary to provide frequent feedback on the daily activities undertaken at the
organisation, especially during the rating period. Feedback is essential when
reporting results and employee contributions, and also necessary for informing the
management about the inefficiencies in company processes and poor performance
of some employees.
Continuous
feedback The management must ensure there is a two-way communication for the feedback
mechanism to be effective. The company can introduce training programs for both
managers and employees to understand how they can work under these
circumstances. In this case, managers have a responsibility of providing feedback in
a way that can be understood by all employees within the required timeframe.
Employees, on the other hand, should ensure that they receive the feedback to
understand their performance and company expectations.

The management, in this case, allows employees to take part in the performance
management process. In this case, each individual is given a chance of rating him or
herself basing on what they have done in a given period. Managers should ensure
this stage if effective by instructing employees to provide statements about their
performance or accomplishments at the end of the defined period. The positive
outcomes of employee input include the following:
Enhancing ownership and acceptance of individual roles in the company;
Employee input It is an indicator for the manager to see how employees worked and achieved the
stated results;
It gives managers an easy time when preparing performance appraisals;
It enhances communication and information exchange, thus improved understanding
among employees; and
The accomplishments if employees at this level can be used on a later date during
the promotion or compensation decisions.

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7.4.1 The Human Resource Competency Model

It is a framework that HR managers use to in outlining skills, behavioural and knowledge

requirements that are essential for an employee to execute a given task successfully. Figure 7.2

depicts the competency model.

Figure 7.2: Competency model

Source: Pulakos (2004)

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The benefits of the model to the organisation include the following:

1. Helps the management in aligning the performance of the workforce to the organisational

long-term goals and strategies.

2. HR managers can use this model to understand the skills and abilities of individual

employees in the organisation. It provides consistency when evaluating performance

metrics of an organisation.

3. It encourages employees to take ownership of their behaviours and skills in performing

daily activities at the workplace.

4. The key components of the competency model include core competencies, functional

competencies and leadership competencies. The choice of components to be included in

the model depends on the business nature and goals to be achieved in the process.

Types of Competencies

According to competencydefinition.com, competency can be described as the behavioural

attributes, skills, and knowledge that are required for putting in suitable performances while at the

job. While behavioural attributes refer to the personality characteristics that are needed to be

successful on the job, skills refer to practical or technical skills that are required for performing the

job satisfactorily and knowledge refers to the experience and previous education that is needed

while on the job. The types of competencies that will be discussed are as depicted in Table 7.6.

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Table 7.6: Types of Competencies

Type of Competencies Elaboration

It is a combination of skills and abilities that enable an individual to
perform a given task in an organisation. They are essential
requirements that employees must attain for them to work in the
Core competencies
company. Therefore, they vary from one organisation to another.
However, they can include crucial elements such as teamwork and
communication skills.

These are elements that enable an employee to be regarded as a top

Functional performer in the organisation. It is a combination of skills and abilities
competencies
that allows an individual to perform a specific role in the company.

It is a set of skills and behaviours mostly utilised at the supervisory

and management positions on the organisations. It is where
Leadership
competencies employees have a responsibility to lead others in undertaking a given
task. The primary role, in this case, is making decisions for the group.

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7.6 AN INTEGRATED APPROACH TO PERFORMANCE MANAGEMENT

An integrated approach aims at ensuring sustainability in the performance of employees and the

entire organisation. Thus, performance management can be regarded as a strategic tool that

affects major types of organisational integration. Table 7.7 explains the types of the integrated

approach to performance management.

Table 7.7: Types of Integrated Approach to Performance Management

Type of Integrated Approach Elaboration

It aims at harmonising the goals of employees and the
Goal integration
long-term plans of the company.
The purpose of the management at this level is to
ensure individuals, teams and departments have their
Vertical integration
objectives aligned to the framework of the company’s
long-term goals.
These elements ensure effective alignment of the HR
HR integration functions to the company’s current activities and
future plans.
The management at this level aims at creating a link
between various business functions so that the
Functional integration
organisation can function as a single complete
system.

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Summary

• In Malaysia, performance management was first introduced in the public sector.

• Significant areas of concern included system-wide involvement in continuous improvement

of quality and development of employee welfare.

• Performance management requires the commitments of the whole organisations from the

top to the bottom level management.

• It requires the integration of various functional units in the company.

• Performance management process begins by having an understanding of the company's

processes and long-term goals before developing a framework that can enable HR

managers to carry out the task.

Key Terms

Appraisal

Evaluation

Indicators

Integration

Monitoring

Performance

Planning

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References

Bacal, R. (2011). Performance management. New York: McGraw-Hill Professional.

Diamond, M. J. (2005). Establishing a performance management framework for government (No.

5-50). International Monetary Fund.Bottom of Form

Pulakos, E. D. (2004). Performance management: A roadmap for developing, implementing and

evaluating performance management systems. Alexandria, VA: SHRM Foundation.Top of

For

Siddiquee, N. A. (Ed.). (2013). Public management and governance in Malaysia: Trends and

transformations. London. Routledge.

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