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Gilmore and Williams: Human Resource Management

Chapter 7: Managing performance

Authored by David Hall

Aims of the chapter

To describe the relevance and development of performance management To define performance management and describe its application as a management intervention for improving organizational performance To understand the role of HRM in managing performance To explain the theoretical contribution towards the development of performance management as an intervention To explore contemporary issues and consider the future of performance management.

Meaning of performance management

Managing performance (performance management) is about individuals, groups and organizations achieving something that is desirable or intended as a consequence of their actions, which leads to improvement and is invariably associated with effectiveness and efficiency.

Put simply as managing the business. (Mohrman and Mohrman, 1995)

Growth of performance management

Globalisation Competition Shareholder and stakeholder expectations Intervention for managing improvement Private, public and third sector organizations.

Performance management and HRM

Performance is a people outcome Managing performance is in the HRM domain HRM models link HR practice with performance Performance related to work practices HRM and line managers share responsibility.

Performance management in practice

Performance management methods or tools Foundations in motivational theory, systems and operational management Performance management systems link individual performance with the organization, e.g. MBO and Balanced Scorecard Organizational aims cascaded and translated into individual goals and targets, often linked to incentives

Appraisal used as a key process to manage performance in many organizations.

Performance appraisal
A common method of performance management and the main intervention (management practice) for formally managing performance Performance review (looking back), feedback, development (looking forward) and improvement Communication, development and motivation Objectives, measures and outcomes

Use of reliable information as a basis for rational (unbiased) discussion and decision making.

Managing poor performance

Specify the performance issue Identify the cause of the performance problem it can be difficult to get to the root cause Reliable information is the basis for rational discussion, decision making and problem resolution without bias Difficult for managers and employees because of a perceived threat to relationships

Disciplinary action as a last resort, e.g. capability procedure.

Values, Attitudes and Behaviour (VAB)

Performance is an outcome of the choices people make about how they behave, i.e. discretionary behaviour (Purcell et al, 2003) Organizations seek desirable behaviour in employees, i.e. behaviour that leads to good performance outcomes which help achieve business aims

Values and attitudes motivate individual (and group) decisions about behaviour in work, influencing performance outcomes
Organizations attempt to align employee VABs with their own in recruitment, selection, development, performance management, career progression and rewards, i.e. by managing performance.

Dysfunctional behaviour and unintended consequences

Individual and group behaviour is influenced by values, attitudes and motivation People may choose to behave (discretionary behaviour) in ways which may not be intended or desired, i.e. dysfunctional behaviour Objectives, targets, punishments and rewards can all cause dysfunctional behaviour resulting in unintended consequences, e.g. dissatisfied customers, shareholders and stakeholders What was behind the dysfunctional behaviour that caused the credit crunch of 2008, Enron scandal of 2002 and the collapse of Barings Bank in 1995?

Contemporary issues in performance management

Human Capital Management (HCM): attempts to quantify the value and contribution of people in organizations can this be quantified? HCM applies performance management methods based on measurement (metrics) what to measure? Governance: managing and reporting on performance is a key element of effective governance

Should organizations be made to manage and report on performance to a greater extent, i.e. continue to adopt best practice on a discretionary basis or more regulation?

The future of managing performance?

A question of convergence or divergence Direction will be influenced by forcing factors How will continuing globalisation and deregulation of markets influence the business and economic landscape? How will social and environmental pressures influence business legislation and how organisations function? Best practice and regulation will lead to a conformity and convergence conditions for stagnation or innovation?

Summary questions
1. Why is performance management relevant to employers and employees? 2. How might an employees perception of performance management differ from their employers?

3. How do HR managers contribute to the performance of organizations?

4. What is the purpose of a performance management system? 5. Critically evaluate the performance appraisal as an effective management intervention to improve employee performance.