There are many advantages associated with the implementation of a performance management system. A performance management system can make the following important contributions:
1. Motivation to perform is increased.
Receiving feedback about one’s performance increases the motivation for future performance. Knowledge about how one is doing and recognition of one’s past successes provide the fuel for future accomplishments.
2. Self-esteem is increased.
Receiving feedback about one’s performance fulfils a basic need to be appreciated and valued at work. This, in turn, is likely to increase employees’ self-esteem.
3. Managers gain insight about subordinates.
Direct supervisors and other managers in charge of the appraisal gain new insights into the person being appraised. The importance of knowing your employees is highlighted by the fact that the Management Standards Centre has recognised that developing productive relationships with colleagues is a key competency for managers (www.management-standards.com, Standard D1: Develop productive working relationships with colleagues). Gaining new insights into a person’s performance and personality will help the manager build a relationship with that person. Also, supervisors gain a better understanding of each individual’s contribution to the organisation. This can be useful for direct supervisors as well as for supervisors once removed.
4. The job definition and criteria are clarified.
The job of the person being appraised may be clarified and defined more clearly. In other words, employees gain a better understanding of the behaviours and results required of their specific position. Employees also gain a better understanding of what it takes to be a successful performer (i.e., which criteria define job success).
5. Self-insight and development are enhanced.
The participants in the system are likely to develop a better understanding of themselves and of the kind of development activities of value to them as they progress through the organisation. Participants in the system also gain a better understanding of their strengths and weaknesses, which can help them better define future career paths.
6. Personnel actions are more fair and appropriate.
Performance management systems provide valid information about performance, which can be used for personnel actions such as merit increases, promotions and transfers, as well as terminations. In general, a performance management system helps ensure that rewards are distributed on a fair and credible basis. In turn, such decisions based on a sound performance management system lead to improved interpersonal relationships and enhanced supervisor–subordinate trust.
7. Organisational goals are made clear.
The goals of the unit and the organisation are made clear, and the employee understands the link between what he or she does and organisational success. This is a contribution to the communication of what the unit and the organisation are all about and how organisational goals cascade down to the unit and the individual employee. Performance management systems can help improve employee acceptance of these wider goals (i.e., organisational and unit level).
8. Employees become more competent.
An obvious contribution is that the performance of employees is improved. In addition, there is a solid foundation for developing and improving employees by establishing developmental plans.
9. There is better protection from lawsuits.
Data collected through performance management systems can help document compliance with regulations (e.g., equal treatment of all employees regardless of sex or ethnic background). When performance management systems are not in place, arbitrary performance evaluations are more likely, resulting in an increased exposure to litigation.
10. There is better and more timely differentiation between good and poor performers.
Performance management systems allow for a quicker identification of good and poor performers. Also, they force supervisors to face up to and address performance problems on a timely basis (i.e., before the problem is too costly and cannot be remedied).
11. Supervisors’ views of performance are communicated more clearly.
Performance management systems allow managers to communicate to their subordinates their judgements regarding performance. Thus there is greater accountability in how managers discuss performance expectations and provide feedback. Both assessing and monitoring the performance of others are listed as key competencies for managers by the Management Standards Centre (www.management-standards.com, Standard D6: Allocate and monitor the progress and quality of work in your area of responsibility). When managers possess these competencies, subordinates receive useful information about how their performance is seen by their supervisor.
12. Organisational change is facilitated.
Performance management systems can be a useful tool to drive organisational change. For example, assume an organisation decides to change its culture to give top priority to product quality and customer service. Once this new organisational direction is established, performance management is used to align the organisational culture with the goals and objectives of the organisation to make change possible. Employees are provided with training in the necessary skills, and are also rewarded for improved performance so that they have both the knowledge and the motivation to improve product quality and customer service. This is precisely what IBM did in the 1980s when it wanted to switch focus to customer satisfaction: the performance evaluation of every member in the organisation was based, to some extent, on customer satisfaction ratings regardless of function (i.e., accounting, programming, manufacturing, etc.).4 For IBM, as well as for numerous other organisations, performance management provides tools and motivation for individuals to change, which, in turn, helps drive organisational change.
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