HRM’s role in the performance management process

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Chapter 8: Performance Management: 8.1a The Purposes of Performance Management Book Title: Managing Human Resources Printed By: Carmen Banner ([email protected]) © 2016 Cengage Learning, Cengage Learning

8.1a The Purposes of Performance Management

It has been said that “what gets measured gets done.” Good performance management systems have the capability to influence employee behavior and improve an organization’s performance. One study showed that organizations with strong performance management systems are 40 to 50 percent more likely to outperform their competitors in the areas of revenue growth, productivity, profitability, and market value. In addition to improving a firm’s overall performance and profitability, Figure 8.2 shows the other two most common purposes of performance management programs, which are administrative and developmental.

Figure 8.2

Purposes of a Performance Evaluation

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Administrative Purposes

Performance management programs provide input that can be used for the entire range of HRM activities, such as promotions, transfers, layoffs, and pay decisions. The practice of “pay-for-performance”—basing employees’ pay on their achievements—is found in all types of organizations. Studies have shown employees who earn performance-based pay are more satisfied. Performance data can also be used for HR planning, to determine the relative worth of jobs, and as criteria for recruiting particular types of employees and validating selection tests.

Yet another purpose of having a performance management system in place along with performance evaluations is to document HRM actions that can result in legal action. Because of the government’s equal employment opportunity and affirmative action directives, employers need to maintain accurate, objective employee performance records

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in order to defend themselves against possible charges of discrimination when it comes to promotions, salaries, and terminations. Finally, the success of the entire HR program depends on knowing how the performance of employees compares with the goals established for them.

Developmental Purposes

A performance management system gives managers a concrete framework they can use to gather information about an employee’s performance, provide employees feedback, and discuss an employee’s goals and how they align with the organization’s. The goal is to build on a person’s strengths, eliminate potential weaknesses, and further his or her career while improving the performance of the organization as well. By taking a developmental approach to the performance management process, managers help employees understand that the feedback they are getting is designed to improve their future competencies and further their careers and are not being conducted simply to judge them.

Companies such as Best Buy and EDS, a business unit of Hewlett-Packard, are among the firms that have redesigned their performance management programs to focus more on employee development and learning. EDS, for example, integrated its system to work in concert with the company’s learning and career management objectives. For each position in the firm, the system includes a detailed job description, performance review information, and career planner to track employees’ long-term goals as well as access to the company’s automated career library. The system is ultimately linked to the company’s succession policies. By creating this overall system, EDS hopes to shift the role of manager from that of “judge” to one of “coach.”

Chapter 8: Performance Management: 8.1a The Purposes of Performance Management Book Title: Managing Human Resources Printed By: Carmen Banner ([email protected]) © 2016 Cengage Learning, Cengage Learning

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