What is performance management? What is the importance of ensuring your measures of performance are valid and reliable?
Performance management as the name suggests is managing someone's performance, and it is mostly related to the business world and organizations. Companies and organization often review and monitor their employees and their performance since it is very important to the company. But before talking about performance management there are things to consider, for instance: if the organization has a successful HR department, and if yes whether they practices and support the performance management process.
It is very crucial for a company to have well-designed job descriptions, top supervisions, comprehensive orientations, and training. The organization has to have a supportive, friendly work environment to encourage its worker to be on the top. According to the slides, performance management is a process of creating a work environment in which people can perform to the best of their abilities. It is also a process where a manager in the company and its team members work together to make plans, be efficient and achieve the common goal. To add to performance management is an ongoing process of setting objectives, reviewing employee’s performances, and providing feedback(Messersmit, 2013).
The fundamental goal of performance management is to promote and improve employee’s effectiveness. Employees in every successful industry are under ongoing assessment that helps the company keep their market value and compete in the business environment. Performance management is tested through evolutions. Each company evaluates and review employee’s performances at least every year. HR managers are responsible for evaluating their employee's performance and to provide feedback and advice.
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Based on the slides and textbook there are six steps in ongoing performance feedback cycle that help the managers and employees be beneficial. These are given as follows:
Step 1 Setting goals and aligning it with the higher level of goals. Each company has to have a solid goal and a business plan, for instance where this company want to be in 5 years, and how much market value it should have by then.
Step 2 is the behavior expectations and standard set and then aligned with employees and organizational goals. What is expected of the workers, what roles and procedures workers have to be aligned with in-order to guarantee a successful team work?
Step 3 is providing ongoing feedback during the cycle. Managers should always be on the run they have to keep the workers continue the hard work and motivate them, provide them positive feedback(Kooij, 2013).
Step 4 is performance appraised by the manager. After the evaluation and reviewing employee’s performance manager has to show the workers where improvement is needed. Step 5 is formal review section conducted. Step 6 is HR decision; for instances, employee is being promoted.
There is also performance evaluation program that includes administrative and developmental programs, where administrative program mostly deals with compensation, support, and on the other hand developmental program deals with training, and career planning.
Successful organization and hardworking managers, employee ensures a company's success. Thus, it is quite essential to have proper performance measurement systems in the organization to make sure that all the employees and managers meet their desired standard of performance. It has also been argued that many people in the organization don’t like to be evaluated or monitored, but still, their performance evaluation is essential because it helps in finding the areas where the company and employee need assistances. This is thus, for the betterment of both, the employees and thereby of the organization as a whole.
It has been said by various authors and researchers of management that “what gets measured, gets done.” Thus, it can be said that good performance management systems have the capability to influence employee’s behavior and thus can help in improving an organization’s performance.
It has been observed that the success of the entire HR program depends on the fact that how the employees have performed in comparison to the goals or standards established for them. That is to say that if the majority of employees meet their desired standard of performance, the HR program is said to be successful and if the majority of employees are unable to meet their desired standard of performance, then HR program is said to be unsuccessful.
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Although we have understood that performance measurement systems help in ensuring the overall success of the employees as well as organization, but sometimes, as mentioned in the textbook, performance evaluation systems can fail too. And the reasons for failure of performance evaluation systems are as follows:
- Many people in the organization feel that evaluation process discourages teamwork because it focuses on the worker's individual achievement and not the whole team.
- Others presented their concern that evaluation is only useful at the extremes for highly effective or highly ineffective employees, but it is not as useful for the middle employees.
- Many employees also says that evaluations often focus on short-term progress rather than long-term learning.
- Job analysis requires reviewing and evaluating each employee, and it is not an easy job. The HR managers have to work really hard to go through job analysis of each employee's and match it with their past performance and based on that state their opinion.
For reasons such as these, a good number of organizations no longer conduct formal evaluations but use ongoing coaching, individual development plans, or other feedback systems instead.
Lastly, it is very important for the organization to be more effective while evaluation their employees. It has been considered necessary for the organization to evaluate their employees on the basis of the knowledge and skills that they possess and measuring them with the knowledge and skills required for a particular job. This again takes us back to the selection phase as there the employer selects the best-qualified candidates who best suits to the requirements of the job.
Moreover, criterion deficiency is considered as a part of performance standards, and therefore it has been advised that it should capture the entire range of employee's performance, for instance, an employee shouldn't be evaluated only based on their sales revenues or customer services only.
Distinguish between a strategic and a nonstrategic compensation plan.
Before distinguishing between strategic and nonstrategic compensation, it is necessary to know what strategic compensation means, and also why we need it and who is benefited from it?
Compensation strategy is extremely important for any organization. This is because the right compensation strategy helps to build a strong, effective and competitive organization. On the other hand, if the compensation strategy is wrong and it doesn't fit the needs of the company and business policies, then it can lead to damaging the whole organization (Bamberger, 2014).
Compensation strategy is generally derived from the HR strategy, and it helps in maintaining the strong position of the company in the job market. This is because the compensation strategy has a huge impact on the cost and expenses of the organization and that is the main reason that the approval of the top management is needed for it.
Compensation strategy also helps in defining the pay market that the organization is to follow. Also, it is essential that the compensation strategy has to be in line with the business and HR strategies.
In accordance with the slides, we can define strategic compensation as a strategy that helps in linking the compensation of employees to the mission, objective, philosophies, and culture of the organization. This definition shows that there is a very strong connection between strategic compensation and the employees. Employees are very important for the success of the organization as these are the only people that make the companies grow and to maintain their valued position in the market.
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Strategic compensation is thus said to be a scheme which is implemented in order to improve and motivate employees to perform better in their respective jobs.
By recognizing and admiring employee’s hard achievements, the employer is able to strengthen his image in the eyes of his employees.
There are some common strategic compensation goals that most successful organization follow. These goals are as follows:
- It is done to ensure that the employees remain competitive in the labor market, and also to maintain salary equity among employees. (For instance, rewarding the employee's past performance)
- It is also done to mesh employee’s future performance with organizational goals.
- The final goal of strategic compensation is to control the compensation budget, and to attract new employees and to reduce unnecessary turnover.
Strategic compensation is also about motivating employees. This is because it tells the employees that the compensation received is equal to the value of the work they have performed in the organization.
In every organization employees who are more hard working and successful than their co-workers receive more attention and rewards. Therefore this theory of motivation holds employees to put in greater work effort in order to gain attention and rewards.
There are many factors involved in the compensation strategy. The two most important factors involved in Compensation Strategy are internal and external factors. These factors influence the overall pay structure of the organization.
The Internal factor consists of the ability to pay. It is the employer’s ability to pay the employees for the work that they have performed. It also includes the business strategy that fits with the organization policies and influences the employee’s compensation. For instance, the business strategy is about acting and taking the smart decision when it comes to the employees if the company decides to hire skilled workers then, in that case, it has to pay more salary as compare to other competitors relatively. External compensation is also about job evaluation and performance appraisal, where the managers have the responsibility to evaluate employee’s performance. Employees are then rewarded and paid satisfactory differential where they are paid differently for different jobs. Managers in the evaluation stage also help the employees to achieve more, and thereby help them in making their career grow and be successful.
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On the other hand, the external factors in the strategic compensation include labor market. This states that the employer should be aware of the business market and labor market so that the organization treats its employees fairly in accordance with the norms of business and labor markets. The other importance of labor market in the external factor is because of the demand and supply for labor influences the employee’s compensation. The scenario is very simple here if there is no demand for the labor in the market they are not valued that much and their pay is much less. On the other hand, if there is high demand for labor in the market, then a high pay is fixed because in such a case the demand is more than the supply of labor.
Going rate is about the compensation that is decided and fixed in the industry, for example, the pay is generally kept similar for the same job in accordance with the pay fixed by the other organizations in the industry (Bryant, 2013).
External factor also takes into account the cost of living because it influences the employee’s compensation and it can decrease or increase based on the level of consumer price index.
Labour union and labor laws are also the other important factors. This happens when the company is unionized. Labour unions back the workers that deal with the dangerous situation based their demands for more money for securing their lives. On the other hand, the companies that are not unionized enjoy the benefits of a fixed compensation plan.
Labour law that is passed by the government is more concerned about the safety of workers. For example, the payment of wage Act 1936 and the minimum wage can be a good example of labor laws that was passed by the government.
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