ModernGhana logo
23.06.2019 Article

Performance Management In Effective Organizations

By Dr Idumange John
Performance Management In Effective Organizations
LISTEN JUN 23, 2019

Every organization has its goals, objectives and the strategies for achieving them. when these goals and objectives are achieved then such an organization can be said to be effective but when they are achieved with minimal resources (money, men, machines materials and minutes) then efficiency criterion comes in to play. Organizational performance consists of the actual output or results of an organization as measured against its intended outputs.

Performance is the accomplishment of a given task measured against pre-determined standards of accuracy and completeness. Simply put, performance is getting the job done to produce the desired result. Performance management, PM not only focuses on individual employees but also on the teams, programmers, processes and the organization as a whole.

Performance Management- a term first used by Beer and Ruh in 1976 implies a more integrative approach to planning and rewarding work outcome including linkage with customer satisfaction and economic contribution. The Data warehouse institute defines performance management as ‘A series of organizational processes and applications designed to optimize the execution of business strategy” PM systems consists of process and people elements. The process element includes: job description, rating criteria, time of performance appraisal, and reward and recognition system. The main component of the people element is the manger- who drives the system by setting expectations communicating plans, encouraging development and giving and receiving…..

Armstrong and Baron (1998) define performance management as “a strategic and integrated approach of delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors”. PM is a systematic and holistic process of work planning, monitoring and measurement, which aims at continuously improving the teams and individual employee’s contribution to the achievement of organizational goals.

What makes an effective performance comprise five basic components namely:

 Goal setting
 Feedback, Review and Appraisal
 Employee Development
 Reward and Recognition
 Collaboration, Team work and Communication
An effective performance Management system begins with a thorough goal setting process and this is followed by regular feedback and periodic reviews/appraisals. PM also identifies employees developmental and this includes reward and recognition practices. The system also encourages. Collaboration, team work and communication. Companies that believe in high performance strategy must not only shift to PM system but also invest more in up-skilling their managerial population on calibration and differentiation, such mangers can become enterprise contributors. Figure1.

High performing organizations consistently outperform competitors and realize bottom – line impact from their human functions. Scholars have identified five components or domains of a high performing organization.

1. Strategy: strategy means how to use organizational resources skills and competencies to create competitive advantage. Strategy exists at three basic levels namely corporate strategy.

2. Corporate Strategy: refers to the overall strategy of an organization which determines how the corporation supports the value of business. It addresses the question of how the structure of an organization creates more value for the individual and the organization. Corporate value enables an organization to know the resources to be deployed, to create the greatest possible value skills to be used and a combination of all variables to support the strategy goals of an organization.

3. Business unit strategy: is concerned with how to win in the market here competitive analysis including gathering competitive intelligence, core competencies and SWOT Analysis are required. In smaller business, corporate strategy and business unit strategy overlap, for this overlap to be in synch, it is important to have a clear definition of the business unit’s mission, vision and core values.

4. Team Strategy: teams are working groups to which specific tasks have been assigned. Each team has its own team-level strategy which is directly related to the achievement of business and corporate strategies. Each team must have a task, team character, operational dynamics and key performance indicators.

2. Leadership: leadership must communicate expectation and develop and promote the right people leadership must initiate structure and consideration and show the direction to follow.

3. Talent: talent refers to those innate capabilities with which an individual worker is endowed talent is necessary for a failed business. Talent close the gap between where the business needs to go and what it takes to manage the business during tough times, sound talent strategy starts with a clear picture of the business outcomes and defining the talents required to achieve the outcomes. Every organization must have a clear –out policy of choosing the right. Talent that will align with the corporate strategy with accomplishing rewards, recognition, and compensation to drive results.

4. Organizational Culture: This is the behavior of humans who are part of an organization and they are attached to the values, vision, beliefs, norms and habits of the organization, organizational culture affects the way people and groups interact with one another, with clients, and with stakeholders. Revasi and Schultz (2006) state that organizational culture is a set of shared assumptions that guide, divine and interpret corporate behavior organizational culture through communication and symbols or competing, in modern times, organizational culture is seen as a network of shared meanings as well as the power struggles involved by creating similar network of competition. An effective organization must have a mechanism of creating a new culture, changing weak cultures, maintaining new culture and establishing and sustaining new culture forms. Corporate culture is the sum total of the values, customs and traditions that make a company unique. Corporate culture is the character to an organization.

5. Market: In organizational perspective every employee should know the relationship between his or her job and its impact on business result. An organization has to apply marketing techniques such as competitive strategy, to analyze how the firm operates; value chain analysis, strategic group of competitors and market research within the context of SWOT analysis. It must also include brand audit, product differentiation and sustainable competitive advantage. Joshi (2005).

2. Purpose of Performance Management (PM)
Performance is the litmus test for organizational survival. High performing employees’ contribute superior performance- giving the company a competitive edge. Every organization needs continuous improvement. This includes quality delivery of services; PM is an effort to maximize results of an organization and its units or departments. This is achieved through planning monitoring organizational teams and enhancing individual effectiveness of optimizes performance.

PM also seeks to encourage individual and team development. Here, attempt is given to competence development performance shortfall remediation and employee development-all geared towards positive performance outcomes.

PM is all-inclusive as it involves communication among all stakeholders, executives, and workforce in relation to the company, team and individual’s commitments interest and values. It tends to satiate the desires of the various clienteles.

PM entails collaboration of all segments of an organization and in the process builds cohesion, against this background, PM leads to the following.

 Development of employees with robust skills and knowledge-base to support excellent performance.

 Helps employees feel empowered and recognize employee’s achievements.

 Helps the organization raise individual performance and increase the overall effectiveness.

 Planning based on insights of trends in the industry and events that impact on our business.

 Monitoring progress towards time-limited target or objective.

 Report past, current or forecast conditions to stakeholders

 Providing a comprehensive feedback to all employees about their performance.

 Providing relevant data for training efforts through training needs analysis

 Constituting a source of information for reward, and.

 Providing a basis for making other important administrative decisions such as deployment staff re-assignments, task assignment and discharge.

3. PM is guided by certain principles
• Corporate goals must be adopted as team and individual goals.

• Objectives must be jointly agreed between supervisor and workers, not set assigned by former.

• Thrives on clarity and comprehensives of goals.

• It relies on cooperation and consensus.
• It emphasis feedback as a basis for assessment and development

4. Strategies for improving organizational performance.

So many organizations are not satisfied with their current positions in terms of performance. As a result some organization truly to re-invent themselves by deconstructing ineffective organizational structures, redefining leadership and revitalizing business practices around management hierarchies.

A huge number of organizations have had to make drastic budget cuts to negatively affect the health of the organization some organizations play the waiting game-the Sidon look approach hoping that things will get back to normal rather than hit at the organization reset button. Making an organization to function effectively is like overhauling an automobile: you change the oil; reset the carburetor to function change the tiers, service the engine and re-align the car so it can maintain accelerated speed.

Consequently, leaders use instability of the present to build on and create organizations that are capable of self-renewal in the absence of crises. Organization renewal involves changing key rules of the game, reshaping part of the organization, redefining the work people do to maintain citizen satisfaction.

Patrick lbarra (2010) identifies three prominent factor namely organization process and individuals which are critical to the achievement of organization goals. An organization must have a clear strategy, good organizational culture and modalities for operational efficiency.

SWOT: is the most renowned tool for audit and analysis of the overall strategic position of the business and its environment. The underpinning rationale for SWOT is to identity the strategies that will create specific models that can align an organization’s resources and capacities to the requirements of the environment in which we operate. SWOT helps us in predicting and forecasting trends for purposes decision making in an organization.

SWOT: helps an organization to build organizations strengths, policy formulation, maximize its response to opportunities and help in strategic planning. SWOT helps an organization overcome threats, identify core competencies, set strategic planning and provide data to track progress.

Figure 2
SWOT Analysis Framework
Source: SWOT Analysis Sos-Definition, Advantage,

SWOT has its own limitations:
5. Performance Management for Organizations
Individuals and organization s alike have come to understand the secrets of high performing organizations. Since the 1890’s advances in business management research has resulted in various theoretical paradigms describing the characteristics high performing organizations.

Tom peter and Bob waterman (2010) wrote “in search of Excellence” and “Built to last by Jim Collins are two prominent examples. The theses of the two books are that there are few success factors such as strategy alignment ‘customer orientation” and “personnel Excellence” which are shared by high performing organization.

In the 2010’s managers are curious to know exactly which characteristics make specific organizations successful Pavlov and Bourne (2011) developed quantitative characteristics of high performing organizations (HPO). Andy Neely developed a methodological approach to HPO. It is called casual performing modeling.

Casual Performance Modeling: This model has four steps:

1. Define performance criteria, identity specific success factors, measure the relationship between the factors and performance.

2. Set up projects: set up projects based on the impact of the success factors.

3. Measure progress: Measure performance with key performance indicators

4. Make decisions: Make your decisions that have impact on success factors and performance.

Figure 2: Performance Management framework
• Build and test casual Use clear defined Measure Based on criteria

• Business model. Performance performance proceed to the

• Define performance criteria indicators next step

• criteria Describe project Any Have your
• Fine out success portfolio improvement performance

• factors Show project Do the success criteria in mind?

• Measurement impact on criteria? Does your
• success factors and performance Is there a need decision impact

• their relationship criteria to rebuild the your

• with performance Identity gaps & casual model? performance

• Rebuild the casual redefine targets or not?
• business model of
• Necessary.
Integration of Performance Measurement System & Performance Theory

This theory is often cited as one of the most popular paradigms quoted by senior executives. The PMS integration is also identified as one of the critical success factors of business management. There are two perspectives to the PMS .The first of the integration is called vertical Alignment along the reporting chain. This includes the interaction of performance measurement with the organizational strategy, cascading the strategic goals down to operational divisions and the linkage of individual.

The horizontal perspective (integration) is the cross functional connection of performance measurement systems alone divisions. It includes interconnection of PMS with other management control systems such as planning budgeting and strategic accounting. Anderson (2006) posits that both have been research by scholars with limited results.

This is illustrated in figure 3
Figure 3. The PMS Model.
The impact of vertical integration of horizontal integration on performance is not very clear. Some authors posit that integration is a critical success factor. It has been argued that every company may need a certain level of PMS integration.

6 How to Measure Organizational Performance
Management theorists have derived several ways of measuring performance.

One way is to distinguish the outcomes of organization activities and the means by which these outcomes are achieved. The former is “performance while the later is “effectiveness”. So performance management is defunct as outcomes Vs effectiveness. Ukko (2009).

Another strategy of characterizing performance is to distinguish between financial and not-financial performance. Financial performance is often measured using traditional accounting methods. Since profit-oriented organizations produce figures annually, there is a balance sheet which makes for comparability of the financial strength of companies.

The non-financial performance can be measured using operational variables such as market share, innovation, rate of consumer satisfaction, brand loyalty are common examples. Whereas many researchers use self-reported measures to operationalize performance, others combine both the accounted financial measure and self-reported ones in their reports. Smith (1997) avers that non-financial performance can be measured but they can hardly be assessed without the link to corporate strategy.

High performing organization (HPO) tends to share similar characteristic. It was found by de Waal (2008)- the academic director at the centre for organization performance is characterized by some success factors such as is presented in figure 4.

Organization Design Characteristics
 Stimulate cross functional and cross-organizational collaboration.

 Flattens the organization by reducing boundaries and barriers between and around units.

 Enhance organization-wide sharing information, knowledge and best practice.

 Realigns business with changing internal and external circumstances.

Strategy characteristics
 Defines vision and stimulates challenges.
 Strikes a balance between long-term and short-term focus.

 Sets clear goals that area measurable an achievable (SMART).

 Adopts strategy that will give the organization a distinct identity

 Aligns strategy goals and objectives with the demands of the external environment.

Process characteristics
 Design a fair and good record system.
 Innovate products, processes and services.
 Simplify and improve organizational process.
 Measure what matters.
 Communicate to everyone financial and non-financial information needed to catalyze improvement.

 Optimize process and entrench practice.
 Deploy resources prudently.
Technology characteristics
o Implement flexible ICT- systems throughout the organization

o Apply user-friendly ICT-tools to increase usage.
Leadership characteristics
• Sustain trust at all level of the organization.

• Lead by example and be decisive in decision making.

• Develop effective, focused and strong leadership.

• Inspire members to achieve goals in an uncommon way.

• Assign tasks; hold people responsible and be result-oriented.

• Assemble a complementary management team and stimulate improvement.

• Show confidence, humility, and grow leaders from within.

• Allow experiments and mistakes.
Individuals & Roles Characteristics
 Create a learning organization to attract people of attitude who fit with the organization culture.

 Engage the workforce and create a secure work environment .

 Nurture core competencies and innovation in them.

 Develop a resilient workforce and inculcate in them the core values, corms and ethics so they can align.

Culture characteristics
• Empower people and give them freewill to make decisions

• Establish care values and create a strong culture of transparency, openness.

• Shared identity is essential while performance driven-culture is necessary for organizational growth

External orientation characteristics
 Enhance customer value creation
 Maintain good human relations.
 Monitor environmental variables and evaluate their consequences.

 Compete and compare with the set in the market place. Encourage partnership and create value chain network.

 Enter into businesses that complement company’s strength

Armstrong Michael (1990) depicts performance management as a human Resources function which comprises a horizontal integrative force involving people, performance, developing people , paying people and involving people in management. This is illustrated in figure 5.

The model above shows that PM is integrative because it aligns corporate, team and individual objectives (vertical integration) and links various HR Management activities such as organizational development, peoples competencies and reward management (horizontal indigenization).

Basically, profit-driven organization, performance management takes place mainly in four generic measures..

1. Financial:……………Return on investment and economic added value

2. Customer:……………satisfaction an investment, Market and account share

3. Internal process:……quality, response time, cost and new production

4. Learning & growth………Employee satisfaction, database information Technology availability.

In some HPOs, the SCORECARD method is adopted as a critical performance management component. Under the scorecard method, the process involves:

 Clarifying and translating vision and strategy.
 Communicating and linking strategic objectives and measures.

 Planning / setting targets and aligning strategic initiatives

 Enhancing strategic feedback and learning (Kaplan and Norton; 1996).

7. Strategies for creating a High Performing Organization

Researchers have identified six crucial components of creating sustainable growth and a high performance organization. The six crucial elements include:

1. Implement an Effective performance Management Process: Here it is advised that managers should use merit-based system to differentiate between high and low performers with a clear definition of standards and expectations at the individual, team departmental and organizational levels. A transparent reward system and shared goals is also essential.

2. Create Empowerment and Authority: managers are expected to recognize and responded to changes especially in order marketplace information and develop innovative ideas to meet market demands I order to stay ahead of competitions. It is also expected that they will connect with customers to create a brand experience. In addition, companies that decentralize their decision-making so employees can contribute their quota to the growth of the company.

3. Increase Leadership capability at all levels of the company; when employees are inspired with constant communication, the firm maintains her link with work trends, initiatives and changes pertaining to where the business is heading. The company’s mission should be communicated to all employees so as to inspire trust and respect which permeates the entire gamut of the organization, involve all employees in developing strategy especially field experts and high potential future leaders.

4. Develop a Customer-centric Strategy: A successful organization must be centered around the customers, which is connecting company brand, people, mission and purpose. A customer centric organization must first understand the nexus between what the employees are doing and how they are meeting the needs and expectations of customers. They should create opportunities for employees’ engagements.

5. Increase Communication and Collaboration: integrating customer service values, mission and purpose, leadership visibility and authority and empowerment into a comprehensive performance management process. Here, the manager has to select leaders and mangers with potential to be top performers based on the right balance of talents, skills, knowledge and experience. When leaders understand their roles and communicate such roles among peers with a view to collaboration pursue opportunities across departmental and division boundaries. Again, creating strong links among the employees also gives them confidence and a sense of belonging to contribute.

6. Enhancing training & Development: Many HPO invests in employees to inculcate in them norms, values and skills that will make them perform. This is continuous growth and improvement of employees. This prevents “talent hoarding” and enhances the organization’s ability to prevent external mobility of employees. Most companies align customized training and development plans with the organization overarching objectives and direction thereby providing a clear career pathway for productivity improvement.

Talent Management Strategy
Another critical component of PM is Talent Management. Business leaders tend to implement talent management processes are better equipped for competitors in a highly globalized economy. The ability of business champions to manage talents helps them to define leadership criteria across all functional area; identify specific competencies and cultivate growth.

In managing talent, the establishment has to be pro-active rather than reactive putting into consideration the dynamic needs of the company, Requisite skills of employees will also be identified and developed in order to save cost. it is also necessary to improve recruitment processes to bring on board high-quality personnel who have the right expertise and competencies to execute strategic assignments.

The best talent management plan is to align talents with the strategic place of the business. Before goal alignment can take place effectively, the objectives of the goals will be communicated to allow managers access and view the departmental goals to reduce redundancy. Goal sharing helps focus employees’ efforts on the most important goals and understand more clearly all responsibilities associated with specific goals. This will strengthen accountability by assigning measurable and clearly articulated goals.

An Effective performance Management System will do the following:

i. Be job specific, covering a huge range of jobs in the organization.

ii. Align organizational strategy with culture
iii. Provide accurate picture of employee’s performance

iv. A collaborative process for setting goals and reviewing performance

v. Monitor and measure why and how of the employee behaviour.

vi. Include positive feedback for jobs well done and constructive feedback when improvement is needed.

vii. Provide training and development opportunities.

viii. Establish a clear line of communication.
ix. Recognize employee achievement.
x. Support decision making about promotions, terminations, compensation and rewards.

xi. SMART: Specific, Measurable Attainable Realistic and Time=Bound.

PM is a process by which managers and employees work together to plan, monitor, and review employee’s work objectives and the overall contribution to the organization. Global research has shown that 52% of leaders see performance management as a catalyst of business performance. However creating a high performing organization that can deliver growth, PM mist take account of the organizational culture and how it promotes business performance. What is recommended generally is to link strategy and the culture so employee can be motivated in the right direction. The Hay Group found that 40% of managers do not use PM effectively, PM is used to reinforce delivery of strategy clarity growth targets and understand how organizational culture can drive: business performance. Above all, a good PM system should obey the ten commandments of performance management.

Ten Commandments of performance Management.
1. Thou shall involve thine employees in the design of performance Management programme.

2. Thou shall go out of thy way to recognize top performers

3. Thou shall allow they employees to fail
4. Thou shall tie a large part of managers own performance appraisal to how well they plan to encourage and assess performance of employee.

5. Thou shall base performance decisions on actual work results, not on personality traits

6. Thou shall link each individual’s goals to the business over goals.

7. Thou shall realize that telling your employees that they have done poorly is not easy

8. Thou shall not succumb to the temptation simply to design a form and call it a performance management programme.

9. Thou shall train managers (including thy self) to give and receive meaningful feedback.

10. Thou shall treat employment as adults and with respect, and not lose sight of the fact that they are people, not just your family members.

As managers and organizational persons, may we faithfully and with trepidation, adhere to these commandments to move our organizations to an enviable height?

Thank you for your kind attention
Pavlov, Andrey.Bourne, Mike (2011): Explaining the Effects of performance measurement on performances an organizational routines perspective in international journals is operations & production Management 31 (1) pp. 101-122.

Source Anderson, S.W. (2006). Managing costs and structure throughout the value chain: Research on Strategic cost management. In c. s.chapman (ED). Handbooks of Management Accounting Research (pp.481-508). Elsevier.

SWOT Analysis sos-Definition, Advantages

Kent E. Romanoff (989): personnel, Ten Commandments of performance Management

Ukko, j. (2009). Management: A Framework for successful operative Level Performance Measurement PHD is at the Lappeenranta University of Technology.

A Paper Delivered at the Institute of Strategic Management of Nigeria, Bayelsa State Chapter on June 22, 2019 @ Steve Azaiki’s Library, Bayelsa State.

ModernGhana Links

Join our Newsletter