Discuss the various purposes of performance management systems.

Question

What will be an ideal response?

Answer 1

Organizations establish performance management systems to meet three broad purposes: strategic, administrative, and developmental. The strategic purpose refers to effective performance management that helps the organization achieve its business objectives. It does this by helping to link employees' behavior with the organization's goals. Performance management starts with defining what the organization expects from each employee. It measures each employee's performance to identify where those expectations are and are not being met. This enables the organization to take corrective action, such as training, incentives, and discipline.

The administrative purpose refers to the ways in which organizations use the system to provide information for day-to-day decisions about salary, benefits, and recognition programs. Performance management can also support decision making related to employee retention, termination for poor behavior, and hiring or layoffs. Because performance management supports these administrative decisions, the information in a performance appraisal can have a great impact on the future of individual employees. Managers recognize this, which is the reason they may feel uncomfortable conducting performance appraisals when the appraisal information is negative and, therefore, likely to lead to a layoff, a disappointing pay increase, or other negative outcomes.

The developmental purpose serves as a basis for developing employees' knowledge and skills. Even employees who are meeting expectations can become more valuable when they hear and discuss performance feedback. Effective performance feedback makes employees aware of both their strengths as well as areas in which they can improve. For performance feedback to serve a developmental purpose, managers should adjust their approach to the level of performance. For a high-performing employee, the manager should open up a conversation about the employee's ambitions and the organization's developmental opportunities, so the employee sees an inviting career path. Employees who are falling short in some areas will require an effort to uncover the source of poor performance. Even among employees meeting standards, managers should identify areas for future growth.