Changing Traditional Appraisal System to Performance Management System

By  –  Khaing Thet Lynn

Consider that you want to change your organization’s performance appraisal system to a performance management system. Describing the advantages of having a well-designed, properly implemented performance management system. Assess the Pros and Cons of such adoption if it shall occur.

Performance Appraisal (PA) is a system that involves employee evaluations once a year without an ongoing effort to provide feedback and coaching so that performance cannot be evaluated on regular basic and it is rather evaluating more about the past rather less planning for the future in a strategic way.

Performance management (PM) is a continuous process of identifying, measuring, and developing the performance of individuals and teams, and aligning performance with the strategic goals of the organization (and/or unit). PM system is based on three pillars; setting clear and measurable goals, implementing concrete actions, and imposing rigorous consequences. A well-designed PM system ensures to advocate thoroughly to the employees on the objectives and benefits of the PM system before the organization changed from yearly PA system. A well-designed PM system makes explicit the employees’ contribution to the organizational goals and well explained what is expected from the employees, what the organization is going to do and how the employees need to contribute on the organization’s strategic plan, how the organization will help its employees’ development and how their performances will be judged relative to compensation.

The aims of Performance Management system are:

 1) Strategic purpose – to help top management achieve strategic business objectives by linking individual goals of the staff with the organizational goals and play the important role in the onboarding process of the staff.

2) Administrative purpose – the outcome from PM system can be useful information for making administrative decisions about employees including salary adjustments, promotions, employee retention or termination, etc.

3) Informational purpose – PM systems serve as an important communication device, when informing employees about how they are doing and provide them with information on specific areas where they need to be improved, etc. and when relating to their performance to the organization’s expectations or strategic goals, etc.

4) Developmental purpose – giving regular feedback on the employees’ performance is an important component of a well-implemented PM system, which allow the supervisors/managers to identify and share the strengths and weaknesses of their subordinate and can plan together and/or offer the development plan. By doing so, the organization can create a good “feedback culture” as well.

5) Organizational maintenance purpose – PM system can provide information to be used in workforce planning, which comprises a set of systems that allow organization to anticipate and respond to needs emerging within and outside the organization, to determine priorities, and to allocate staff resources where they can perform the best (talent mapping / talent inventory maintaining process).

6) Documentational purpose – PM systems allow to collect useful information that can be used for several documentation purposes, such as reference tool for administrative decision on staff while considering for the staff applied to another position within the organization, while discussing development plan, while having regular conversations on the employees’ performance and make note of any problems that arises, and finally can be a reference if any judicial case occurs.

The Characteristics of an ideal PM system are:

Strategic congruence – PM system offer the individual goals must be aligned with the unit and organizational goals

Context congruence – PM system should be congruent with organization’s culture and brings a broader cultural context such as 360 degree feedback system, emphasis on measuring behaviors and results of the employees, etc.

Thoroughness – PM system should be thorough regarding four dimension; all employees should be evaluated including managers, all major job responsibilities should be evaluated, evaluation should include performance spanning the entire review period (not just few weeks or month before the review), feedback should be given on positive performance aspects as well as in need of improvement.

Practicality – PM systems are expensive, time consuming and convoluted will obviously not be effective if not applying well. Benefits of using the well-designed PM system must be seen as outweighing the cost, i.e. noticeably increased performance and job satisfaction in a decent time, effort and expenses.

Meaningfulness – PM system must be meaningful in several ways such as PM process must be important and relevant, functions and process must be under the control of the employees (inclusiveness), having regular intervals (reviews/feedbacks/discussions between the manager and subordinates), having/planning continuous skill development, results should be used for important administrative decisions, etc.

Specificity – Well established PM system should be specific, providing detailed and concrete guidance to employees on the organization’s expectation on them and how they can meet the expectations. Top management and managers must be trained prior to the deployment of the PM system as well if the organization changed its annual PA system to PM system, so that the top managers can lead and contribute to the correct use of the system and in effective way.

Identification of effective and ineffective performance – PM system should provide information that allows for the identification of effective and ineffective performance, which will be useful to make correct decisions based on the effectiveness or ineffectiveness of the employees’ performance.

Reliability – PM system should include measures of performance that are consistent and free of error, such as rating system should reflect the reality and similar for the staff who are in the same unit.

Validity – The measures of performance should be valid, include all relevant performance facts and should not include irrelevant performance facts. (must be evaluated on critical performance facts)

Acceptability and fairness – PM system must be acceptable and perceived as fair by all participants. PM system is all about distributive justice, procedural justices, interpersonal justice, informational justices and these dimensions need to be under clear rules which are applied consistently by all supervisors.