Performance management is an area of human resource management which has the potential to make the most significant contribution to organisational effectiveness and growth. Performance management is essentially a strategic management technique, with strong roots which links business objectives and strategies to individual goals, actions, performance appraisal and rewards through a defines process. To the extent that performance management systems are capable of incorporating all these links, then they can provide a very powerful tool for driving change through the organization. The most important feature of an effective performance management system is its ability to be seen as a method of continuous securing improvements in the performance teams and individual against predefined business strategies and objectives.
2.2 DEFINITION OF PERFORMANCE MANAGEMENT
Performance management can be defined as a systematic process for improving organizational performance by developing the performance of individuals and teams. It is a means of getting better results from the organization, teams and individuals by understanding and managing performance within an agreed framework of planned goals, standards and competence requirements. Processes exist for establishing shared understanding about what is to be achieved, and for managing and developing people in a way that increases the probability that it will be achieved in the short and longer term. It is owned and driven by line management. (Amstrong, 2006)
Other definitions are:
Performance management is: 'The development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organisation which supports and encourages their achievement' (Lockett, 1).
Performance management is: the process of 'Directing and supporting employees to work as effectively and efficiently as possible in line with the needs of the organisation' (Walters, 3).
Performance management is a strategic and integrated approach to delivering sustained success to organisations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors' (Armstrong and Baron, 4).
2.3 SPECIFIC AIMS OF PERFORMANCE MANAGEMENT
The specific aims of performance management as expressed by a variety of organizations (source: IRS Employment Trends, 1 August 2003, pp 12-19):
Performance management is to establish a high performance culture in which individuals and teams take responsibility for the continuous improvement of business processes and for their own skills and contributions within a framework provided by effective leadership. Its key purpose is to focus people on doing the right things by achieving goal clarity.
All individuals being clear about what they need to achieve and expected standards, and how that contributes to the overall success of the organization; receiving regular, fair, accurate feedback and coaching to stretch and motivate them to achieve their best (Marks & Spencer Financial Services).
The alignment of personal/individual objectives with team, department/divisional and corporate plans. The presentation of objectives with clearly defined goals/targets using measures, both soft and numeric. The monitoring of
performance and tasking of continuous action as required (Macmillan Cancer Relief).
Performance management is about aligning individual objectives to organizational objectives and ensuring that individuals uphold corporate core values. It provides for expectations to be defined and agreed in terms of role responsibilities and accountabilities (expected to do), skills (expected to have) and behaviours (expected to be). The aim is to develop the capacity of people to meet and exceed expectations and to achieve their full potential to the benefit of themselves and the organization.
The goal of performance management is to raise the level of an employee's performance, which ultimately affects the organization in many positive ways. Organizations can improve their performance management system by using effective training methods, communicating clear objectives and receiving feedback from a variety of stakeholders (Soltani et al., 2005). Hence, a performance management system is interpreted as a broad set of functions, which include performance appraisals, feedback, counseling, coaching, reward systems, career planning and training and development (T&D).
2.4 A CONCEPTUAL FRAMEWORK OF PERFORMANCE MANAGEMENT
Mission And Value Statement
Objectives
Performance Agreement
Feedback
Continuous Performance Management
Preparation For Review
Feedback
Performance Review
Performance Related Pay
Development Or Training
Performance Rating
Figure 2.1 Performance Management Framework/source: Armstrong
2.4.1 Preparation Of Mission A Value Statements
Mission is the organisations vision of its future position and how it will be achieved. The organizational mission and vision together form an important management instrument that expresses the soul of the firm and indicates what the organization stands for, for which purpose it exists on earth, what its primary goal is, where it wants to go to, how it plans to reach there (based on his/her values), and on which important points should everyone concentrate. They form the collective ambition of the organization, and have an important impact on the bond of employees to the organization and their performance. A successfully formulated collective ambition shows people how their activities contribute to the whole, whereby they work together on the goal of the organization, which will lead to higher performances. As a result, they get a feeling of pride that they are making a useful contribution towards something that is worth it. This only works if they believe that management has a long-standing commitment to it (Hamel & Prahalad, 1994).
2.4.2 Objectives
Objectives provide explicit guidance on the future behavior and performance requires achieving the mission (Philpott & Sheppard, 1992). The objectives are directly derived from the organizational vision and form realizable milestones, which are measured yearly. Objectives are organisation's performance target- the result and outcomes management wants to achive. They functions as yardstick for measuring how well the organisation is doing. Objectives need to be set for every result area in a hotel such as:
catering supplies
restaurant services
visitors′ lunches
hygiene standards
budgeted revenue
A key result area statement should contain an indication of not only what has to be done but also why it has to be done. The 'why' part clarifies the ongoing objective but it may be necessary to expand that by reaching agreement on a performance standard that describes what good performance will look like. A performance standard definition should take the form of a statement that performance will be up to standard if a desirable, specified and observable result happens. It should preferably be quantified in terms, for example, of level of service or speed of response. (Armstrong, 2006).
To achieve results against these key result areas, objectives are bound to be Specific, Measurabe, Achievable, Relevant and Time frame.
2.4.2.1 Balance Scorecard
Kaplan and Norton describe the BSC as a process which "move beyond a performance measurement system to become the organizing frame work for a strategic management system". A BSC is an information-based management tool that translates our strategic objectives into a coherent set of performance measures.
Clearly, the balanced scorecard is a relatively recent innovation, in integration of "soft" factors within a strategy. The corporation has focused its direction on the strategy management process (Clark, 1986). The balanced scorecard defines that direction in the four perspectives. It is based on a balanced set of indicators covering a company's mission and goals, not just financial measures.
The BSC is a system that enables the organization to clarify their strategy and translate them into action. It is a system, derived from the strategy, reflecting the business objectives which the firm had set for itself. The approach supports the strategic planning and implementation by integrating all the activities of the organization around a common understanding, with the goals of the organization. The BSC translates an organization's strategy into a comprehensive set of performance measures that provides framework for the implementation of strategy.
2.4.3 Performance Agreement
The Performance Agreement is the document that the manager and employee mutually develop at the beginning of the assessment period which sets out the employee's goals, objectives and targets for the year. Performance agreements support a management by objectives approach. This is where managers help staff recognize how their roles fit into the larger picture of organizational success. From there, each staff member develops specific performance goals and objectives that are aligned with the company's strategic goals. Performance agreements not only ensure that performance is measured, they also set up a great communication system to regularly discuss individual performance. These agreements are essentially a way of making sure that everyone is aware of what they need to work on, and why.
2.4.4 Continuous Performance Management.
It evaluates the individual performance, qualities and competencies against relevant objectives. By supervising continually, improper performance can be identified at any time during the performance cycle and assistance can be provided to address such performance rather than waiting until the end of the period. Continuous performance management encourages individuals and their managers to exchange information, and comment on their achievement.
Managing Performance Throughout The Year
Perhaps one of the most important concepts of performance management is that it is a continuous process that reflects normal good management practices of setting direction, monitoring and measuring performance and taking action accordingly. Performance management should be treated as a natural function that all good managers carry out.
To ensure that a performance management culture is built and maintained, performance management has to have the active support and encouragement of top management who must make it clear that it is regarded as a vital means of achieving sustained organizational success.
2.4.4.2 The Continuing Process Of Performance Management.
Performance management should be regarded as an integral part of the continuing process of management. This is based on a philosophy that emphasizes:
achievement of sustained improvements in performance.
continuous development of skills and capabilities.
that the organization is a 'learning organization' in the sense that it is constantly developing and applying the learning gained from experience and the analysis of the factors that have produced high levels of performance.
Managers and individuals should therefore be ready, willing and able to define and meet development and improvement needs as they arise. As far as practicable, learning and work should be integrated. This means that encouragement should be given to all managers and members of staff to learn from the successes, challenges and problems inherent in their day-today work. The process of continuing assessment should be carried out by reference to agreed objectives and to work, development and improvement plans. Progress reviews can take place informally or through an existing system of team meetings. But there should be more formal interim reviews at predetermined points in the year, for example quarterly.
2.4.4.3 Feedback
Performance feedback to employees is one of the essential key to make that exclusive objective a reality. When employees are uncertain about their work performance and job, they cannot be as satisfied and productive as possible. It is widely accepted that feedback is an essential component of an effective performance improvement strategy. A triumphant coaching process begins with an evaluation of the executive's role as defined by the institution, current performance expectations and perceptions that have developed over time, including feedback from the superior and key peers and subordinates. The coach should conduct one-on-one confidential interviews to get a snapshot of any performance issues from various perspectives.
2.4.5 PREPARATION FOR THE REVIEW.
At this stage the manager and employee prepare themselves for a meeting. The basis for preparation by managers should be the objectives, standards, competence requirements and plans agreed at the last main review as amended during the year. Achievements should be assessed by the application of appropriate performance measures. Reference should be made to any notes made during or following interim review meetings about the individual's performance. Changes in the individual's role since the last review should be noted. Consideration should be given to any changes in internal organizational, divisional or departmental circumstances that may have affected the definition and achievement of objectives. Employees adopt a self-assessment which is a process in which they review their own performances, using a structured approach, as the basis for discussions with their managers in review meetings. The main advantage of using a self-assessment approach is that it reduces defensiveness by allowing individuals to take the lead in reviewing their own performance rather than having their managers' judgements thrust upon them. It helps to generate a more positive and constructive discussion during the review meeting. It
encourages people to think about their own development needs and how they can improve their own performance (Armstrong, 2006).
2.4.6 PERFORMANCE REVIEW
Performance review or PA is the same and an important process. A performance review is a part of directing and handling career development. It is the process of obtaining, evaluating, and recording information about the relative worth of an employee to the organization. The annual performance review jointly review achievements and progress, comments and ratings are made as required and a new performance agreement is reached.
2.4.6.1 What Is Performance Appraisal?
Appraisal is something we all constantly do, either consciously or unconsciously, objectively or subjectively (Torrington & Hall, 1991). The term "performance appraisal" has generally meant the annual interview that takes place between the manager and the employee to discuss the individual's job performance during the previous 12 months and the compilation of action plans to encourage improved performance. Moon (1993) succinctly defined appraisal "… as a formal documented system for the periodic review of an individual's performance". Performance appraisal is part of the larger process of performance management. Marchington and Wilkinson (1996) describe it as a cyclical process: determining performance expectations; supporting performance; reviewing and appraising performance; and, finally, managing performance standards.
2.4.6.2 Uses Of Performance Appraisal
Performance appraisal can be used for numerous purposes including: coaching; counselling; negotiating improvements in performance; improving the work environment; clarifying expectations and duties; improving upward and downward communications; reinforcing management control; helping validate selection decisions; providing information to support HR activities; identifying development opportunities; and improving perceptions of organisational goals.In short, it would appear to be a "panacea" (Taylor, 1998).
One of the critical objectives of performance appraisal is to provide feedback to foster employee growth and development (Stroul, 1987). Squires and Adler (1998) suggest that an appraisal system must not only evaluate what has been accomplished, but also "guide future development, leverage existing strengths, and address skill deficiencies". Thus, a third important component of effective PA relates to the frequency and nature of supervisor feedback. To be most effective, a continuous performance-based feedback process should exist between superiors and subordinates (Henderson, 1984) and should include two-way communication and negotiation between the supervisor and employee (Smith, 1987). Similarly, Kane et al . (1995) suggest that, in providing feedback, supervisors should allow employees the opportunity to share their insights and evaluations concerning their own performance. Thus, effective performance feedback should involve, inform, and motivate employees and also create improved supervisor-employee communications (Villanova et al). Fourth, effective PA should provide the opportunity for the supervisor and employee to promote the achievement of individual and organizational goals. That is, effective performance appraisal serves to clarify performance standards and expectations (Lowenberg, 1998) and provides the medium for supervisors and employees to negotiate mutually agreed-upon goals (Katzell, 1994). In addition, performance appraisal should be an important component of both the organization's succession planning program ( Cordner et al1982 ) and the individual employee's career self management (Squires &Adler, 1998).
2.4.6.3 Performance Appraisal In Hotel Industry
The hospitality industry is one of the fastest growing sectors worldwide. Organizations are becoming more service and customer-oriented. Accompanying this interest in service has been an increase in the consideration paid to quality, most recently through total quality management initiatives. Under TQM, the customer, internal and external, is supreme and it thus seems a logical step to include customer evaluation of performance in the appraisal of staff. Performance appraisal can then play a key role in communicating to managers whether quality standards are being met.
However, a growing use of "mystery shoppers" is being used to assess the performance of workers in the hotel industry. Here an individual, either a company employee or someone contracted in, poses as a customer or client and monitors and reports on the service encounter to senior managers.
2.4.6.4 Effectiveness Of 360 Degree Feedback
360-degree feedback has been defined by Ward as: 'The systematic collection and feedback of performance data on an individual or group derived from a number of the stakeholders on their performance.'
Managers
Internal Customers
Peers
Individual
Direct Reporters
Figure 2.2 360 degree feedback model (Armstrong)
Kavanagh's (1997) refers to the idea of employees wanting to know how they are performing; the issue of how best to provide effective feedback to employees; and the challenge of providing feedback to employees which facilitates both performance improvement and effective career development processes. DeNisi and Kluger (2000) herald that, for scholars and practitioners in the field of human resource management in general, it is widely accepted that feedback is an essential component of an effective performance improvement strategy. Furthermore, commentators argue that performance feedback increases job satisfaction and motivation (Hackman 1980) and many decision-making and career development models include a feedback loop emphasising that
individuals learn on the basis of receiving feedback on their performance. Thus, performance feedback plays an important role in numerous organisational activities such as career development, motivation, job satisfaction, and performance management.
2.4.7 Performance Rating And Training Development
Ratings are required so as to know the actual performance of the employees within the organization. Upon the results of the performance rating, managers will have to identify areas of training where required. Organization possessing a training policy will facilitate employees to plug any skills shortages in your workplace. This is advantageous to employees and will also have an optimistic impact on business performance.
A training policy can be realized to permit employees to perform their current role more successfully. In fact PM is being implemented in organization as to enables employees to develop their abilities and potential to achieve the organization goals.
2.4.7.1 Coaching: A Positive Approach To Manage Performance
The word "coach" can mean many different things to many people, our research strongly suggests that a coach is an individual who is in a position to provide feedback, counsel and accountability to another individual with the purpose of helping them improve their performance and develop their talents (Longenecker, 2007b).
Coaching has become a necessary technique for performance improvement. Coaching is more of a two-way communication process. When learners, who are expected to be coached, deliver results, coaches will give feedback and let learners adjust their actions again. This process will go on and on until they reach the expected outcomes. It is a reciprocal relationship between coaches and learners.
Coaching enhances skills and ability and can raise a person's game. It gives individuals the opportunity to review themselves, their performance and identify where enhancements can be made.All coaching should lead to improved performance. Requirements in terms of the extent and urgency of that improvement, as well as time availability of those to be coached, will all help to conclude the most effective means of delivering coaching.
2.4.7.2 Performance Management And Continuous Development
Armstrong and Baron (1998) put forward the most important function of PM is concerned with development. PM cannot be improved without proper training and development and essential learning. They added that individuals should be encouraged to take risks and experiment where mistakes are tolerated where means for those involved learning from their experience.
2.5 PERFORMANCE MANAGEMENT SYSTEM IN THE HOTEL SECTOR
Tourism sector are confronted with fierce competition and challenges. Guest (1987) and Walton (1985) suggest that all organizations are operating in increasingly uncertain environments, within which the emphasis is on responsiveness to customer needs and on provision of higher quality customized goods and services.
Adding values for customers, employees, and owners has become a vital thesis in strategic management for hospitality companies. To create values for these stakeholders, a firm should achieve a competitive advantage (CA) over its challengers by settling itself to the uncertain industry environment, understanding the varying needs of customers, and responding to new market entries. As achieving CA has been recognized as the single most important goal of a firm (Porter, 1980), managers have pondered why some organizations have been able to secure an advantageous competitive position, while others have not. Without achieving CA, a firm will have few economic reasons for existing and finally will wither away.
The hotel industry is undoubtedly a labour-intensive industry. Its success depends "on the social and technical skills of its personnel, their ingenuity and hard work, their commitment and attitude" (Gabriel, 1988, p. 7).It is also true that in a labour-intensive industry, the effective utilisation of human resources can give an organisation its competitive edge. "By effectively linking HRM with organisational objectives and needs, human resources can be recruited, developed, motivated and retained towards gaining a competitive advantage" (Cheng 1998). Thus, the success of the hotel industry depends on the quality of its employees and their effective management in order to assist the organisation to achieve its objectives (Berger 1995).
Buick (1997) supports the view that "best HRM practices" in the hospitality industry should include appraisal systems, training and development, empowerment and team working. Service quality is linked to customer satisfaction and customer loyalty. Heskett et al. (1994) considered customer satisfaction and loyalty as behaviour for increasing the profits and growth of a business. A satisfied customer will be loyal to the company and this loyalty is measured through customer retention which eventually is a measure for business performance.
A Hospitality Coach can give you an idea about more ways to running a victorious business without having to feel like its controlling your life - they will facilitate you give your business a bright perspective and help you set goals which once would seem impractical with your current work load. Coaching in the hotel industry will concentrate in Continuous Professional Development for Managers and Supervisors and meet challenges by providing quality guest services and retain customer loyalty.
2.6 BARRIERS TO SUCCESSFUL PERFORMANCE MANAGEMENT SYSTEM
The implementation of PMS can bring competitive advantages to the organization but on the other hand there are some factors that can prevent the PMS to be successful. Some of the limitations are:
2.6.1 Inadequate Training For Managers
When managers are not properly trained there is greater difficulty in achieving performance goals than might otherwise be the case. Poorly trained managers, who do not possess the requisite skills, damage performance at both the individual and work group level. Second, there is a loss of employee productivity at a time when most organizations are clamoring to improve efficiencies and competitors are ready to take advantage of any faltering by a competitor. Poorly trained managers create or fail to address quality problems or allow performance barriers to continue without resolution. They may not have the ability or focus to practice continuous improvement in their operation which is sorely needed in most enterprises.
2.6.2 Inadequate Training for employees
In the Harvard map of HRM, Beer et al. (1984) talk about training as one of the several human resource flows which altogether lead to achieving the "four Cs" of HR outcomes: commitment, congruence, competence and cost effectiveness. In order to achieve high-performance outcomes, others consider employee training as the vital component of HRM and highlight the existence of policies and practices to realise the latent potential of the workforce at all levels as the litmus test of an organisation's orientation. The impetus for much of this research is indicative of a growing conviction that employee training facilitates the journey towards high-performance work practices or as Senge (1990) put it, learning organisation.
2.6.3 Lack Of Proper Planning
The traditional approach which involves measuring effectiveness in terms of objectives poses a number of problems. For example, effective performance must be determined, in part, by the objectives of the organization itself rather than by an externally imposed standard (Otley, 1980). Many organizations fell short in setting performance expectations and goals for groups and individuals to direct their efforts toward accomplishing organizational objectives. Getting employees involved in the planning process will help them understand the goals of the organization, what needs to be done, why it needs to be done, and how well it should be done.
2.6.4 Biases Of 360 Degree Feedback
Moses et al. (1993) who argue that there are fundamental flaws in the 360° feedback inventories which result in the feedback that the system produces being severely limited. According to Moses (1993) a number of factors impact the effectiveness of the feedback process. An appraiser may rate the learner in relation to "generalised trait-based outcomes" rather than concrete situations. Second, a limited or non-existent frame of reference may exist for making rater/observer judgements. Third, the rater is making observations on past performance based on memory. Fourth, the rater may not be sufficiently equipped to effectively interpret the learner's behaviour.
2.7 CONCLUSION
The real concept of performance management is associated with an approach to creating a shared vision of the purpose and aims of the organization, helping each individual employee understand and recognize their part in contributing to them and in so doing manage and enhance the performance of both individuals and organization.
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