Key Performance Indicators (KPI)4
In recent years, as many studies reported, more and more organizations have implemented performance management because it could lead to better organizational results. Armstrong (2005) defined performance management as a cycle process: planning, acting, monitoring and reviewing. The final review is also called performance appraisal, in order to set a new and reasonable target for organizations’ future development. Thus, it is widely concerned by organizations that how to build an ideal performance appraisal system to contribute to the effective management of employees to achieve a better outcome. In this essay, it will first review the relevant literatures about performance management and performance appraisal. Then it will take a Chinese cooking utensil company SUPOR as an example, which applied Balanced Scorecard (BSC) and 360-degree feedback as the main method to manage their performance. It will analyze the application of this approach in their performance management system, including the strengths and the limitations. Some recommendations will be given at the end of this essay.
Performance measurement is a fundamental process of management (Muchiri et al., 2010). It managed the performance of both organizations and individuals. The performance may include the “inputs, outcomes, impacts and relate to economy, efficiency, effectiveness, cost-effectiveness, or equity” (Brudan, 2010). The process of performance management is like a cycle, which include plan, act, monitor and review (Armstrong, 2005). “Planning” is to set goals for organizations. It helps to identify the objectives and competence requirements of an organization. “Acting” is to implement the plan into practice by using different approaches. “Monitoring” is to supervise the implement of the plan, like a checking process, in order to find new demands. At last, “reviewing” is to evaluate the results of the whole process, which can measure weather the target are achieved and what is the new requirements for the organizations. This step is also called performance appraisal, it provide feedbacks which are very important to help setting the new target for the next period of organizations’ development.
There are plenty of approaches for organizations to review and manage their performance, such as Management by Objectives (MBO), Balance Scorecard (BSC). To be specific, Management by Objectives (MBO) is mainly focus on defining objectives within organizations and pay more attention on what must be accomplished (goals) rather than how it is to be accomplished (methods). According to Odiorne (1965), the system of MBO can be described as a process in which the superior and subordinate managers set common objectives for organizations, and define each individual's major areas of responsibility, then evaluate the performance periodically, and reward according to the result. The advantage of this method is that, it clears the personal goals of each employee, and involves them in the whole process of goal setting, thereby increase employees’ job satisfaction and commitment.
Furthermore, according to Kaplan and Norton (1992), Balance Scorecard (BSC) is “a system of linked objectives, measures, targets and initiatives which collectively describe the strategy of an organization and how the strategy can be achieved. It can take something as complicated and frequently nebulous as strategy and translate it into something that is specific and can be understood”. There are four perspectives in the original BSC model for organizations: “Financial, Customer, Internal Business Processes, and Learning and Growth” (ibid). With the development of BSC, it became a powerful method to accomplish...