What Your Performance Management System Needs Most

Topics: The Gallup Organization, Performance management, Management Pages: 5 (1280 words) Published: September 16, 2013
29/04/2013

What Your Performance Management System Needs Most

Gallup Business Journal: businessjournal.gallup.com

What Your Performance Management System Needs Most
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A company can have a world-class system in place -- but it's only as effective as the managers who implement it by Megha Oberoi and Paresh Rajgarhia

Performance is the true litmus test for survival in the marketplace. High-performing employees contribute superior performance, giving the companies they work for a competitive advantage -- and their extra effort differentiates great organizations from merely good ones. It's crucial for businesses to have systems in place to identify, recognize, reward, and retain their top performers to achieve sustainable growth. Most companies understand this and spend enormous sums acquiring a performance management system to help ensure their success. Yet wide variation in employee performance persists despite this investment. An effective system should encourage collaboration, teamwork, and communication.

To investigate why this variance occurs, we reviewed employee engagement data from one of the most significant emerging economies -- India. Our analysis included data from more than 50,000 employees working in 10 major industry sectors in 22 global companies. We learned that more than half of the employees (54%) felt that their company's performance management system was not effective. This perception is likely to demotivate employees, creating feelings of anguish or frustration that negatively affect their performance, which ultimately defeats the whole purpose of designing and setting up an effective system in the first place. We also wanted to discover why the same system was viewed differently by different employees -- and why some found the system to be effective while others didn't. To determine the elements of an effective performance management system, we asked members of the human resources function in the 22 companies: "What makes an effective performance management system?" From their responses, five common themes emerged, as shown in the graphic below.

businessjournal.gallup.com/content/161546/performance-management-system-needs.aspx?version=print

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29/04/2013

What Your Performance Management System Needs Most

An effective performance management system starts with a thorough goal-setting process, followed by regular feedback and reviews/appraisals. It also identifies employees' developmental needs and includes robust reward and recognition practices. The system also should encourage collaboration, teamwork, and communication. The manager's effect on a performance management system Fundamentally, a performance management system is composed of process and people elements. The process element includes items such as job descriptions, rating criteria, the time period of performance appraisal discussions, and reward and recognition systems. The key component of the people element is the manager, who drives the system by setting expectations, communicating plans, encouraging development, and giving and receiving feedback. Our analysis revealed that most companies invest in world-class processes for their performance management system, but they overlook the importance of the people element. And because managers have the greatest impact on that element, we decided to investigate whether managerial ability was responsible for the variance in employee experience with the system. To determine the manager's effect on the performance management system, we conducted research with the same participants from our initial study. To gain a sense of managerial ability, we asked each businessjournal.gallup.com/content/161546/performance-management-system-needs.aspx?version=print 2/5

29/04/2013

What Your Performance Management System Needs Most

employee to rate his or her manager to determine how much managers: helped employees feel empowered recognized or praised employees'...
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