Operation of Performance Management Systems

Operation of Performance Management Systems

The idea of managing performance is not new, but the way in which performance management is handled is changing. New systems and new ideas about what motivates employees and causes them to do their best work are being studied, along with adaptations of the older ideas created by individuals such as Maslow and Herzberg. No matter what kind of company is considered, addressing the issues with employee performance can deeply affect the bottom line. When employees are happy they are much more likely to do a better job, which helps the employees and the company. It is difficult to force an employee to perform in a better way for a long period of time, but it is quite possible to provide the employee with incentive to perform better -- and that is at the heart of managing employee performance.

Introduction

Managing performance is a wide, over-arching concept. It can be used to manage the performance of a person, a department, a company, or even a particular process. Performance management systems are a part of human resources, and they are used to ensure goals are met. Those goals need to be met both efficiently and effectively, or the company will suffer. Monitoring employee performance is more complicated than just making sure that employees are working designated hours. What those employees are doing and how they handle and manage their time are both highly significant in considering the bottom line of the company. What causes a person or company or department to perform in a way that pleases the employees and the bottom line? Incentives. The employees must feel as though they are getting something for the work that they are giving the company -- and often that "something" must be more than just a paycheck and/or benefits.

While being well-paid for the work one is doing is important, and getting benefits like health insurance can also greatly affect how a person feels about his or her job, employees generally need things that matter to them and that will be part of their lives for a long period of time. Overall, each employee is different and it can be difficult to determine what the best choice is when it comes to offering performance incentives. Companies have to make money, but if they strive to give their employees what those employees need the companies can often well offset the costs of the benefits they are offering. Performance management is the term that encompasses this, and has been in use since the late 1970s. It addresses technology that manages results and behavior -- both of which are critical elements when considering performance. In order to use the technology of PM, however, a person or company must know how to get the desired results and behavior, and that requires a study of motivation as it relates to employees.

Findings

The Background and Definition of Performance Management

Performance management is most commonly seen in a work environment, but wherever people interact with one another PM can be used. This includes community meetings schools, churches, sports teams, political settings, and more. When people interact with each other and their environment to produce a desired effect, PM can come into play -- and most people do not even realize it. In 2000, Austin & Carr identified PM as an approach that was both integrated and strategic, and that increased an organization's effectiveness by raising the performance level of people who work in those organizations and by developing capabilities in both individual contributors and teams.

Getting all of the employees in an organization to reconcile their personal goals with the goals that are held by the organization is something that really is possible when PM is used. This is part of what is called the self-propelled performance process (SPPP). In order to get everyone "on the same page" so to speak, a mission statement is needed for each job and an analysis of the commitment to that job must be undertaken. In the mission statement, it is important to include the purpose, product, scope, and customers. By creating a strong and complete mission statement for each job, the organization will be able to identify the performance standards and the key objectives for each job. Then, the organization can better determine what kinds of incentives can be offered to employees in order to ensure that those employees work hard to meet the objectives and standards of the job to which they are assigned.

When an organization dedicates itself to the performance of systems or the management of employees, it is able to create an effective delivery of both operational and strategic goals. The correlation between the use of PM software or programs and the improved results of a business or organization is too strong to ignore. Integrated software can provide information much more quickly than a spreadsheet-based system. That can offer a return on investment (ROI) that is highly significant for any business. Both direct and indirect benefits appear and those benefits can be adjusted and manipulated in a way that will allow greater enjoyment for employees and a better bottom line for the business for which those employees work. When PM is used correctly, it is much easier to see the potential in every work day of every employee. That can provide benefits such as a growth in sales, a reduction of organizational costs, and a decrease in the time it takes to make important changes.

The value of a motivated workforce cannot be overemphasized. When employees see how they are directly contributing to the company, and when the employees are being rewarded for that contribution, they want to work harder and do more than they otherwise would. While PM can be used to study their performance and discover ways in which the employees can do things differently to make the company (and, therefore, also the employees) more profitable, the employees must be motivated in order to do a good job. If there is no motivation, there is no point in addressing PM because the employees are not likely to get onboard what the company is attempting to do. Fortunately, motivation of employees is something that has been extensively studies in the past. In order to completely understand PM and the broad definition of performance management as a function of human resources, motivation must be addressed and explained.

Motivation in the Corporate World

Originally, it was only the corporate world that was looking at its employees in ways that included more than just how those employees were being paid. However, that trend is now spreading beyond corporations and into sales and other industries (Bedeian, 1993). Because that is the case, and because management the performance of employees is much easier to do when employees are motivated, it is important to look at trends in compensation and how those trends are being used to help ensure that companies all around the country and the world are able to continue to motivate their employees and grow their bottom line. A reward system for all of the employees is one that will track employee progress but that will also help the employee be more productive while remaining in line with the mission that is held by the company and/or by the industry as a whole.

Mostly, the mission of a company has been straightforward -- to produce goods and services that are high-quality, have strong customer service, and have a workforce that is professional and dedicated. That is easier said than done, of course, but it is also something that can be accomplished and something that can be measured. If employees are not properly compensated for the work that they are asked to do, it is very unlikely that those employees will be able to provide the company with the dedication for which it is looking. The company will then have two choices -- let the employees go and hire new ones, or find ways in which the employees can be motivated to do what the company is looking for in terms of work ethic and customer service. The right kinds of compensation opportunities can skyrocket profitability for a company, and the performance management program will show the growth and development of the bottom line more rapidly than in the past.

The motivation of employees does not come easy. Many people want to work because they want to be paid, but they find that they are only interested in the check and the insurance benefits. They continue to do what they need to do to get by so that they do not lose their job, but that is the extent of their commitment to the organization. That lack of commitment can be seen in performance management, when it becomes clear that productivity is not what it should or could be and the employees who work for the company are not dedicated to doing everything they can to move the company forward. In short, the goals that the employees have (take home a paycheck) are not the same as the goals held by the employer (grow the business, expand the bottom line, etc.).

However, when an employee sees that his or her employer is stepping up and trying to do something that the employee wants or needs, instead of just what is good for the company and not the employees, motivation can result. People need to feel that they matter to their employer. Few people are content with only receiving monetary compensation for the work that they do for their boss. They are all individuals and they have a desire to be recognized. They have goals that do not match up with the goals of the organization for which they work, but they may also have goals which are similar in nature to those of the company by which they are employed. Has anyone asked them what they really want to do with their lives and how the company can help facilitate those dreams? Companies that are concerned about the health and well-being of their employees can help themselves and the employees by searching for common ground within job descriptions and allowing their employees the freedom to grow and develop. The more an employee can do, the more benefit he or she will be to the company.

Trends and Pay-For-Performance

One trend that is being seen more and more commonly to motivate employees and get them working toward the same goals as the company is pay-for-performance. The idea of paying for performance instead of providing a steady salary is not new, and has been around for many years. However, it has become more common recently because the idea of being able to set how much money is made is a big motivator. Employees are able to help the company move toward its goals, because they foster those goals when they are pursuing their own raise in income. By becoming interested in how much extra they can make (or other perks that are offered for performance) the employee inadvertently helps the company to advance its goals and desire, because the employee is bringing in much more business. That is a winning situation for everyone involved, and that winning situation will show in the bottom line when performance management programs are used to determine where the company has been in the past and where it may be going in the future.

When a company is setting up performance management, that company should be aware that money is far from the only important factor to employees. Things like vacation days, praise, promotions, discounts, office parties, business vehicles, insurance, and simple recognition are just some ways in which employees can be compensated for their hard work. Some employers offer child-care, extra vacation or sick days, repayment for tuition, and other incentives to encourage their employees to do more and go further, because that ultimately helps the bottom line of the business. Employees can be highly motivated by these types of things if the motivators are used correctly (Leonard, Beauvis, & Scholl, 1999).

For employees who truly are deeply motivated by how much they are being paid, pay-for-performance compensation appears to be the way to go for businesses that want to reward employees and get them working hard for the company. When an employee is offered this type of deal, though, he or she may be "contingent" in that, if he or she does not sell enough there will be no continued offer of employment. While that can motivate many people, it can also deeply concern some of them to the point that they do not want to continue working for the company. They may be so fearful of failure or of losing their job that they end up struggling -- and ultimately losing their job because of it, which is the very thing that they feared.

Making money on the pay-for-performance plan really is unlimited, but the key is still in the actual motivator. Each employee has goals and dreams -- some of which coincide with the work of the company and some of which do not -- that the employee hopes to someday accomplish. If the company can offer nothing to help that employee realize those goals and dreams, all of the money that can be made may not be enough. Not all goals and dreams require a large amount of cash. When an employer realizes that, he or she has taken the first step toward working with employees to form a cohesive unit where everyone is working toward something of value for the company and for themselves (Leonard, et al., 1999).

One of the reasons that employers are starting to turn more and more toward performance management is to increase their bottom line, but another reason is the realization that things have to change if the company wants to keep its best employees. Each employee has something that is important to his or her working life. If an employer offers that, the employee is more likely to stay. In 1985, Schein called these things "career anchors," and they are an integral part of what motivates and makes up an employee. If the career anchor held by an employee has nothing to do with the goals and plans of the business, holding on to that employee may be difficult. In those types of circumstances, it may be best to allow the employee to move on and find what works for him or her. That will also allow the business to locate employees whose career anchors are more closely matched to the business' goals and future plans.

Some employees see their career anchors much differently, because of the nature of their job. Employees who work in sales, for example, have territories in which they sell their goods or services. These territories are very significant to them, and usually the people who sell the most and are the most consistent are offered the best territories. That makes sense from the standpoint of the company's bottom line, but it can also make it very difficult for a new salesperson to get anywhere -- and that can lead to discouragement and a high turnover rate. To compensate employees that are new and give them a chance to succeed, more training may be in order. They can also be given the chance to work with a mentor, praised, and provided with sales leads. At the end of the day, though, the employee must have similar goals to the organization or the likelihood of success will be low.

The job description may not fit with the employee's goals and dreams, and he or she may have career anchors that do not fit well with the business. In order to motivate an employee, a business must take the time to get to know that employee. People are very different, and if they are given the opportunity, most of them can do great things. Unfortunately, that is more difficult to accomplish when they feel as though what they want is not something they can receive from a particular company. Employees should not expect a company to do everything for them, but they certainly deserve a reasonable level of appreciation and respect.

When an employer works with employees to get what is needed for everyone involved, employees are highly motivated to do what they can to help -- because they see that their hard work will be rewarded with something that matters to them. Managing employee performance, whether it is done through a program or through an old-fashioned method, is not a stand-alone effort. In other words, just looking to see where employees are on a scale or spectrum is not enough if the company does not work to help employees improve. When employees are motivated to do more, everyone benefits.

Models of Human Motivation

In studying human motivation there are two different models, called the process model and the content model. Both are simple to understand, but they are very important to any company that is interested in managing the performance of employees. In the content model, there are needs and there is a deficiency in those needs (Perry, 1993). Individuals all have internal motivation, and they are working in order to satisfy that motivation -- which relates to one or more needs. Satisfying that need is all these individuals require in order to be motivated, and the deep desire for need satisfaction will prompt them to continue to work toward goals that they are interested in achieving, no matter what else might be taking place in their lives or around them.

In the process model, how a person satisfies a need is more significant than simply whether that need is ultimately satisfied (Perry, 1993). How does the person feel about the way in which his or her need is being satisfied? Equity and fairness are important to people who operate on the process model. They may seriously want to get ahead, but if they have to do something that is unethical, immoral, or illegal in order to get what they want, they will be much more likely to turn away from their need and leave it unsatisfied, rather than get their need met through a way with which they do not feel comfortable. If the goals of someone who uses this model do not meet the goals of the company (or the way in which the company intends to meet those goals), it can be difficult for that person to continue to work for that company. The conflict may be too great.

People who use the process model are interested in fair treatment and a good relationship with their employer. Many people are motivated by these things, because everyone wants to be liked and to be treated with basic human dignity. If people do not get the kind of treatment for which they are hoping, they will often not be able to complete their work correctly. They may feel as though they do not have a point in their life and/or in their career, and that can lead to depression and other problems they have to face. In order to avoid those kinds of problems, employees need to seek out employers who share common goals with them. Also important are employers who share common values, because these are not the same as goals. While values are sometimes harder to pin down, they are still very important when it comes to good relationships between employees and employers -- and they make for much more common ground on which both sides can stand to work together.

Maslow and Herzberg

Measuring employee performance and motivation through the HR department does not have to be complex when one has a basic understanding of human psychology. Maslow's Hierarchy of Needs, for example, is one way in which an employer can determine what matters most to his or her employees. In the 1940s, Abraham Maslow developed this hierarchy, which lists five specific needs. (Brethower & Smalley, 1998). The opinion at that time -- and one still held by many people today -- was that each person is somewhere on that particular hierarchy. There are needs that a person wants to see met, and he or she will not move to the next level until that level's needs are met. If a person is willing to work hard enough, he or she can get past one level and on to the next one, but if there is no work being done the person will remain at that level and will not advance.

Of course, not everyone feels that Maslow was correct. Some people are concerned that they see something at the top level as being much more significant than something at the bottom level -- even if they do not possess anything at the bottom level. Everyone is different, however, and it is impossible to group people together completely. They all have their differences of opinion, especially in what matters the most to them in their lives and in their careers. With management of employee performance it is not so much what level a person is on but what level they are desiring to reach. If an employer can motivate his or her employees with things on their hierarchy, that employer is going to be much more likely to find something for which the employee will work hard and stay committed to the goal.

Maslow believed that each thing that a person desired was in order from the lower, more base needs at the bottom to the needs that were at the top. Those needs at the top were, of course, much harder to obtain than the needs that were at the bottom. Money in various forms is on that list, but it is not the only thing -- and not always spelled out. For example, food and shelter are on the list, and money is required to obtain those kinds of things. Power and prestige are also on the list, and those two things are very difficult to achieve if one has no money. Homeless people or people who are living paycheck-to-paycheck in society today have very little prestige and power in the eyes of most individuals.

Whether people get go from one level to the next is debatable. What motivates a person to climb up the hierarchy, what can happen to them that they return to a lower level, and whether certain things matter to them as much as those things matter to other people are all cause for concern (Brethower & Smalley, 1998). In other words, it is not possible to use only something like Maslow's Hierarchy of Needs when trying to determine what motivates employees and how those employees should be treated. There is much more to the employee-employer relationship than just finding one style of needs and assuming that it applies to everyone. Assumption is a dangerous thing, both for employees and employers.

A basic need of which Maslow talks is the need to have security, which is something that money can buy. However, that does not mean that every person who takes a job will do so for the money that job provides. While security is important, the person who takes a particular job may have a spouse who pays the bills with his or her job. That person may be independently wealthy and simply want to work. There are many reasons why a person would seek out employment. If security is not one of those reasons, it will be impossible for an employer to motivate that employee with security. The employee does not require that motivation, because his or her security need has already been met (Gill, 2001).

Unlike Maslow, Herzberg states that people need more just something with which they can live. They need work and other areas of life that bring them satisfaction. If they can achieve that satisfaction, they will be much more likely to be good employees and work hard at the job that they are given (Chapman, n.d.). Because the job they have satisfies them, they have no desire to slack off or leave what they are doing. That is important for the company for which these people work, because the company will not have to work as hard to motivate these kinds of people. They are already motivated all on their own, and their performance show that to be the case. Job enrichment is important, but different things still motivate different people and employers must remember that.

Most employees will gladly accept more money, but that does not mean that they will be dissatisfied if they do not receive it. Some people are much more interested in other types of perks, or in simply feeling as though the company values and includes them. Companies that use performance management often better meet the needs of these types of people, because they understand that there are many motivators. By creating job descriptions and mission statements, they can help show employees exactly what is expected of them. Employees may feel empowered by having a job description, and a mission statement can show them that they are doing something highly valuable, of which the company is appreciative. Having a "mission" in life is not always easy, but there are generally good rewards for people who work hard as something. Companies who work with performance management and motivation as part of HR show employees that they matter.

Examples and Motivation Techniques

When considering motivation, Maslow's safety issue is often one of the best explanations. Employees want and need to feel as though they are safe. If they do not have security, the lack of security and safety may be too much on their minds for them to perform their job duties to the best of their ability (Pitt, 2001). If an employer is willing to motivate an employee with security, that employee is more likely to stay with that company. Why? Because he or she feels as though there is a future with that company. Fears of things like getting fired are reduced, even though self-employment is really the only way to guarantee that a person will not be fired. Employees understand that there are risks in life, but it is always good to have an employer who is aware of that concern -- and who is able to reassure employee so that they can put their fears behind them and do a great job for the company.

Many employees who are reassured of their security do a better job for the company than employees who do not have that reassurance, but there are other areas in which employees can be focused. Goal setting is vital to motivation, but it is a theory that belongs to Herzberg, not Maslow. Employees all have goals that they want to accomplish, and employers have goals that they need their employees to accomplish so that the business can continue to operate effectively (Clarke, 1995). When employees and employers are able to work together on goals that are common to both of them, there is much more that a company can accomplish -- and employees are generally rewarded for that (Pitt, 2001). Employee goals give them satisfaction, and hard-working employees satisfy the company.

There are many forms in which a person can see financial reward (Bowen & Radhakrishna, 1991). Not all are immediate, such as raises, and some take longer to realize, like 401k accounts or another form of retirement option. Another way to realize financial gain is to receive perks that help save money. When an employer offers its employees health insurance, a company car, or something else that will help an employee avoid costs out of pocket, that is a financial incentive to keep that employee. Options of this nature work on two levels -- they help an employee move up on Maslow's hierarchy, and they also help with the goals theory of Herzberg. In addition, they are helpful to the company because the cost of the items are often much less than what the company gains from happier and more productive employees.

When a company focuses on the employees and what they want and need, safety and security are provided for the employees and for the company, too. It is no secret that a high turnover rate is costly to companies, so providing a high degree of job satisfaction is one of the ways in which employers can keep employees. Power and prestige also make a difference for many employees (Tonnessen, 2000). That can include things like promotions, designated parking spaces, or a better office or cubicle. Anything that makes a person feel more powerful in his or her job can be a way in which that person can be motivated to continue to perform at a higher level. Just improving wages is often not enough (White, 1995). Realizing the benefit of providing more than just extra money, though, can go a very long way toward motivating employees to perform better (Robertson, 2006).

In short, it is important that a company pays close attention to how its employees are being both motivated and monitored. If employees are being closely watched but they are not motivated by anything that matters to them, a company cannot expect those employees to do better in the long run. By using performance management, a company can see where the problems lie and can look for ways to correct those problems by motivating employees to work both smarter and harder. That way, the employee gets something that matters to him or her and the company sees growth and a better bottom line.

Conclusions and Recommendations

The main issue with performance management (PM) is not about whether to buy software or use a spreadsheet, but about how to increase the performance that is being seen. Management of employee performance is all well and good, but how can that performance be properly managed if the company is unclear as to what is causing the performance that it has currently. In other words, if the company does not know that the employees are not being motivated in a way to which they can relate, and the company is not willing to work to find that out and to find out how to properly motivate the employees, there is very little point in performance management. The company will be frustrated because it does not feel as though it is getting what it needs from its employees, and the employees will not have any desire to work any harder, even if the employer tells them they must improve.

Because most companies focus primarily on financial rewards like raises and bonuses, these companies miss out on some of the other great things that they could be doing in an effort to help their employees. If they would spend time talking to the employees and determining what those employees really need and want, they would be much more likely to get what they need from their employees in the form of increased productivity and a stronger bottom line. These companies would also see an increase in employee loyalty, which is highly valuable from a financial standpoint because it is very expensive to train new employees. There are many other reasons why loyalty is important, but there is no reason that a company should not be focused on the bottom line. What matters is that the employer and the employees are both happy with the arrangement under which they work.

In order to be successful in business today and in order to retain good employees, a company needs to find good workers and then keep them coming back to work each day. If employees are constantly leaving, it is time for a business to become aware of what is causing those employees to leave. Even paying them well may not be enough to make them stay if they are not getting any kind of satisfaction from their work. There is only so much satisfaction to be had in carrying that paycheck home and using it to pay bills and buy things. An employee can get that somewhere else, but he or she may not be able to get a feeling of accomplishment at the end of the work day or some other style of perk which the employee finds very significant to his or her well-being.

Employees need to feel as though they matter, and a company that gives that to the employee will be better off in the long run because that company will keep good employees. When a company practices transformational or servant leadership and makes all employees feel as though they are part of the team, it is much easier for that company to continue moving forward. When that kind of company focuses on PM, it is able to see what is currently taking place within its organization and where the weak points are located. It is much easier to start with a good foundation and plug a few leaks than it is to start with a poor foundation and have to build everything from scratch.

Making employees part of the team is one of the best ways in which a company can succeed and continue to do well in the marketplace, and the employees will appreciate being part of a group instead of just feeling as though they just work for a company who cares nothing for their needs. No matter what a company decides to use when it comes to performance management -- software, a program, a spreadsheet, or something else -- the bottom line is not what is used but how it is used. If PM is used to find ways to motivate employees and improve their work environment so that they will do better work, the company that uses it in this way will be on its way to greater success.

Annotated Bibliography

Austin, J. & Carr, J.E. (2000). Handbook of applied behavior analysis, New York: Context Press. 2000. Understanding the behavior of individuals in the workplace and in other areas of daily life can be very difficult. However, it is vital that an employer or anyone who is in charge of people focus on learning about the behavior of the individuals of which he or she is in charge. It is not possible to properly motivate people for employment or any other reason without being clearly aware of what motivates those people and what they are focused on in their careers and in the rest of their lives. Gaining information on how to analyze the behavior of those individuals is a way in which leaders can see more success.

Bedeian, A.G. (1993). Business owners (3rd ed.). New York: Dryden Press. Owning a business may sound enjoyable because there is no "boss" to which to answer. However, having a business of one's own is more complicated than most people think. This is especially true in the hiring of employees because there are so many different areas to consider. Reading up on how a business operates and the kind of information which is needed to successfully run a business is something that all leaders should do, even if they are not the head of the business in which they are working. Those who are high up in management are particularly susceptible to not realizing the needs of other people, and that can start them down a slippery slope of not doing what is right by their employees -- and those employees will leave, causing the business to struggle if it cannot quickly find good help.