PERFORMANC
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E
MANAGEMENT
UNIT 4
Mrs. HIMAKUMARI .V
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MANAGEMENT
•Effective performance management is an integral part of the
employee lifecycle and is as crucial to organizational success as
talent acquisition and retention. Performance management encompasses
monitoring and evaluating employee performance, productivity and efficiency. To
contribute to organizational growth one needs to constantly improve one’s performance.
•Performance management encompasses monitoring and evaluating employee
performance, productivity and efficiency. To contribute to organizational growth one
needs to constantly improve one’s performance.
•However, there are certain performance issues that employees and employers face at
work that make performance management challenging and hinder quick yet sustainable
growth.
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1. LACK OF CLARITY IN VISION AND OBJECTIVES
One of the first performance issues which prevents effective performance
management is a lack of clarity in what needs to be achieved. A vague vision
and unclear objectives leads to situations where employees do not know what is expected
of them and the leadership is unable to identify parameters to evaluate their performance.
Without specific objectives, there will always be an ambiguity in what constitutes effective performance.
Solution for fast growing organizations: Start with a clear vision and strong company values.
Clearly and regularly communicate them along with long term and short term objectives. It is
possible for the vision to be dynamic and change from time to time. In such cases, keep the team
members updated on what the organization is progressing towards. Additionally, fast growing
organizations must clearly indicate the role of each employee in achieving the vision and objectives to
ensure transparency across all levels. When employees know the how and what of their roles, they perform
better. 3 3
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2. LACK OF WELL-DEFINED WORK PROCESSES
The next employee performance issue that organizations come across
is a lack of clarity on how the vision and objectives are to be achieved. This obstacle
is especially true for fast growing organizations which lack clear processes and systems to
achieve an identified goal. Often, employees have no institutional benchmark for a
particular task and hence, face performance issues.
Solution for fast growing organizations: Leaders need to guide team members on how
to navigate their way to the end and collectively brainstorm and ideate on the best path. While
internal benchmarks might be lacking, fast growing companies can always take inspiration
from external benchmarks and processes. Additionally, hypergrowth organizations can give
their employees the freedom and autonomy to experiment the best way forward. 4 4
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3. NO ALIGNMENT BETWEEN EMPLOYEE AND
LEADERSHIP THINKING
Another performance issue is a lack of alignment between employee and
leadership thinking. This is again more relevant to fast growing companies, where a
dynamism of vision and best practices leads to conflicting views between employees
and the leadership. They may have different notions of what constitutes effective performance,
and, thus, achieving the same will have different pathways and metrics for evaluation.
Solution for fast growing organizations: Involve employees across the organization in
brainstorming and promote shared goal setting. Identify a middle way on what success will look
like and how it can be achieved. The best way for fast growing organizations to mitigate this
obstacle is by having effective OKRs which communicate the top objectives and
associated key results to align expectations across. 5 5
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4. LACK OF EVALUATION METRICS AND TOOLS
Effective performance management and the path to dealing with performance
issues requires mapping and measuring performance and productivity. However,
Most Fast growing companies lack metrics and key performance indicators to measure
the same. Often, they have an ad hoc approach and understanding of what constitutes good
performance, which is neither inspirational nor uniform.
Solution for fast growing organizations: It is important to have specifically defined KPIs
and metrics to measure performance effectiveness. It is important to customize the KPIs to
specific roles and tasks, instead of simply implementing those that appear on the first page of
Google search. Since the work culture of fast growing companies is different from others, the
KPIs must be customized and adapted accordingly to suit specific business needs.
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5. SHORTAGE OF THE RIGHT TALENT, SKILLS,
AND RESOURCES
This performance issue is faced by almost all organizations as there is an
overall shortage of skilled, qualified talent with the right attitude and work ethic.
However, it is more apparent for hyper growth organizations which have financial
constraints and limitations on how much they can spend along with a relatively lesser know
brand name. Shortage of competent talent and resources leads to inefficiency in performance and
other employee performance issues.
Solution for fast growing organizations: Despite financial constraints, fast growing
companies can deal with shortage of talent and resources by focusing on upskilling existing
employees through intensive learning and development opportunities to address 7 7
organizational needs.
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6. INADEQUATE REWARDS AND RECOGNITION
Performance issues arise when employees feel their efforts are going
unrecognized. Often, in the hustle of growing the businesses and
1000 other things that go on, fast growing organizations miss rewarding,
acknowledging, and appreciating everything their employees do, especially when they
go the extra mile. Many companies in the growth stage feel the financial limitations prevent
them from rewarding exceptional performance. However, this leads to a lack of motivation,
resulting in low levels of performance.
Solution for fast growing organizations: Focus on showing gratitude to employees for
everything they do. Most performance issues can be solved by creating incentives for higher
outcomes. Rewards don’t have to be monetarily driven and can simply be Thank You notes,
public acknowledgement and appreciation, gift vouchers, an extra day off, etc. The idea is to8 8
show that their performance and efforts are being recognized.
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7. OVERLOOKING EMPLOYEE VOICE AND
OPINION
Employee performance issues are intrinsically linked to overlooking
what employees have to say. Most employees who join fast growing companies
are driven by their purpose and passion and seek to make a difference. This
requires organizations to hear what employees have to say, and when this does not happen,
there is a performance disconnect.
Solution for fast growing organizations: Focus on gauging employee pulse and opinion by
leveraging different platforms. It is important to understand what employees have to say
about the culture, factors contributing to performance problems and much more. If employee
performance issues are to be addressed to facilitate effective performance management,
understanding their side of the story is crucial to uncover the challenges as well as potential 9
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solutions.
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8. LACK OF LEADERSHIP COMMITMENT
Unless the leadership is committed to addressing performance
issues and removing the obstacles to effective performance management,
it is very difficult to move the needle. Often, leaders in fast growing companies are
occupied with multiple things on their plate and find themselves stretched for time.
Invariably, they are unable to understand the causes of performance problems and thus,
unable to manage the same.
Solution for fast growing organizations: Leaders must set time aside to address
employee performance issues and commit to their growth and development. They need to
display their commitment by regularly communicating with team members, understanding the
challenges, and identifying solutions collaboratively.
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9. INABILITY TO PROVIDE COACHING AND
MENTORING
Coaching and mentoring are integral to effective performance
management. Due to lack of mentoring and guidance, employees find themselves
lost in the way, leading to performance problems. Leaders and managers find themselves
pressed for time and are often unable to see the return on investment with respect to coaching
and mentoring.
Solution for fast growing organizations: While companies in the growth stage may not have
enough leaders to offer coaching and mentoring support to all their employees, leveraging
external partnerships and technology to facilitate personalized 1:1 meetings can be a good
option. The idea is to invest in the personal and professional development of employees to
encourage and motivate them to bridge the performance gap.
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10. POOR COMMUNICATION AND SILOED WORKING
Employee performance issues often stem from lack of transparent
communication and a siloed approach to working. Adapting to new
models of working, especially in the new normal, employees in hybrid organizations
find it difficult to communicate with everyone on the team. This leads to m i s c o m m u n i c a t i o n
and prevents everyone from being on the same page. Consequently, these collaboration
barriers result in declining performance.
Solution for fast growing organizations: Explore and experiment with unconventional forms of
communicating with team members. Have an open door policy and share as much as possible.
Promote a clear and transparent communication policy without hierarchies. Greet everyone in the team
with a smile and have coffee/ virtual coffee breaks to bond beyond work. Finally, conduct icebreakers
and different activities to facilitate communication and collaboration, which fall in your financial constraints,
but are also effective and impactful. Using technology to keep employees engaged is often a useful and cost-effective1212
solution.
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11. INABILITY TO OFFER FEEDBACK
Finally, many fast growing companies lack the
patience to allow their employees to make mistakes and offer
feedback to help them improve. This often results in performance issues or
rapid turnover. Either way, it is an obstacle to effective performance management.
Solution for fast growing organizations: Encourage leaders to provide
constructive and timely feedback to all their team members to help them learn
from their mistakes. Share what team members can improve and also listen to
their side of the story. Explain how small changes will not only improve their
performance, but add to their professional development in the longer run.
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ROLEtoOF
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● A line manager has a significant impact on an employee’s
behavior, attitude and level of performance.
● An organization’s overall quality is shaped by a line manager.
● Employees feel free to communicate directly with their line manager about
any problem.
● Day to day responsibility of managing employees have gone down from the
HR manager to line managers.
● As employees and line managers are always in close and are in regular contact
with each other, line managers tend to have a greater impact on employees.
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LINE MANAGER
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PERFORMANCE MANAGEMENT
The line managers or the front-line management play a very crucial role in implementing and enacting
the HR policies. Hence, it is very important for the management to ensure that the line managers
possess a right attitude towards the performance management approaches and equally possess the
right competencies for executing it. The line managers mostly consider the performance
management process as a mere bureaucratic chore and hence they consider it as a sheer waste
of time. Some managers lack the required skills for reviewing the performance of the
employees, providing feedback and identifying objectives along with them. These limitations can be
overcome by adopting the following remedies:
● By providing leadership from the top.
● By communicating with the line managers about the importance of performance
management in driving successful results and how it is a part of their responsibility.
● By maintaining simplicity in the overall process of performance management.
● By reducing the pressure from the line managers by making the process an ongoing one
instead of an annual review.
● By involving the line managers in the design and development of the performance
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management processes by representing them in pilot studies.
SKILLS NEEDED FOR THE ROLE OF LINE MANAGER
● Self-management
● Communication
● Decision-making skills
PERFORMANCE MANAGEMENT AND REWARD
Linking performance to pay band is the most basic way of linking performance to reward. Organizations
have a pay band for each category of employees. Managers will be having three or four categories
based on their experience and competency level required for a job. Performance-based compensation
models are extremely popular, particularly for sales-based roles.
BENEFITS OF LINKING COMPENSATION AND PERFORMANCE
● There’s no denying that paying your team more when they perform at a higher level (for
example, when they make more sales or move the needle on company goals) can be a powerful
motivator.
● The promise of earning more money can inspire people to work harder, and when they get
paid more, it can also act as indirect feedback that they’re doing their job well 16
SIGNIFICANCE
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The elements of reward management within a business organization are all
the things that they use to attract potential employees into their business
which includes salary, bonuses, incentive pay, benefits and employee growth
opportunities such as professional development and training opportunities.
Having a reward management system in place provides the business with
many advantages, especially in small to medium size organizations where
the managers must have a good relationship with the employees. Reward
programs have proved to be very successful in motivating employees and in
turn increase the performance of the organization as a whole.
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REASONS WHY A REWARD SYSTEM IS IMPORTANT
1. Mutually beneficial – A reward system is beneficial not only to the employee but also to the
organization. The employee will feel more motivated to work harder by having a reward
system in place. The employee will feel more committed to their work and their productivity
will increase. An increase in productivity will then benefit the organization. Therefore, a
reward system is mutually beneficial to the employee and the organization.
2. Motivation – A reward system will motivate employees by reaching targets and
organizational goals in exchange for rewards. A reward system is great at
motivating employees but they will also be motivated to prove themselves to the
organization.
3. Absenteeism – A reward system will reduce absenteeism in the organization.
Employees like being rewarded for a job well done and if there is a reward system in place,
employees will be less likely to be ringing in sick and not showing up for work. Also, by
having a reward system in place the employees will be clearer about the targets and
goals of the organization as they will be rewarded when they reach certain targets. So, by
having a reward system as an incentive they will be less likely to be absent from work. 18
REASONS WHY A REWARD SYSTEM IS IMPORTANT
4. Loyalty– A reward system will increase the employee’s loyalty to the
organization. By a reward system being in place the employee feels valued by the
organization and knows that their opinion matters. If an employee is happy with the reward
system, they are more likely to appreciate work place and remain loyal to the organization
5. Morale– Having a reward system in place providing employees with incentives and
recognition will boost their morale. By encouraging employees to meet goals and targets it
gives them clear focus and purpose which will improve their morale. By the employees
morale being boosted this will increase the morale of the entire organization. This is all down
to a reward system in the organization.
6. Teamwork–The reward system will increase the teamwork spirit in the organization.
The reward system will promote teamwork to the employees. The employees will work
together as part of a team to achieve their targets in return for rewards. Teamwork within
the organization will help increase efficiency and create a happier workplace. This is
another reason why reward systems are important in business organizations. 19
LINKING PERFORMANCE TO PAY
Linking performance to pay band is the most basic way of linking performance to reward.
Organizations have a pay band for each category of employees. Managers will be having
three or four categories based on their experience and competency level required for job.
E.g.; level 1 pay band is from 20,000/- to 40,000/- with a gap of Rs 500/-. i.e., 20,000 –
20,500 – 21,000 – 30,000 etc.
Managers placed a higher priority on potential discretion in their attempts in manage their
employee than on organization’s edict that accuracy be their primary concern.
The main reasons for this are;
● The belief that accurate rating would have a damaging effect on the subordinate’s
motivation and performance.
● The wish to avoid creating a negative permanent record of poor performance that
might hound the employee in the future.
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