THE ROLE OF PERFORMANCE MANAGEMENT IN EMPOYEE RELATIONS
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Performance management is a crucial component of effective employee relations. This is because it involves the implementation of various processes that organizations use to evaluate and improve employee performance while maintaining positive relationships among its employees .
Performance management can be defined as the process through which managers ensure that employees' activities and outputs contribute to the organization's goals. (Michael Armstrong, 2014)
It can also be defined as a a ‘systematic approach’ to managing and measuring employee performance in order to achieve organizational goals. (Bratton & Gold, 2017) According to DeNisi and Pritchard , its the process of identifying, measuring, evaluating, and developing the performance of individuals and teams and aligning performance with strategic goals and objectives of the organization. (DeNisi & Pritchard, 2006)
The relationship between performance management and employee relations
The relationship between performance management and employee relations is complex and dynamic due to its mutual dependent nature. In fact, performance management process can have a significant impact on employee relations. Employees who believe they are being fairly evaluated by the organization and recognized for their efforts, will yield greater job satisfaction and have a healthy relationship with the organization. On the other hand, employees who perceive that they are being evaluated poorly, will leads to feelings of resentment, frustration and creates a negative relationship with the organization. (DeNisi & Pritchard, 2006)
There are many theories that show the relationship between performance management and employee relations.
- Social Exchange Theory
This theory suggests that employees engage in relationships with their organization based on the expectation of mutual benefits. As stated by (Cropanzano & Mitchell, 2005), "Employees are likely to engage in behaviors that are perceived to be beneficial to the organization when they perceive that the organization values and rewards those behaviors." As a result, organizations must adopt efficient performance management procedures that meet employee expectations and offer them rewards for their contributions.
- Psychological contract theory
This theory suggests that employees have unstated yet valid expectations and obligations towards their employer, and the employer has reciprocal expectations and obligations towards the employee. The performance management process plays a crucial role in fulfilling these obligations and expectations. According to this theory, employees expect to be fairly evaluated and rewarded for their performance and for this to be achievable, the organization must provide a transparent and objective performance management process. (Rousseau, 1989). On the contrary, if the organization fails to fulfill its obligations towards employees, it can lead to a breach of the psychological contract, resulting in negative relationship towards the organization and a decline in employee motivation and performance (Robinson & Morrison, 1995)
- Agency theory
This theory suggests that employees may act in their own self-interest rather than in the best interest of the organization. As such , organizations must have performance management systems that align with the goals and expectations of the employees with the organization’s the goals and expectations. (Jensen & Meckling, 1976). In order to achieve this, the managers must have a better relationships with their employees to receive a better understanding of the employee’s expectations.
- Unitarist theory
This theory suggests that there is a unity of interest between organization and the employees where all members of the organization work towards a common objective. Prowse highlighted that this emphasizes collaboration between management and employees than conflicts. (Prowse & Prowse, 2009)
- Pluralist theory
(Poole & Warner, 1998) stated that this theory assumes that organizations have various interests groups (employees, management, unions etc) and they have different goals. The organization as a whole must have better performance management mechanisms and good relationships with these interest groups.
Benefits of Performance Management in Employee Relations
Good employee relations can yield a range of beneficial outcomes, such as increased productivity, improved morale and commitment, and fewer grievances, as noted by (Armstrong & Baron, 2005) Having good employee relations will help to align employee goals with organizational objectives , yielding better performance and productivity. A study by Herman Aguinis and Charles A. Pierce found that , effective performance management helps to clarify expectations and goals, which leads to increased motivation and better job performance. (Aguinis & Pierce, 2008) Effective performance management can also promote transparency and fairness in employee evaluations, which in return establishes trust and communication in the workplace. (DeNisi & Pritchard, 2006). Another study suggests that performance management helps to identify employee development needs and training gaps. By having regular performance reviews, one to one feedback with employees, managers can identify areas of development and support employees . (Buckingham & Goodall, 2015) Armstrong and Baron highlighted that performance management improves employee morale. As regular feedback and coaching sessions can help to address performance issues in a timely manner, it can mitigate serious issues, minimizing conflicts in the workplace. (Armstrong & Baron, 2005)
Elements of Effective Performance Management
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| Author's own work |
- Goal setting: Goal setting in performance management has been linked to employee relations as it helps to align individual employee goals with the overall objectives of the organization. A research by (Locke & Latham, 2002) highlights that goal setting has a greater impact on employee motivation, especially when they are aligned with their best interests. Clear goal setting promotes positive relationship between management and the employees as it provides clarity, reduces conflict and make employee feel that the organization values their contributions to achieve a common goal.
- Regular feedback : Regular feedback in performance management can help improve employee relations by providing employees with a better, real time understanding of their performance expectations and progress. (Smither, et al., 2005) in his article “Does Performance Improve Following Multisource Feedback? A Theoretical Model, Meta-Analysis, and Review of Empirical Findings” found that when employees receive regular feedback it builds trust and reduce turnover.
- Coaching : Coaching in performance management is essential to employee development and overall performance. (Mone & London, 2018) found that coaching as a performance management tool is positively related to employee performance and it can contribute to a positive relationship between managers and employees. This is because coaching provides guidance and support to employees to improve their knowledge and skill gaps.
- Rewards and Recognition : Rewards and recognition are important elements of effective performance management and can have a positive impact on employee relations. (DeNisi & Pritchard, 2006) stated that when employees perceive they are evaluated fairly and provided with fair system of rewards and recognition, they are motivated and perform well in the organization.
Performance Management Strategies: Successful Case Studies and Outcomes
1. Google
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| Image source:(Gupta,2022) |
Google has received recognition as one of the top employers with a positive work environment. Their performance management system “g2g”(Google-to-Googler) includes goal setting, regular feedback check-ins and peer feedback. The employees of google are encouraged to set their own goals, and feedback and coaching is provided by managers to help the employees achieve them. Google also promotes recognition and rewards, including bonuses, opportunities for career development etc. In fact, employees of google have better relationships with the organization and coworkers where 80% of Google employees call their work employment positive. (Gupta, 2022) As a result, Google's performance management system has been able to increase its employee engagement, retention, and overall performance.
2. Adobe
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| Image source :(PerformYard,2023) |
Adobe is one of another best workplaces with 89% of employees agreeing as a great place to work. In 2012, adobe moved from their annual review cycle to an agile “Check-ins” system. The new system supports a two-way dialogue between managers and employees, giving both parties an equal opportunity to participation. Adobe's HR team, was renamed as the "People Resources team" and the company focused more on fostering employee relations to achieve better performance management. This resulted in a more collaborative and positive work environment at Adobe.
Post implementing the Check-in system, the company witnessed great success. The hours spent on performance management have decreased saving over 100,000 manager hours per year. The implementation of the new system helped Adobe grow its brand and global recognition. Currently, 75% of employees leaving the company say they would recommend Adobe as an excellent place to work. (PerformYard, 2023)
Effective Performance Management in Employee Relations: Challenges and Barriers
There are many challenges and barriers to implement effective performance management in employee relations.
One challenge is that employees may perceive performance evaluations as unfair. As highlighted by (Robinson & Morrison, 1995) , these negative perceptions can lead to poor performance and lack of commitment.
Lack of training and coaching skills in managers can be a barrier in terms of supporting underperforming employees. (Kim & Ployhart, 2013)
Another challenge is that performance management systems can be time consuming and may require more resources for maintenance. This can be challenging for organizations with limited resources and even for larger organizations in can consume more working hours of managers in these tasks. (PerformYard, 2023)
To overcome these, organizations must ensure that the performance evaluation systems are transparent and have clear procedures accessible to all employees. This can reduce negative perceptions on unfair or biased performance evaluation from employees. (Kim & Ployhart, 2013) Steps can be taken to provide training and development opportunities for managers to facilitate their underperforming employees by knowing how to provide effective feedback and coaching. More organizations can move towards agile performance management systems as followed by Adobe which may reduce unwanted hours spent on maintaining traditional performance management systems.
In summary, the relationship between performance management and employee relations is complex and dynamic due to its mutual dependent nature. The performance management process can have a significant impact on employee relations. There are many theories that show the relationship between performance management and employee relations, including Social Exchange Theory, Psychological Contract Theory, Agency Theory, Unitarist Theory, and Pluralist Theory. Goal setting, regular feedback, coaching ,rewards and recognition are some important elements of effective performance management. There are many challenges and barriers to implement effective performance management in employee relations such as negative perceptions, lack of training in managers, complex systems and lack of resources . It is the responsibility of organizations to take necessary steps to address these issues.
References :
Aguinis, H. & Pierce, C. A., 2008. Enhancing the relevance of organizational behavior by embracing performance management research. Journal of Organizational Behavior , 29(1), pp. 139-145.
Armstrong, M. & Baron, A., 2005. Managing Performance: Performance Management in Action.. 2 ed. London: CIPD.
Bratton, J. & Gold, J., 2017. Human Resource Management: Theory and Practice. 6 ed. New York: Macmillan Higher Education.
Buckingham, M. & Goodall, A., 2015. Reinventing Performance Management. Harvard Business Review, Volume 4, pp. 40-50.
Cropanzano, R. & Mitchell, M., 2005. Social Exchange Theory: An Interdisciplinary Review. Journal of management, 31(6), pp. 874-900.
DeNisi, A. S. & Pritchard, R. D., 2006. Performance Appraisal, Performance Management and Improving Individual Performance: A Motivational Framework. Managament and Organizational review, Volume 2, p. 5.
Gupta, S., 2022. LinkedIn. [Online]
Available at: https://www.linkedin.com/pulse/productivity-through-learning-soumya-gupta/
[Accessed 13 04 2023].
Jensen, M. C. & Meckling, W. H., 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), pp. 305-360.
Kim, Y. & Ployhart, R. E., 2013. The Effects of Staffing and Training on Firm Productivity and Profit Growth Before, During, and After the Great Recession. Journal of Applied Psychology, Issue 3, p. 99.
Locke, E. A. & Latham, G. P., 2002. Building a practically useful theory of goal setting and task motivation: A 35-year odyssey.. American Psychologist, 57(9), pp. 705-717.
Michael Armstrong, S. T., 2014. Armstrong's Handbook of Human Resource Management Practice. 13 ed. London: Kogan Page Limited.
Mone, E. M. & London, M., 2018. Employee Engagement through Effective Performance Management: A Practical Guide for Managers. 2 ed. New York: Routledge.
PerformYard, 2023. performyard.com. [Online]
Available at: https://www.performyard.com/articles/adobe-performance-management#:~:text=Adobe%20got%20rid%20of%20the,a%20cloud%2Dbased%20software%20company.
[Accessed 13 04 2023].
Poole, M. & Warner, W., 1998. The IEBM Handbook of Human Resource Management. London: Thomson Learning.
Prowse, P. & Prowse, J., 2009. The Dilemma of Performance Appraisal. . Measuring Business Excellence, 13(4), pp. 69-77.
Robinson, S. & Morrison, E., 1995. Psychological Contracts and OCB: The Effects of Unfulfilled Obligations on Civic Virtue Behavior. Journal of Organizational Behavior, Volume 16, pp. 289-298.
Rousseau, D. M., 1989. Psychological and implied contracts in organizations. Employee Responsibilities and Rights Journal, 2(2), pp. 121-130.
Smither, J. W., London, M. & Reilly, R. R., 2005. Does Performance Improve Following Multisource Feedback? A Theoretical Model, Meta-Analysis, and Review of Empirical Findings. Personal Psychology, 58(1), pp. 33-66.
Excellent post on the importance of performance management in employee relations! I agree with the article's observations, particularly the effects of effective performance management on staff morale and dedication.
ReplyDeleteWhat are some frequent performance management blunders that organisations make that have a detrimental impact on employee relations?
Thank you for your valuable comment on the importance of performance management in employee relations, Niluka! Indeed, effective performance management can positively impact employee morale and dedication by providing feedback, setting goals, and creating opportunities for growth and development.
DeleteHowever, as you pointed out, some organizations may make mistakes when it comes to performance management that can have a negative impact on employee relations. One common mistake is providing infrequent or inadequate feedback to employees, which can lead to confusion, frustration, and lack of motivation (DeNisi & Smith, 2014).Another frequent performance management blunder is not aligning individual employee goals with the overall organizational objectives, which can lead to employees feeling disconnected and demotivated (Bacal, 2012).Additionally, organizations that use performance management to solely focus on negative feedback and corrective action may create a culture of fear and mistrust among employees (Leatherbarrow et al., 2016).
In line with the negative impacts of poor performance management, what do you think are some effective ways that organizations can avoid these performance management mistakes and create a positive and supportive work environment for their employees? Do you think there are any new trends or approaches in performance management that could enhance employee relations?
A good article, Thahani. I particularly like that you have brought in real case studies to discuss performance management along with their outcomes. However, adding a few statistics to prove the outcomes of your selected case studies, would help buttress your stance further.
ReplyDeleteThank you for your feedback. While I appreciate your suggestion of including statistics, it is important to note that case studies can provide valuable qualitative evidence of the outcomes of performance management practices. According to Yin (2009), case studies are useful in providing in-depth, holistic descriptions of complex phenomena, and can help to generate hypotheses for future research. In fact, case studies have been widely used in the field of human resource management to examine the outcomes of various HR practices, including performance management (Brewster & Hegewisch, 2017). Moreover, some case studies may not have readily available statistical data, which is why qualitative evidence is often relied upon to evaluate their effectiveness. Also it is important to note that not all case studies may have available statistics or data. In such cases, qualitative evidence and anecdotal evidence ( evidence based only on personal observation such as testimonials) can also be useful in illustrating the outcomes of performance management. Additionally, some case studies may have unique circumstances or factors that make it difficult to compare their outcomes to statistical benchmarks. Nevertheless, I will keep your suggestion in mind for future articles.
DeleteDo you have any suggestions for how organizations can measure the effectiveness of their performance management strategies beyond statistical analysis?
This article discusses the relationship between performance management and employee relations, highlighting its complex and mutual-dependent nature. The article defines performance management and presents different theories to show how it affects employee relations, such as social exchange theory, psychological contract theory, agency theory, unitarist theory, and pluralist theory. The article also presents benefits of effective performance management in employee relations, such as increased productivity, improved morale and commitment, and fewer grievances. Finally, the article highlights the elements of effective performance management, such as goal setting and regular feedback.
ReplyDeleteOne question to ask regarding this article Thahani, How can organisations ensure that their performance management system aligns with the goals and expectations of their employees, as suggested by agency theory?
Thank you for your question George! I think that to align the performance management system with the goals and expectations of employees, organizations need to consider implementing a participatory approach to performance management. This approach involves employees in the design and implementation of the performance management system, which can increase their ownership and commitment to the process.
DeleteOne way to implement this approach is by involving employees in the goal-setting process. According to (Locke & Latham,2002), involving employees in the goal-setting process can lead to increased motivation and goal commitment. Additionally, organizations can provide regular feedback to employees and involve them in the performance appraisal process to ensure that their goals align with organizational objectives (Cummings and Worley, 2014).
I totally agree with your points Thahani! Employee relations strategies are not always same. Management have to adopt to changing business environment and hence to change their strategies. It is of course not easy, however, changing business needs requires changing business strategies. What I believe is that this will only be achieved via an effective communication mechanism.
ReplyDeleteThank you for your comment Avindu! I completely agree that effective communication is crucial for successful employee relations strategies. This has been highlighted by (Bratton & Gold, 2017)stating that communication is an important component of employee relations, as it allows management to share information with employees, receive feedback, and build relationships. Effective communication can help to build trust and increase employee engagement, which in turn can lead to improved productivity and better business outcomes.
DeleteFurthermore, a study by Watson Wyatt (2005) found that effective communication is one of the key drivers of employee engagement, which is essential for achieving organizational goals. The study found that companies with effective communication practices had an employee engagement level that was 7.5 times higher than companies with poor communication practices.
In light of this, what do you think are some effective communication strategies that organizations can use to improve employee relations and minimize conflicts?
According to Saks and Gruman (2011), the performance could be enhanced beyond expectations if the employee engagement is focused in the performance management process.
ReplyDeleteI agree with your statement Aashiq. Employee engagement is essential in the performance management process, as it can enhance performance beyond expectations. As noted by (Saks & Gruman,2011), employee engagement is a "multidimensional construct" that involves the employee's cognitive, emotional, and behavioral connection with their work and organization. When employees are engaged, they tend to be more committed, motivated, and satisfied with their work, which can result in higher levels of productivity and performance.
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