Armstrong's Handbook of Performance Management

An Evidence-Based Guide to Performance Leadership

Michael Armstrong

• Publisher: Kogan Page
• Year: 2022
• ISBN:
  9781398603035
• Edition: 7
• Topic: Business
• Subtopic: Gestione delle risorse umane
• Index: Business

Optimizing staff performance is a key component of achieving outstanding business results. The new edition of Armstrong's Handbook of Performance Management is an essential companion for improving employee and organizational performance. From performance pay and giving feedback to managing underperformers, this handbook addresses all areas of performance management to enable students and practitioners to understand how to assess, measure and improve performance.This updated seventh edition contains new chapters on the meaning and development of performance management and managing performance with a remote workforce. It also covers performance leadership and multi-source feedback. Packed with examples to show how the theory applies in practice and exercises to consolidate student learning, Armstrong's Handbook of Performance Management remains an indispensable and engaging resource for securing effective performance across all aspects of the organization. Supporting online resources include an instructor's manual, lecture slides, a glossary and a literature review

Part One

Performance management fundamentals

01

The meaning and nature of performance management

Introduction

Performance management has been described as ‘a broad set of activities aimed at improving employee performance’ (DeNisi and Pritchard, 2006: 255). This definition of the meaning of performance management is expanded in the first section of this chapter, which is followed by an explanation of the difference between performance management and performance appraisal. The next section explores the nature of performance management as an informal process (what managers do by acting as ‘performance leaders’), or as a formal process (performance management systems). The chapter continues with sections dealing with the purpose and aims of performance management, its impact and the ethical dimension. The chapter concludes with a brief review of the performance management approaches that can be adopted. The conceptual framework that influences the practice of performance management is examined in the next chapter.

Performance management defined

Performance management is the process of improving performance by setting individual and team goals that are aligned to the strategic goals of the organization; planning performance to achieve the goals; reviewing and assessing progress; and developing the knowledge, skills and abilities of people.

Here are some other definitions:

• Performance management is a continuous process of identifying, measuring and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization. (Aguinis, 2005: 2)
• Performance management is the system through which organizations set work goals, determine performance standards, assign and evaluate work, provide performance feedback, determine training and development needs and distribute rewards. (Briscoe and Claus, 2008: 17)
• Performance management is the key process through which work gets done. It’s how organizations communicate expectations and drive behaviour to achieve important goals; it’s also about how organizations identify ineffective performers for development programmes or other personnel actions. (Pulakos, 2009: 3)
• Performance management is regarded as a continuous, future-orientated and participative system; as an ongoing cycle of criteria setting, monitoring, informal feedback from supervisors and peers, formal multi-source assessment, diagnosis and review, action planning and developmental resourcing. (Shields, 2007: 22)
• Performance management is a process consisting of managerial behaviours aimed at defining, measuring, motivating and developing the desired performance of employees. (Kinicki et al, 2013: 1)
• Performance management involves the setting of corporate, departmental, team, and individual objectives; the use of performance appraisal systems; appropriate reward strategies and schemes; training and development strategies and plans; feedback, communication and coaching; individual career planning; mechanisms for monitoring the effectiveness of the performance management system and interventions and even culture management. (Roberts, 2001: 506)

Performance management and performance appraisal

Performance management should be distinguished from performance appraisal. The two topics are clearly related, but are not identical. The term ‘performance management’ arose when scholars and practitioners began talking about transforming performance appraisal from an event to a process. DeNisi and Pritchard (2006: 254) describe performance appraisal as:

a discrete, formal, organizationally sanctioned event, usually not occurring more frequently than once or twice a year, which has clearly stated performance dimensions and/or criteria that are used in the evaluation process. Furthermore, it is an evaluation process, in that quantitative scores are often assigned based on the judged level of the employee’s job performance on the dimensions or criteria used, and the scores are shared with the employee being evaluated. Measurement issues are important for the performance appraisal process, as are issues of rater motivation, so that effective appraisal systems are those where the raters have the ability to measure employee performance and the motivation to assign the most accurate ratings.

They point out that, in contrast, performance management is a broad set of activities aimed at improving employee performance and that the aim of performance appraisal should be to provide information that will enable managers to do that. In short, performance appraisal attempts to measure performance while performance management aims to improve performance. Performance appraisal functions as a subset of performance management.

The nature of performance management

Performance management is about leadership and managing the business. Managing performance is what line managers do in their capacity as leaders. Performance management happens informally as a natural process of leadership. It can also operate formally as a performance management system – a set of practices or activities that fit together and interact to guide managers on how they should manage performance. A fully developed system will include formal arrangements for concluding performance agreements, setting objectives using the ‘SMART’ formula (S = specific or stretching, M = measurable, A = agreed, R = realistic and T = time-related), annual performance reviews, evaluating performance through a rating system and documenting the outcomes on a performance management form.

Line managers as performance leaders clarify what their team members are expected to do and achieve (set the direction), ensure that their people have the skills and resources required to get results, motivate them, secure their engagement, monitor their progress, keep them informed of how they are doing (feedback), develop their skills through coaching, and see that corrective action is taken when necessary. Performance leadership involves the use of performance management skills and techniques such as defining objectives, providing feedback and coaching. Managers may exercise these skills when operating a formal performance management system. Many organizations believe that a formal system is essential, but it isn’t. A contextualized approach to developing managers as performance leaders is a valid alternative.

The purpose and aims of performance management

As John Shields (2007: 24) put it: ‘A well-designed and well-accepted performance management system can be said to have a four-fold purpose: (1) strategic communication, (2) relationship building, (3) employee development and (4) employee evaluation.’

From the viewpoint of the organization, the fundamental purpose of performance management is to further the achievement of the organization’s strategic goals. But it also has three specific purposes:

• managerial – to provide a framework within which managers can effectively manage performance;
• developmental – to provide the basis for identifying and meeting learning and development needs;
• administrative – to provide the information required to administer performance pay and talent management systems.

Thus performance management can make a contribution to strategic human resource management by helping to achieve strategic alignment (the vertical integration of HR and business strategies). DeNisi and Smith (2014: 144) emphasized that: ‘it is important that every aspect of this broader performance management system be directly aligned with the firm’s strategic goals – this is related to defining what performance means to the firm’. This is the process of ‘cascading’ goals, an important ai...