By Nicos & Koralia Timotheou

Managers have been striving for centuries to invent better theories and practices of "management” so as to execute the mission of the organization they have been heading and realize its vision – in other words to create and deliver value, at present and in the future, to its stakeholders, be them the owner(s)/ shareholder(s), the creditors/ investors, the customers, the employees, the partners/ suppliers and their community.

One of the many techniques that was invented was ‘performance management (PM)'.

Its overall purpose is to contribute to the achievement of ‘high performance’ by the organisation and its people. 'High performance' means reaching and exceeding stretching goals/targets for the delivery of productivity, quality, customer service, growth, profits and shakeholder value.'

Nowadays, great significance is being given to Performance Management, as companies incorporate them in their effective management strategies.

However, a lot of people find this process a complicated one, mostly because of the many options that it offers - on the organization, on a specific department/branch, on a product or service and on employees, among others.

So as to help eliminate this misunderstanding, we’ll try, in this and following articles, to explore the issue!

Performance Management appeared in the middle of the 20th century as a source of income justification and was used to determine employee rewards based on performance.

It was invented in parallel with Management-by-Objectives (MBO), Balanced Scorecard (BSC), Fact-based Management and Activity-based Management (ABM) and was further developed in parallel with Customer Relationship Management (CRM) and Customer Intelligence, Business Process Management (BPM) and Process Intelligence, Value-based Management, Human Capital Management and Employee Intelligence and so on to Business Intelligence.

Organisations used and still use Performance Management to drive behaviours from the employees to get specific outcomes.

In practice, the method worked well for employees who were mainly motivated by financial rewards. However, where employees were driven by soft motives, such as learning and development of their skills, it failed miserably. The gap between justification of pay and the development of skills and knowledge became a huge problem in the use of Performance Management.

This became evident in the last quarter of the previous century; organizations realized that a more comprehensive approach to management and reward performance was needed. Most of the evolution occurred in the Anglo-Saxon world: in UK and USA.

In recent decades, the process of managing organizations and people has become more formalized and specialized. Many of the old performance appraisal methods have been absorbed into the concept of Performance Management, which aims to be a more extensive and comprehensive process of management.

The evolution was accelerated by the following factors:

• The recognition that the execution of the process of Performance Management is a fundamental duty of line managers, from the CEO down to team and gang leaders, continuously throughout the year – it is not a once off annual event coordinated by the personnel department; and
   
• The recognition that People Management is not just ‘another asset' management but another fundamental duty of line managers and hence a strategic driver and an integrated approach to the management and development of employees.

      Both being interleaved and continual, if not continuous!

• So what is Performance Management?

Performance management is a process that provides both the manager and the employee (the person being supervised) the chance to determine the shared goals that contribute to the overall goals of the company by looking into employee (as an individual and as a team member) performance –at all levels.
 

• Why is PM significant?

Performance Management establishes a framework for employees and their managers to plan, act, monitor and review their work while, in parallel, assess and agree on aims and concerns arising in executing the mission and in realizing the vision of the organization. This enables both sides to have clear objectives that help them in both (1) executing their processes creating and delivering value and (2) their professional growth.
   

• Who manages performance?

Line managers at all levels, i.e. people overseeing the outcome and behaviour of other people - work/team leaders, supervisors, managers, department heads, managers, general managers up to the CEO.

Sometimes the term “performance management” is used in lieu of the traditional appraisal system. That is wrong! Performance management encompasses a much broader management concept.
 
A performance management system is combined with a formal business model and therefore a systematic Plan, Act, Monitor and Review cycle approach, as, for example, is a combination of Management-by-Objectives and Balanced Scorecard.
 
Such a business model diagram we include here. It shows the interrelations between: mission and vision, processes, KPIs and deliverables, process-dictated competences and competencies, people competences and competencies assessment and development to a performance-based rewards model.
 
We will explore further aspects of this model in future articles.
 
Meanwhile, do remember that performance management is an all-encompassing managerial umbrella duty linking the manager's five duties:

• Managing culture;
• Managing processes;
• Managing people;
• Managing mission and vision; and
• Managing sub-processes;
  all of them executed consciously and continuously.

 12.2.2016