Comparing Performance Appraisal and Performance Management:
While the idea that appraisals should improve employee performance is nothing new, many managers take the integrated nature of that process of setting goals, training employees, and then appraising and rewarding them more seriously today than they have in the past. They call the total, integrated process performance management. We may define performance management as a process that consolidates goal setting, performance appraisal and development into a single, common system, the aim of which is to ensure that the employee’s performance is supporting the company’s strategic aims. Performance management includes the practices through which the manager defines the employee’s goals and work, develops the employee’s capabilities, and evaluates and rewards the person’s effort all within the framework of how the employee’s performance should be contributing to achieving the company’s goals.
When properly designed, performance management therefore never just entails meeting with a subordinate once or twice a year to “review your performance. It means setting goals that make sense in terms of the company’s strategic needs. It means daily or weekly interactions to ensure continuous improvement in the employee’s capacity and performance. And it involves continuously ensuring that the employee has the training and development he or she needs to perform the job.
Why Performance management?
The increasing use by employers of performance management reflects several things. It reflects, first, the popularity of the total quality management (TQM) concepts advocated several years ago by management experts like W Edwards Deming. Basically, Deming argued that an employee’s performance is more a function of things like training, communication, tools, and supervision than of his or her own motivation.Performance management’s emphasis on the integrated nature of goal setting, appraisal, and development reflects this assumption. Second, it reflects the fact that a vast array of studies have shown that traditional performance appraisals are often not just useless but counterproductive. Third, performance management as a process also explicitly recognizes that in today’s globally competitive industrial environment, every employee’s efforts must focus like a laser on helping the company to achieve its strategic goals. In that regard, adopting an integrated, performance management approach to guiding, developing, and appraising employees also aids the employer’s continuous improvement efforts. Continuous improvement refers to a management philosophy that requires employers to continuously set and relentlessly meet ever-higher quality cost, delivery, and availability goals. Continuous improvement means eradicating wastes where ever they are, including the seven wastes of overproduction, defective products, and unnecessary downtime, transportation, processing costs, motion and inventory. Central to this philosophy is the idea that each employee must continuously improve his or her own personal performance, from one appraisal period to the next. Performance management is crucial to this process, because, as noted, it consolidates goal setting, performances appraisal, and development into a single, common system, the aim of which is to ensure that the employee’s performance is supporting the company’s (continuous improvement) strategic aims.