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Impact Of Performance Management On Organizational Success Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 3778 words Published: 1st Jan 2015

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The concept of Performance Management is an important HRM process that provides the basis for improving and developing performance and is the part of the reward system in its most general sense. Performance management is a systematic process for improving organizational performance by developing the performance of individuals and teams. It is a means of getting better results by understanding and managing performance within an agreed framework of planned goals, standards and competency requirements.

Performance management is: “A process for establishing a shared understanding about what is to be achieved and how it is to be achieved, and an approach to managing people that increases the probability of achieving success.” (Weiss and Hartle, 1997)

“Performance management can be defined as a strategic and integrated approach to delivering sustained success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors.” (Armstrong and Baron, 1998)

Performance management is all about improvement-synchronizing improvement to create value for and from customers with the result of economic value creation to stockholders and owners. The scope of performance management is obviously very broad because performance management must be viewed at an enterprise – wide level.

Organizations work more effectively when the goals and objectives of the organization, those of the smaller work units and the job responsibilities of each employee are all linked. When people in the organization understand how their work contributes to the success of the company, morale and productivity usually improve. The aim of all the parts of the company is the key to making these links clear to everyone. (Robert Bacal, 1999)

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Performance management has three distinct components defined by Banks and May, 1999 that are following: The first component consists of the definition of performance which includes organizational objectives and strategies, the second component is the actual measurement process itself and the third component is the communication between supervisor and subordinate about the extent to which individual behaviour fits with organizational expectations.

Many of the components of performance management have been recommended for years as valuable to performance assessment. The importance of performance management is that the process combines most of these suggestions and adds the overlay of the strategic importance of various performance areas. (Frank & Conte, 2009)


The objectives of a research project summarise what is to be achieved by the study. Objectives should be closely related to the statement of the problem. Properly formulated, specific objectives will facilitate the development of the research methodology and will help to orient the collection, analysis and utilisation of data. For example, realizing the two keywords performance management and organization success, it is important for this research study to have a particular organization that will focus in determining impact of performance management on McDonald’s success. The research objectives are the goals to be achieved through the research.

The Research should always be based on pre-decided questions. These questions help to focus on the research objectives. The first step in any research is defining the problems to be studied and the questions to be asked. (Campbell et al, 1982)

A good research question defines the focus of your research project. It helps readers to know the specific subject matter you will be addressing. It can set boundaries to help you figure out where to go next and defines which data you need to collect and which methods you will use to access and analyse your documents (Hung & Popp, 2009).

Research question needs to be answerable by the kind of study researcher could actually conduct. The researcher doesn’t want to pose a question that no feasible study could answer, either because the data that might answer them could not be obtained. (Maxwell, 2005)

In the research the following questions will be answered:

What is Performance Management? How is it achieved within McDonald’s?

What is meant by organizational success? How is success affected by the impact of performance management?

What are the positive and negative impacts of performance management on an Organization?


Literature reviews or searches are essential steps in any research project. They often focus on articles in academic journals although textbooks may also be consulted. Performance management is a term, which is widely used in organizations and in particular by human resource professionals. A generic definition is that it is about applying processes, techniques and systems which maintain and improve individuals’ performance whilst simultaneously aiming to improve the performance of the organization. ( Hale & Whitlam, 2000)

From the HR field Armstrong and Baron highlight the importance of performance management being strategic, integrated (vertical, functional, HR integration and integration of individual needs), concerned with performance improvement and development.

The principle of setting goals for individuals which are linked to organizational goals has a long history, evolving from merit – rating to management-by-objectives (‘MBO’- first coined by Peter Drucker in 1955), through Locke’s Goal setting Theory of 1968 (Greenberg & Baron, 2000) and finally to performance management, which became a recognised process in the 1980’s (Armstrong & Baron, 2002).

Philpott and Sheppard (1992): “The fundamental goal of performance management is to establish a culture in which individuals and groups take responsibility for the continuous improvement of business processes and for their own skills and contributions.”

As stated by Hartle (1995), “Performance management should be integrated into the way the performance of the business is managed and it should link with the other key processes such as business strategy, employee development and total quality management.” Performance staff members are at all times faced with the test of building agreement as to which workloads are supposed to be treated the best, and categorizing which workloads should be acceptable to experience a constrained setting. Once agreement is attained, the essential tools and measurements have got to be in place to decide if the prioritized workloads are meeting definite goals.

Literature reviews of various academic journals and text books written by different authors are very helpful in conducting the research and supporting the research findings with the opinion and point of views of different authors. Performance management of employees is an important element of HR processes in the successful organizations (Burnes 2004). Performance management is a concept which emphasize on the continuous improvement on employees performance which has a good impact on the productivity of the organization in the long run. Effective performance management of employees is very helpful in order to achieve the strategic business objectives (Caldwell 2002). HR managers of successful organizations consider the implementation of performance management process essential for the business growth and development. It also helps the employees to improve and develop their own skills (Chen 2003).

Most of the employees working in the organizations want to grow in their field; the supervisors during the performance management process can guide their subordinates which is helpful for them to overcome their professional weaknesses and improve their skill essential for their professional growth (Cherry 1993). The process suggests a complete career growth plan for the individuals by enhancing their performance in a professional business environment. However, it is important that performance management process should be implemented in a way that it should also improves the overall performance of the business by using different business processes like total quality management.


Performance Management is a method for creating a collective understanding regarding what is to be accomplished and how it is to be accomplished. It is an approach to supervising people that raise the likelihood of reaching success. The performance management process helps the managers and supervisors to provide feedback to the employees regarding their current performance at job and expected level of performance (Covey 1991). It provides clear direction to the employees about management expectations regarding their performance. The compensation and rewarding system is also established based on the performance of the employees over the period of time. It also assists the organizational leadership to identify the training needs of the organization and resolve the performance related issues. It provides opportunity to the managers to set the performance expectations and keep proper tracking of the employee’s performance (Doorewaard and Benschop 2003). The supervisors and managers can measure the performance outcomes by comparing it with the performance expectation and performance appraisal can be done on the basis of this exercise. However, it is important that management should adopt the performance management practices that are consistent with the business operation requirements and objectives of the organization (Drumm 1999).

An effective performance management process starts with defining the performance objectives which includes tasks and results which needs to be accomplished. It is important for the management to communicate the objectives to the employees in order to get the desired results (Francis 2003). Planning is also an important part of the performance management process. Planning includes making clear to the employee how they assist the organization to accomplish its objectives. Work together with the employees to clarify the performance standards and make sure that there is accountability at every stage. Employees should be made to comprehend the accountabilities and expectations regarding their job. Clarify the behaviours which are required from them and why. Explain them that they are accountable for taking an active role in running and judging their performance all through the year.

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Effective communication methods could be adopted for this purpose because if the objectives and tasks have not been communicated to the employees, they will not be able to perform according to the expectations. Once the tasks has been communicated and employees have started putting efforts in order to achieve those tasks then continuous performance reviews are very essential to advise employees about their ongoing performance and management expectations. Feedback is considered to be the most critical step in performance management process (Gibb 2001). Give frequent informal coaching. It involves acknowledging the good work that the employee is doing and helping out the employee to perform up to the mark. Discover ways through which the employee can grow and improve, and work together to generate development plans. Rapidly communicate novel opportunities and adjustments that affect the employee’s job. Name clear actions that the employee can implement so that suggestions offered are concrete. Formulate informal observation notes (perhaps on a calendar) whenever the employee performs a good job, make and implement development plan. These observations will assist supervisor while reviewing the performance of employee and filling the performance appraisal form. The supervisor can also note down praise or complaints from consumers concerning an employee’s work (Hale 2000). The manager and supervisor can use all saved notes regarding the employee’s performance and evaluate their performance on accountabilities and behaviours. The supervisor can invite the employee for feedback with reference to how they performed throughout the year. They may perhaps remind the supervisor of particular occasions of good performance or troubles outside their control that harm their capability to do their job well. After completion of the performance appraisal forms talk to employee about ratings and remarks.

The most important step in this process is to recognize and reward the employees for their good performance because it will not only motivate employees to go extra mile to meet the goals but also increases the loyalty of the employees. In the modern business worlds loyalty of internal customers has been an important concern for the HR managers because if employees don’t feel ownership of the work they will never put their 100% efforts for the success of the business (Huang 2001). Therefore, it is important for the organizational leadership to recognize the employees for their efforts and compensations should be made on the basis of employee’s performance and efforts because if employees are compensated and rewarded on performance basis then it will create an atmosphere of healthy competition within the organization essential for individual and organizational growth (Hunt 2003).

Training and development of people is also an important step in performance management process which helps to improve the skills of the employees according to the job requirements (Hyland and Verreault 2003). The value of employees and their progress all the way through training and education are key features in shaping long-term profitability of a business. If you appoint good quality employees, it is likely to spend in the development of their skills as they can enhance the productivity. Training is mostly thought to be for new employees only which is a wrong perception because continuing training for existing employees facilitates them to adjust according to the varying job and business requirements because external environment is changing on continuous basis and it is essential to develop and train the employees according to the latest system and processes in order to increase the efficiency of the business and maintain the market share (Johnson and Scholes 2002).

An important step in performance management process is to link the individual objectives with the business objectives and directing the efforts of the employees towards the achievement of those objectives. Here comes the role of the immediate supervisor of an employee who can direct the employee’s efforts towards accomplishment of specific objective and make the employee feel that his efforts are important for the growth and success of the business (Kane and Grant 1999). At the end of the process it is important to ensure that individual efforts should be directed towards meeting the organizational goals. It needs to be determined the contributions of each team towards tasks achievement. This is also helpful in defining the future human resource policies and strategies.

These approaches may help to improve organizational performance depending on if they are put into practice at length and stay alert on managerial outcomes. Some of the following, e.g., organizational learning and knowledge management, might be interpreted more as movements than organization performance strategies because there are wide interpretations of the concepts, not all of which include focusing on achieving top-level organizational results (Liao 2005). Nevertheless, if these two notions are instilled from corner to corner of the organization and focus on organizational outcomes, they can add strongly to managerial performance. On the other hand, the Balanced Scorecard, which is purposely intended to be inclusive and focused on organizational results, will not develop performance if not applied from a strong design.


The fundamental structure of performance management is drawn from basic principles of well-established motivational and learning theories. These theories are underpinning of performance management in this research proposal. Goal theory was developed by Latham and Locke (1979) who highlights four mechanisms that connect goals to performance outcomes: They direct attention to priorities; They stimulate effort; They challenge people to bring their knowledge and skills to bear to increase their chances of success; The more challenging the goal, the more people will draw on their repertoire of skill. This theory underpins the emphasis in performance management on setting and agreeing objectives against which performance can be measured and managed.

Control theory focuses attention on feedback as a means of shaping behaviour. As people receive feedback on their behaviour they appreciate the discrepancy between what they are doing and what they are expected to do and take corrective action to overcome the discrepancy. Feedback is recognized as a crucial part of performance management processes.

Social cognitive theory was developed by Bandura (1986). It is based on his central concept of self-efficiency. This suggests that what people believe they can or cannot do powerfully impacts on their performance. Developing and strengthening positive self-belief in employees is therefore an important performance management objective.

Clayton P. Alderfer (1972) devised ERG theory of human needs that explained three primary categories:

Existence: This is akin to physiology and security needs in Maslow’s hierarchy of needs. It is concerned with fulfilment of basic requirements like food, shelter and clothing.

Relatedness: It is related to needs like interpersonal relationships, acceptance as a member in a group/society and family relationships.

Growth: This need involves people finding the opportunities ‘to be what they are most fully and to become what they can.’

Expectancy theory developed by Porter and Lawler (1968) and it states that motivation will be high when people know what they have to do to get a reward, expect that they will be able to get the reward and expect that the reward will be worthwhile. So this theory leads to the performance management.

Equity theory demonstrates the importance of perception in motivational behaviour of employees. The central theme of this theory is that satisfaction as a consequence of job performance is contingent upon the perception of equity. Stacy Adams (1965), who was given credit for development of this model, had brought recognition to the issue of equity in performance management.

As we know literature review is the major part of the research project. So, it is necessary to know what has already been covered and the theories that have been developed to provide leads and reference points or as the basis for a grounded theory.


“Methodology usually refers to the general approaches to research, while method refers to techniques for gathering evidence” (Gancian 1992). Therefore “Methodology is a theory and analysis of how research does or should proceed” (Harding 1987). Methodology is that how to apply the methods in the research. In my research, the methodology will be based on both, qualitative and quantitative data collection techniques. The qualitative research aims to generate insights into situations and behaviour so that the meaning of what is happening can be understood and it is often a useful tool to discover research questions. Quantitative research is empirical-based on the collection of factual data that is measured and quantified and in other words it is the link between “cause and effect”. The proposed methodology will include both primary and secondary data collection techniques. Data collection techniques will include comprehensive database research, highlighted data, surveys, supplemental interviews. By using the case study in research, the concept will be better understand. The analysis of this research is qualitative which is used to highlight the different patterns and make it easier to understand. In this research, the case study will be on McDonalds. The structure of research is based on literature review. (Saunders et al 2008).


Interviews are an important research method. Interviews are basically qualitative but they can become more quantitative by the use of content analysis. The advantages of interviews are that they obtain information directly from the people involved in the area that is being researched and can provide insights into attitudes and perspectives. It gives opportunity to give information of research to interviewee so he/she can give relevant information (Zikmund, 2003). The interviewer is an integral part of the investigation. (Smith, 1983)


Surveys obtain information from a defined population of people. They provide more powerful data than other methods by using a combination of questionnaires and interviews and possibly focus groups. (Zikmund, 2006) states that the main purpose of survey in research is to collect primary data, which is assembled specifically for the research.


A case study is a description or history of an event or sequence of events in a real life setting. Case study protocol sets out the objectives of the research, how the case study will support the achievement of those objectives, including the evidence required and how the work of producing the case study will be conducted. This methodology covers sources of evidence such as interviews, observations, documents and records. The use of multiple source of evidence, each with its strengths and weaknesses, is a key characteristics of case study research.(Gillham, 2000)


The data collected through interviews, surveys and case studies will be continuously analysed. Doing data collection and data analysis, according to Merriam (1998) is “the right way” to do it in qualitative research. It is helpful, as it enables the researcher to “focus and shape the study as it proceeds,” through consistent reflection on the data and attention to what the data are saying (Glesne, 1999).


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