Business Success through Performance Development

Introduction

Business survival depends upon efficient and effective systems and processes that result in positive shareholder returns. In an ever changing economic environment, organisations are faced with human capital decisions about downsizing, restructuring, developing leadership capability and retention of critical employees. More than ever therefore, they are scrutinizing performance, at the organisational, divisional, team and individual level. To help them do this, they will need to continually advance their performance management approach in order to address their unique needs in a timely and responsive way. An organisation's performance management system is one of the most widely adopted Human Resources activities with the greatest potential to positively impact upon organisational performance.

A US based survey of HR professionals prioritized retention, employee development, talent management and performance management as the most pressing issues in the HR field (SHRM, 2008). Results suggested that linking employee performance and its impact on the organisation's business goals was likely to have a major strategic impact on business outcomes. In addition, after recruitment, development was seen as the most important functional HR area in terms of contributing to the organisation's business strategy. This whitepaper considers the value of Performance Management to an organisation and highlights how the greatest impact can be made when it is used primarily for development purposes.

Understanding Performance Management

Formal appraisal of work performance can be traced back to the First World War when it was used to evaluate officer performance. Officers in the US armed services started to receive ratings of their performance as early as the 1920s, a trend which later spread to the United Kingdom (Wilson & Western, 2000; Armstrong & Ward, 2005). In the 1930s, appraisal schemes were designed to facilitate promotion decisions, while giving feedback became more important in the 1950s, although people received feedback on their personality traits rather than their performance. There was then a move away from personality appraisal towards evaluating job performance and setting goals. The popularity of performance measurement within organisations has since continued to grow. It is important to distinguish between the concepts of Performance Appraisal and Performance Management as they are not interchangeable terms. A concise definition of Performance Appraisal (referred to as PA throughout the paper) was put forward by Moon (1993, p.8) as "a formal documented system for the periodic review of an individual's performance." The PA process tends to be an annual or biannual recorded event that attempts to link staff development to organisational objectives.

Performance Management however, has a broader scope and has been described as a:

• "cyclical process: determining performance expectations; supporting performance; reviewing and appraising performance; and finally, managing performance standards" (Marchington & Wilkinson, 1996).
• "continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organisation" (Aguinis, 2009).