What is performance management?

 What is performance management ? We talked to many HRs in our day to day who do not know very well the definition that definition or confuse performance management with performance evaluation .

 

Herman Aguinis, one of the greatest academics in organizational/industrial psychology, whose books are required reading for any HR professional who is serious about the topic, defines performance management as “the ongoing process of identifying, measuring and developing the performance of individuals and teams, and the alignment of this performance with the organization's strategic objectives” (Aguinis, 2009).

 

To manage is to measure and improve or measure to improve. Vicente Falconi defines management as “solving problems”. In both cases, performance management (we use performance and performance interchangeably) can be further defined as measuring and improving performance, or solving performance problems.

 

In any case, it is clear that within performance management there is a component to measure and another to improve or develop, and that performance cannot be dissociated from the company's strategic objectives .

 

What is the performance management context?

The organizational/industrial psychology literature (it was born industrial and is becoming organizational, due to the proportional increase of non-industrial organizations as a whole) has always been very focused on the aspect of performance measurement or evaluation .

 

Much of the literature is focused on the details of how to structure performance appraisal questionnaires to:

 

increase satisfaction with the process;

improve the perception of fairness in the process;

increase the accuracy of the process.

Furthermore, traditional literature deals almost exclusively with performance in its individual aspect. However, nowadays there are several occupations and areas of activity within organizations in which the measurement of individual employee performance is much more difficult and sometimes even unwanted.

he Spotify case

Spotify has become famous in the HR wheels not only for its music streaming app, but also for the way it organizes its product teams . At the Scandinavian company, designers, back-end engineers, front-end, quality control and agile methodology coaches make up cross-functional teams that take care of specific aspects of their products (the websites and music applications).

 

Teams are organized through Scrum, an agile project management and software development methodology. Thus, a product manager defines what will be done by the team in sprints from two weeks to a month, and the team organizes itself to carry out the tasks as efficiently as possible.

 

The results of these teams' efforts are often objective and measurable: a team responsible for streaming quality, for example, can have its performance measured by the number of users who have problems with unwanted pauses or loss of quality in their audio.

 

However, it is often difficult to distinguish exactly who contributed the most or the least to this performance: each new feature or bug fix in the system is the result of the efforts of several team members, each contributing their expertise in a complementary way.

 

We will see more about this theme of measuring results later, but here we wanted to highlight the difficulty of evaluating individual results of an employee in contemporary work environments, which are increasingly common.

 

What is performance management for?

Performance management ultimately exists to improve the company's performance through the performance of each of its employees, individually or collectively.

 

A company's performance can be measured in many different ways. At the beginning of the century, perhaps the only aspect of performance that interested an entrepreneur was the profit left over at the end of the month for the company's shareholders.

 

Over the years, other aspects have been added to the concept of a company's performance. The second half of the 20th century showed that profit itself can be a very myopic measure of performance, as it ignores how prepared the company is to continue generating profits for its shareholders in the future. Under this discussion, the Balanced Scorecard was born , which defines some dimensions of a company's performance that must be evaluated together, in a balanced way:

 

Financial: its growth, health, cash generation, profitability etc;

Customers: customer satisfaction, market-share, etc;

Internal processes: innovation, operational aspects, services etc;

Learning and growth: employee satisfaction, capabilities, training, etc.

The performance management we are concerned with in this article is one that goes through the people of the company and generally lives under the responsibility of the human resources area. We are interested in processes that, among other things, develop the performance of the company's employees so that the company's results improve, however it defines its performance (we strongly believe in a collection of complementary metrics and goals, as indicated by the Balanced Scorecard ).

 

The clarity that any performance management process or program has as its main objective the improvement of the company's performance is fundamental and is often lacking for many HR professionals. If it doesn't, the process isn't working right.

 

But how is this impact of HR performance management on the company's performance management?

 

performance development

The relationship between the development of a company's employees and their performance is straightforward.

 

By development we can understand an increase in the capacity of individuals to produce results (or to contribute to the results of a group) through improvements in their productivity. Improved productivity can be understood as:

 

Do more with less";

increase your scope of responsibilities;

do activities with greater impact or leverage;

improve the quality of the work performed, among other possibilities.

The development goal of the performance management process is most likely the highest return on company performance —and perhaps one of the most overlooked.

 

As they are traditionally designed, performance management programs are more oriented to performance measurement (which, as we will see, feeds the company's administrative and talent management processes) than to the production of inputs and guidance so that participating employees can become make better at what they do.

 

Decision making and talent management

Another objective that has its importance often overestimated by executives and human resources areas is the production of inputs for administrative decision-making and talent management within a company.

 

The inherently quantitative processes that make up the expressive majority of performance management practices , such as multiple choice questionnaires where demonstrated competences and results produced by each employee are evaluated.

 

The great product of these assessments is the differentiation between employees, which serves as a basis for making talent management decisions, such as:

 

Who should be promoted on merit;

Who Should Receive Pay Increases;

Who should occupy open positions (or with the prospect of being open) in the organization (with or without promotion);

Who should be fired, among others.

Just above we said that the importance of these decisions is often overestimated. This is because the vast majority of companies do not have the size or complexity for the talent decisions we are talking about to be frequent or complex.