Impact Of Performance Management On Organizational Performance

Ch 6- Performance Management

This chapter explains the HR function of performance management, its policy integration and its impact on organizational performance. First, the performance management at the organization is introduced. Second, the major elements of performance management policy its integration, implementation and its relationship with organizational performance is mentioned. The research findings are described and at the end, with conclusions and suggestions are outlined at the end of the chapter.

Performance management is a continuous process of identifying, measuring and developing organizational, unit and individual performance and aligning performance with the strategic goals of the organization (Aguinis 2005). Organizational

The performance ratings are as follows:

1. Top Talent: Exceptional employees represent the very best contributions within the organization i.e. the top 20 percentile. They represent those set of employees who continually exceed goals. Require little or no supervision, anticipate new challenges, develop creative solutions to address them and think beyond the immediate job at hand for the good of business.

2. Highly Valued: These employees represent the strength of Genpact, in the words of their policy formulators- the next 70 percentile. They continually need dynamic goals, react quickly to new challenges, resolve issues in a timely manner and complete work on schedule with minimum supervision.

3. Least Effective/ Need improvement: They present the set of employees who are the least effective in terms of contributing to the organization, the last 10 percentile. They contribute least towards dynamic goals, do not deliver or lag behind on commitments, need a lot of supervision and / or direction and wait to be directed when challenges arise. A performance improvement plan is drafted to bring satisfaction to required satisfactory

1997; Delery and Shaw 2002; Guest 1997; Kessler and Purcell 1992). According
to Guest (1997), various HR practices including performance management result in outcomes such as commitment, quality and flexibility, which lead to behaviour outcomes in the form of efforts/motivation, cooperation, involvement and organizational citizenship behaviours. The behaviour outcome of people of the organization contributes to the performance output which are directly associated with financial outcomes of profit and ROI. Similarly, model proposed by Becker et al. (1997) states that business and strategic initiatives lead to design of appropriate HRM system which leads to employee skill and employee motivation enhancement which results in productivity, creativity and discretionary efforts amongst the employees. If employees improve their productivity and creativity, it would improve ultimately organizational performance, which would be in the terms of profit and growth. Any organization experiencing a high profit and growth path would capture better market value in the business environment. Moreover, Delery and Shaw (2002) in their model describe that HRM practices including performance management supports workforce characteristics such as enhancement of KSAs, motivation level and empowerment, which help support improving