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Performance management is a process a business uses to achieve its targets and objectives effectively. It includes such processes as planning and targeting, strategy development, performance appraisals, etc.
Performance management is important for a business because it helps the business to remain competitive, it helps to expand and help the business grow, it involves self-evaluation and other staff evaluation which helps improve the communication between staff and makes staff more aware of how well they are performing, training and development takes a significant role in performance management it has a major influence in promotions of employees and the future of every employee.
Managers exercise their control by planning with objectives and targets, establishing the performance standards, monitoring the actual business’ performance, comparing performance with targets and correcting mistakes and taking action.
MBO has an important role in performance management, MBO is a process in which individual performance and organisational performance is being consistently measured against objectives and targets that have been mutually agreed between managers and employees. MBO can be determined through regular meetings between managers and employees. This involves a top-down and bottom-up approach.
The processes of MBO are more likely to be successful if they meet the SMART criteria:
S – Specific – Specific means that an observable action, behaviour or achievement is described and is also linked to a rate, number, percentage or frequency.
M – Measurable – This is the process of tracking, monitoring and assessing the behaviour or action upon which the objective is focused.
A – Agreed – The objectives that are set with people need to be capable of being reached but most importantly they need to be agreed by both parties involved.
R – Realistic – This means two things: (1) The goal or target being set with the individuals where they can impact upon change. (2) Objectives are realistic and important to the business.
T – Time Based – This means there has to be a date and time for when the task staffed and when it is to be completed.
Motivational theories take a significant role in performance management. Employees must be well motivated in order for the business to run smoothly and to reach its set targets. Poor motivated employees will mean that many important areas of the business will suffer, for example the production rate could decrease, and situations like this would eventually lead to less profit being made by the business.
Businesses approaches to performance management may be influenced by the following motivational theories:
Frederick Taylor’s Theory
Taylor worked in locomotive axle factory in the USA. From his studies of how people worked he concluded in order to motivate staff successfully a business needs to take into account the following ideas:
– Employees are only motivated by money, introducing a piecework system where employees are paid by the number of items they make or sell would therefore increase the work rate of employees.
– Managers should be properly trained and run the organisation and employees effectively with firm but fair disciplinary methods.
– Employees must be properly trained through ‘scientific management’, to do specific tasks effectively.
– Employees should be properly selected through tests and interviews to ensure they are the right people for the job.
– When employees are motivated by good pay they would work hard without questioning what they are required to do.
Many businesses still use Taylorism, even in rich countries, but over the years businesses have come to realise that employees want more from their jobs than job security and good pay.
Abraham Maslow’s Theory
Abraham Maslow believed that all motivation comes from meeting unsatisfied needs. He stated that there was a series of needs that need to be met in the correct order; Maslow arranged these needs into the form of a pyramid, the needs at the bottom being the most basic working up to the most self important need. Once an employee has been motivated to one level the next level then needs to be motivated.
Maslow ideas were:
– Employees need to be paid adequately so they can pay their basic physiological and social needs.
– Employees must have social contact with colleagues, most people who work alone in private offices are unhappy.
– Esteem can be promoted if a business offers the chance of promotion, or by offering better fringe benefits to employees in higher positions (e.g. managers are offered better cars, better pensions, etc).
– Self actualisation is the most hardest to achieve, it really means that an employee has the chance to become everything they ever wanted to become.
However, from a businesses point of view, these ideas cause two problems:
– The employer of a business cannot offer such opportunities to all their employees. That would be unrealistic.
– Many theorists believed that employees are self actualised by work, this is not true because many people are self actualised by their private lives and work is just considered a means to pay the bills.
Douglas McGregor’s Theory X and Y
McGregor said that many managers made generalisations about their employees, he said that managers would put all the people who worked for him into a theory X or theory Y category.
This theory states that all employees are lazy, not ambitious and that they dislike any extra responsibilities expected of them. They would disagree with any changes to the business and are not interested in the future of their employer. They have no interest in the business itself and just want to be told how to work and what to do.
This theory is just the opposite of theory X. Employees want to be given more responsibility and will naturally work harder without having to be supervised or told what to do all the time. They are prepared to accept changes because they realise that it is important for the business to keep up with the times. Also, the employees show interest in the business and the work they are doing, they like to be included more in the business and want to be asked for their opinions.
An employer who relates his workers to theory X needs to monitor his staff closely and introduce methods in order to control their behaviour. A list of rules and regulations would be made with serious consequences for any employee who breaks them.
A theory Y employer can be very positive about their employees. The employer can afford to leave their employees unsupervised and know that the work set will still be completed successfully. Theory Y employees save the business a lot of money on supervision and inspections.
The main problem with McGregor’s theories is that no business is completely full of theory X or theory Y people. Another problem is that employees might not fit in or like the theory they are judged on, for example a good employee may leave a theory X business because they feel not trusted and may question why they are under constant supervision.
Frederick Herzberg’s two factor theory
Herzberg motivational theory consisted of two factors. He said that certain elements in a job motivate employees to work harder; he called these ‘satisfiers’. Herzberg also said that there are elements that do not motivate employees to work harder; he labelled these ‘hygiene factors’.
Satisfiers consist of: Recognition, responsibility, achievement, advancement and personal growth and the actual work itself.
Hygiene factors include: Status in the business, job security, pay and conditions, benefits (fringe benefits), relationships with other employees and the quality of the business’ manager.
Herzberg’s main point was that hygiene factors do not motivate but if they are not very good then the satisfiers will not motivate either.
A business needs to take into account these two factors and make improvements where necessary in order to offer more satisfiers.