HRM3706 PERFORMANCE
MANAGEMENT NOTES
WITH CORRECT
PRACTICE QUESTIONS
2022.
, PERFORMANCE MANAGEMENT (HRM3706)
STUDY UNIT 1: CHAPTER 1: PERFORMANCE MANAGEMENT AND REWARD
SYSTEMS IN CONTEXT
The Shift From Performance Assessment To Performance Management
Performance assessment has a long history based on comparative judgements of human worth.
Modern performance assessment developed from sophisticated rating systems designed by work
psychologists for military use during the two world wars. Performance assessment was initially used
for promotions, salary increases, and discipline (Price 2011:402). Fletcher and Williams (1992:5-8)
provide an overview of the development of performance management. They trace the origins of
performance management as far back as the First World War, focusing on the period since the
1950s, a decade that involved personality-based appraisal. The focus then was on evaluating
performance, but with no intension of improving it.
Fletcher and Williams (1992) further observe that, in the 1960s, appraisal practices shifted to a
greater emphasis on goal-setting and assessment of performance-related abilities (and more
recently, competencies) rather than personalities. The late 1980s and the whole of the 1990s saw
organisations undergo a process of rapid and successive change. Almost inevitably, what Fletcher
and Williams (1992) call “performance appraisal” became a central mechanism in a more holistic
approach towards managing people and business in general.
According to Mello (2015:438), the terms “performance evaluation” and “performance appraisal”
imply a one-sided judgemental approach to performance management, where employees have
limited involvement in the process. Traditional performance appraisal simply involves evaluative
supervisory comments on the past performance of employees.
According to Houldsworth and Jirasinghe (2006:6–7), things shifted again in the 1990s, when
performance management began to be seen as more of a core management process, growing out
of its “appraisal” box, and developing into an integrated, strategic and grown-up concept.
In summary, the practice that we today know as performance management developed from humble
beginnings some 60 years ago. During those early days, the emphasis was on individual
competencies of employees. Over the last couple of decades, this has developed into a more
sophisticated organisational function. Today, performance management is a fundamental part of a
company’s HRM system and recognised as a HR activity contributing to the achievement of the
strategic goals of the organisation.
Performance Management: Definition
1. Continuous process of
Identifying, measuring and developing performance of individuals and teams
Aligning performance with strategic goals of an organisation
Process of setting goals and objectives, giving & receiving on-going coaching and feedback
2. Alignment with strategic goals
Managers to ensure that employee act & outputs are congruent with
organisation goals
Help organisation gain competitive advantage
PM creates direct link between employee performance and organisation goals
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,Perfor m na ce
M nage
a ent
m W ithin
An Inte g ted
r a H um naRe s our
ce M
naga meent ( HRM )
Sy s t em
According to Werner, Schuler and Jackson (2012:290), performance management activities should
be aligned with the organisation’s internal environment, the external environment and other HR
activities. The internal environment refers to the organisation’s business strategy, the company
culture and technology. The external environment includes laws and regulations, the labour
market and the country culture. Other HR activities refer to performance-based incentives and
employee development.
The Internal Environment
1. According to Werner, Schuler and Jackson (2012:289–290), performance management
activities can only be effective if they are aligned with the organisation’s business
strategy and the company culture in the internal environment.
2. Managers should translate the objectives of the organisation’s business strategy into
specific behaviours and goals for their employees. When a company’s culture depends on
effective performance management, it can be described as a performance-driven culture.
3. Companies with performance-driven cultures share a common focus on monitoring and
improving performance.
4. Technology also plays an increasingly important role in performance-driven cultures by making
it possible for employees to receive detailed information about their behaviour and
performance, which can then be used in their performance development.
The External Environment
T h
eer e k y issu
e s inht e t e
x arn lnei rvonm ne tnfi uen
l ecpe f r ma
or ce
n ma anem
g ne, tna em ly
th e
le gal
e v inr onmen
t h, t lea bour
ma ke
r an
t dth e coun
t r cy ultur
e .
1. The laws and regulations in the le ga en
l i ron
v en
m t serve as the basic principles to ensure the
legality of performance management practices. These principles are similar to those for
selection practices. These laws and regulations protect employees against negative
consequences in the workplace caused by unfair discrimination and the use of
inappropriate information when making employment decisions (Werner, Schuler & Jackson
2012:290–294).
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, 2. The lab uo rma rket
refers to the geographical area from which employers recruit their
employees for particular jobs (Wärnich, Carrell, Elbert & Hatfield 2015:181). Companies must
compete for employees and sometimes seek them domestically, in global markets, or both. The
characteristics of the labour market are unique and always changing.
3. Different cou tryn u cult res result in different HR practices and how employees relate to the
work environment. Performance management does not occur in a vacuum, but through
interpersonal interactions. These personal interactions reflect differences in country cultures.
When performance goals are set, for example, in countries like Germany and Sweden,
employees expect their supervisors to negotiate with them. In India, however, these personal
interactions related to performance management are more informal and confidential (Werner,
Schuler & Jackson 2012:294).
The following are some of the laws that have implications for performance
management practices in South Africa:
The Labour Relations Act (LRA)
The Basic Conditions of Employment Act (BCEA)
The Employment Equity Act (EEA)
Integration With Other Human Resources And Development Activities
PM systems serve as important “feeders” to other human resources and development activities. eg.
consider the relationship between performance management and training. PM provides
information on developmental needs for employees. Developmental plans provide information
on what skills will be acquired in the near future. This information is also in making recruitment
and hiring decisions.
PM also provides key information for workforce planning. Specifically an organisation’s talent
inventory is based on information collected through the performance management system.
Finally, there is an obvious relationship between performance management and compensation
system. Compensation and reward decisions are likely to be arbitrary in the absence of a good PM
system.
PM is thus a key component of talent management in organiastions. It allows for assessing the
current talent and making predictions in the future needs both at the individual and organisational
levels.
Implementing of other HR functions, including training, workforce planning, recruitment and
selection, and compensation.
Demonstrate how performance management systems are linked to other human resource activities.
Performance management is not a stand-alone process isolated from other HR activities. The
information gathered through the performance management process can be linked to training,
development, and workforce planning. Through performance management the development needs
of employees are identified, which can then be feeded into the training and development initiatives
of the organisation. Development plans provide information on which skills will be required in future.
Recruiting and hiring decisions are also based on this information. To do workforce planning, the
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