Performance management: what is it?

You know the difference between what is performance management and performance appraisal ? Although the question may seem basic, several HR managers end up confusing the two concepts.

According to Herman Aguinis, one of the greatest scholars of organizational psychology:

Performance management is nothing more than a continuous process of identifying, measuring and developing the performance of individuals and teams.

Also according to the author, it is necessary that this performance is aligned with the company’s strategic objectives . Thus, managing is a form of measurement for continuous improvement.

Therefore, when we talk about performance management we are talking about making constant measurements for the purpose of improvement within an organization or as a way to solve problems related to performance.

In any case, it is important to keep in mind that to improve something you need to have a measurement. After all, without a comparison, it is not possible to measure exactly what was the improvement achieved.

Contextualizing what performance management is

When we look for the concept of performance management in the literature of organizational psychology , we have a vast material that deals with the subject.

It is possible to note, however, that a good part of the literature is centered on the structuring of performance evaluation questionnaires .

The main purpose of these questionnaires is to monitor employee performance . In addition, they tend to increase satisfaction with the process, improve the perception of fairness and increase the accuracy of the process .

Another point that can be observed in traditional literature is that it deals exclusively with performance from an individual perspective .

However, nowadays there are numerous occupations and areas of activity within companies where measuring individual employee performance is more complicated and even less desired.

The application of performance management

If we stop to analyze, the sole purpose of a company is to continuously improve its performance in order to achieve maximum efficiency of its results.

Considering that a company is made up of people , each of its employees must also improve, both individually and collectively, to achieve more efficient performance management.

Thus, an organization’s performance can be measured in different ways. Gone are the times when the only performance that mattered to a company was the shareholder profit .

In fact, when an organization’s performance is measured only by its profit, it ends up generating a great distortion. After all, in this case the strategic perspective of present loss for future profit is ignored.

As a way to deepen this issue, an organizational analysis methodology called Balanced Scorecard (BSC) was born in the second half of the 20th century, which aims to define some dimensions of a company ‘s performance .

Thus, these dimensions need to be assessed in a joint and balanced way. The dimensions are:

  • Financial – Analysis of growth, health, cash generation and business profitability;
  • Customers – Analysis of consumer satisfaction, market share , among other aspects;
  • Internal processes – Evaluation of innovations, operational aspects, services, etc.
  • Learning and growth – Measurement of employee satisfaction, capabilities, training, etc.

The “Learning and growth” axis of the BSC shows an internal perspective that has a strong relationship with performance management. When we talk about this subject, we are talking about the performance of the company’s employees, whose objective is continuous improvement, so that the company’s results can also improve. This is a big challenge, because how is the impact of performance management on the company given? How to make a measurement in this case?

Understanding development along with performance

One thing needs to be clear in the minds of company leaders: the development of employees and the performance of an organization are directly related .

Therefore, when we talk about employee performance development, we are talking about their ability to produce results through an improvement in their productivity, skills and knowledge.

Improving the performance of employees to achieve a better result within the company is one of the biggest challenges today.

However, it is still common to see performance programs geared to measuring performance, rather than being geared to producing inputs and guidance so that employees can become better at what they do.

Therefore, there is still a need for a real paradigm shift so that the performance of employees is really seen as something essential within the organizational culture to improve the entire result.

Talent management and decision making

Another issue that also has great relevance, and that often ends up being ignored by executives and even by the company’s HR, is the production of inputs for decision making within an organization.

Therefore, it is common for quantitative processes such as multiple choice questionnaires, in which demonstrated skills and results produced by each employee are evaluated , do not have the prominence they deserve to have.

After all, these evaluations are able to show the difference between employees. And it ends up serving as a basis for talent management decision making . In which it is possible to know who should be promoted on merit and who is not.

Furthermore, this evaluation still has the ability to show who should receive increases in remuneration and other bonuses. Who should occupy open positions in the company as well as who should be fired or not.

As we said, these decisions are still made with little basis within companies. Not least because the vast majority of them are neither large nor complex so that talent decisions are frequently debated. In fact, in small companies with less than 100 employees, it is even normal for these questions to be taken intuitively, as people are closer and it is easier for managers to follow the team.

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