HRM3706 Performance Management
STUDY UNIT 5 – Performance management systems: development and
implementation
5.1 Introduction
We measure work-related behaviour and work outputs. Organisations employ people in the hope that the
“output” that these employees generate will exceed the “cost”, in terms of the remuneration of employing
them. This naturally indicates a need to evaluate the performance of employees. Not only is it to the benefit of
the employers to measure performance, but employees also have an intrinsic need to know how they are
performing. Feedback not only satisfies these basic needs but is also the first step in the development process.
A PM system should not be seen as a separate HR function. Instead, it should be viewed as an integral part of
the process of performance management owned by all managers in the organisation. Whereas a performance
management process is a general and continuous process of monitoring employee performance, a PM system
is a systematic approach of managing employee performance followed by each organisation.
After the job analysis is done, candidates are recruited, selected and the energy of employees is directed
towards delivering specific outputs. The extent to which these outputs are delivered should be evaluated,
among other things, to determine training needs and levels of remuneration. These are the two common
reasons for having a PM system in the organisation.
Another reason to have a PM system in the organisation is so that the organisation attain their objectives
through employees. As you know, the objectives of employees and those of the employer are often in conflict.
For instance, for the employee it is important to experience job satisfaction while performing his or her tasks,
and also to be rewarded satisfactorily. For the typical organisation, on the other hand, productivity, and
therefore profit, is important. It is not too difficult to see that these two sets of needs are not necessarily
compatible (or complementary).
The big question is: Is there a way to synchronise these two sets of objectives?
Performance management systems articulate the company business objectives to individual goals. In other
words, employers set the performance standards, and also clarify the roles of each individual employee’s daily
tasks and their contribution towards the achievement of the organisational goals. Employees may also know
about the rewards they will receive if they exceed their set performance standards.
5.2 Underlying theories in performance management
Employees need to be motivated to perform. employees will always assess whether there is organisational
justice in every decision made in their organisation. They observe that justice is in place regarding their
performance management practices, they will become motivated and committed to their organisation.
Motivation is the process that determines the inclination of an individual towards certain objectives or goals.
Thus, employee motivation is explained as a set determination that employees reflect in their work towards
the improvement of the organisational goal. The inner drive guides the action and behaviour of the person
towards the attainment of a particular target (Singh, Upadhyay & Srivastava, 2017). We may say that
excellence comes from people who are motivated.
5.2.1 Goal-setting theory and employee performance
The core premise of the theory is that some people perform better at work tasks than others because they
have different performance goals. If goals are specific, they will increase employees’ desire to exert more
effort in order to achieve them. This means that despite their abilities and experience, employees who set
goals will focus on the achievement of those goals.
This theory is based on three basic arguments.
❖ First, individuals have different goals.
❖ Second, people only act to achieve their goals if there is a chance of success.
❖ Third, the value of the goal affects the level of motivation.
Page 1 of 14
Summary by L Petzer
, → By implication, individual performance goals are derived from overall organisational goals (Aguinis,
2019); therefore, it is important that all members of the organisation share organisational goals. This will
result in employees internalising these goals and eventually making them their own.
The goal-setting theory further suggests that not only does assigning specific goals to individuals or teams
result in enhancement of performance, but that enhancing goal acceptance through employee involvement
and increasing the challenge or difficulty of goals also lead to increased motivation and improved
performance. Employees’ job content should be challenging in order to motivate them to strive for excellence.
Main components of the goal-setting theory are that there must be optimal levels of challenge, goal clarity and
feedback.
McDowell (2017) recommends the following tips as guidelines to be followed when setting performance goals:
Set goals at the end of the last quarter in line with organisational goals for the following year, aligning
the priorities of employees with organisational goals.
Write realistic goals together with the employee for better buy-in and understanding of expectations.
Ensure that staff have the tools they need to achieve these goals.
Do not set too many goals – keep the number of indicators reasonable and time effective to both
record and analyse.
Review goals at regular intervals to monitor progress and trigger corrective action plans to remedy
underperformance – if you want to see real progress do not leave these until annual interviews.
Instigate some official channels and employee apps to communicate praise and acknowledgement of
goal completion on a daily basis.
Structure reward and any appropriate remuneration increases in line with targets.
A goal is the object or aim of an action, for instance to attain a specific standard of proficiency, usually within a
specified time limit. According to Locke and Latham, (2006: 706–707), goals affect performance through four
mechanisms, namely:
1. Goals serve a directive function
Goals direct attention and effort towards goal-relevant activities and away from goal-irrelevant activities.
Locke and Bryan (1969) observed that people who were given feedback about multiple aspects of their
performance on an automobile-driving task, improved their performance on the dimensions for which they
had goals but not on other dimensions. Negative feedback reduced participants’ mastery goal pursuit,
while positive feedback should be encouraged due to its positive motivational effects. The most effective
feedback on goal achievement focuses not on what went wrong in the past, but on what can go right in the
future in order to achieve the set goals.
2. Goals have an energising function
High goals lead to greater effort than low goals. This has been shown with tasks that
➢ directly entail physical effort, such as the ergometer (an apparatus for measuring the work performed
equipped in an exercise machine such as a treadmill)
➢ entail repeated performance of simple cognitive tasks, such as addition
➢ include measurements of subjective effort, choosing specific tasks over others
➢ include physiological indicators of effort, such as heart rate, blood pressure, body temperature
3. Goals affect persistence
When participants are allowed to control the time they spend on a task, hard goals prolong effort. There is
often, however, a trade-off in work between time and intensity of effort. Faced with a difficult goal, it is
possible to work faster and more intensely for a short period or to work more slowly and less intensely for a
long period.
4. Goals affect action indirectly by leading to the arousal, discovery, and/or use of task-relevant knowledge
and strategies
When challenged with task goals, people automatically use the knowledge and skills they have already
developed that are relevant to goal attainment. Also, if the path to the goal is not a matter of using
automatised skills, people draw from a range of skills that they have used before in related contexts and
apply them to the present situation.
Page 2 of 14
Summary by L Petzer
STUDY UNIT 5 – Performance management systems: development and
implementation
5.1 Introduction
We measure work-related behaviour and work outputs. Organisations employ people in the hope that the
“output” that these employees generate will exceed the “cost”, in terms of the remuneration of employing
them. This naturally indicates a need to evaluate the performance of employees. Not only is it to the benefit of
the employers to measure performance, but employees also have an intrinsic need to know how they are
performing. Feedback not only satisfies these basic needs but is also the first step in the development process.
A PM system should not be seen as a separate HR function. Instead, it should be viewed as an integral part of
the process of performance management owned by all managers in the organisation. Whereas a performance
management process is a general and continuous process of monitoring employee performance, a PM system
is a systematic approach of managing employee performance followed by each organisation.
After the job analysis is done, candidates are recruited, selected and the energy of employees is directed
towards delivering specific outputs. The extent to which these outputs are delivered should be evaluated,
among other things, to determine training needs and levels of remuneration. These are the two common
reasons for having a PM system in the organisation.
Another reason to have a PM system in the organisation is so that the organisation attain their objectives
through employees. As you know, the objectives of employees and those of the employer are often in conflict.
For instance, for the employee it is important to experience job satisfaction while performing his or her tasks,
and also to be rewarded satisfactorily. For the typical organisation, on the other hand, productivity, and
therefore profit, is important. It is not too difficult to see that these two sets of needs are not necessarily
compatible (or complementary).
The big question is: Is there a way to synchronise these two sets of objectives?
Performance management systems articulate the company business objectives to individual goals. In other
words, employers set the performance standards, and also clarify the roles of each individual employee’s daily
tasks and their contribution towards the achievement of the organisational goals. Employees may also know
about the rewards they will receive if they exceed their set performance standards.
5.2 Underlying theories in performance management
Employees need to be motivated to perform. employees will always assess whether there is organisational
justice in every decision made in their organisation. They observe that justice is in place regarding their
performance management practices, they will become motivated and committed to their organisation.
Motivation is the process that determines the inclination of an individual towards certain objectives or goals.
Thus, employee motivation is explained as a set determination that employees reflect in their work towards
the improvement of the organisational goal. The inner drive guides the action and behaviour of the person
towards the attainment of a particular target (Singh, Upadhyay & Srivastava, 2017). We may say that
excellence comes from people who are motivated.
5.2.1 Goal-setting theory and employee performance
The core premise of the theory is that some people perform better at work tasks than others because they
have different performance goals. If goals are specific, they will increase employees’ desire to exert more
effort in order to achieve them. This means that despite their abilities and experience, employees who set
goals will focus on the achievement of those goals.
This theory is based on three basic arguments.
❖ First, individuals have different goals.
❖ Second, people only act to achieve their goals if there is a chance of success.
❖ Third, the value of the goal affects the level of motivation.
Page 1 of 14
Summary by L Petzer
, → By implication, individual performance goals are derived from overall organisational goals (Aguinis,
2019); therefore, it is important that all members of the organisation share organisational goals. This will
result in employees internalising these goals and eventually making them their own.
The goal-setting theory further suggests that not only does assigning specific goals to individuals or teams
result in enhancement of performance, but that enhancing goal acceptance through employee involvement
and increasing the challenge or difficulty of goals also lead to increased motivation and improved
performance. Employees’ job content should be challenging in order to motivate them to strive for excellence.
Main components of the goal-setting theory are that there must be optimal levels of challenge, goal clarity and
feedback.
McDowell (2017) recommends the following tips as guidelines to be followed when setting performance goals:
Set goals at the end of the last quarter in line with organisational goals for the following year, aligning
the priorities of employees with organisational goals.
Write realistic goals together with the employee for better buy-in and understanding of expectations.
Ensure that staff have the tools they need to achieve these goals.
Do not set too many goals – keep the number of indicators reasonable and time effective to both
record and analyse.
Review goals at regular intervals to monitor progress and trigger corrective action plans to remedy
underperformance – if you want to see real progress do not leave these until annual interviews.
Instigate some official channels and employee apps to communicate praise and acknowledgement of
goal completion on a daily basis.
Structure reward and any appropriate remuneration increases in line with targets.
A goal is the object or aim of an action, for instance to attain a specific standard of proficiency, usually within a
specified time limit. According to Locke and Latham, (2006: 706–707), goals affect performance through four
mechanisms, namely:
1. Goals serve a directive function
Goals direct attention and effort towards goal-relevant activities and away from goal-irrelevant activities.
Locke and Bryan (1969) observed that people who were given feedback about multiple aspects of their
performance on an automobile-driving task, improved their performance on the dimensions for which they
had goals but not on other dimensions. Negative feedback reduced participants’ mastery goal pursuit,
while positive feedback should be encouraged due to its positive motivational effects. The most effective
feedback on goal achievement focuses not on what went wrong in the past, but on what can go right in the
future in order to achieve the set goals.
2. Goals have an energising function
High goals lead to greater effort than low goals. This has been shown with tasks that
➢ directly entail physical effort, such as the ergometer (an apparatus for measuring the work performed
equipped in an exercise machine such as a treadmill)
➢ entail repeated performance of simple cognitive tasks, such as addition
➢ include measurements of subjective effort, choosing specific tasks over others
➢ include physiological indicators of effort, such as heart rate, blood pressure, body temperature
3. Goals affect persistence
When participants are allowed to control the time they spend on a task, hard goals prolong effort. There is
often, however, a trade-off in work between time and intensity of effort. Faced with a difficult goal, it is
possible to work faster and more intensely for a short period or to work more slowly and less intensely for a
long period.
4. Goals affect action indirectly by leading to the arousal, discovery, and/or use of task-relevant knowledge
and strategies
When challenged with task goals, people automatically use the knowledge and skills they have already
developed that are relevant to goal attainment. Also, if the path to the goal is not a matter of using
automatised skills, people draw from a range of skills that they have used before in related contexts and
apply them to the present situation.
Page 2 of 14
Summary by L Petzer
