Performance Management System

According to Aguinis (2009), performance management is a continuous process that aligns the individuals and teams performances with the strategic goals of the organization. While refer to Neely et al. (1995), performance management system or performance measurement system refers to ‘a set of metrics used to quantify both the efficiency and effectiveness of actions’.

            Why it is important for an organization to have performance management system? In this competitive world, all of the organizations are facing a heat competition among one another. In order to survive in the marketplace, the organization will need to have some competitive advantages as well as strategic goals. Performance management system is a system to make sure the performance of the employees is according to the strategic goals so that the strategic goals are able to be achieved. In addition, nowadays, the world become customer-oriented which customers have the high bargaining power. Therefore, the employees must have a good performance in customer services and this is also measure by the performance management system.

            What is an effective performance management system? According to Tung, Baird and Schoch (2011), an effective performance measurement system or normally be called as performance management system is a system that allows the organization to measure and control its performance in line with the corporate or organizational strategy. Besides, an effective performance management system is able to provide accurate information on the performance to the managers. An accurate information enables the managers to evaluate the employees’ performance to see if they fulfill the efficiency and effectively. At the same time, the accurate information also allows the managers to track down their own performances by using performance management system.

            Furthermore, Langfield-Smith et al. (2009) stated that effective performance management system provides the indicators of the current market position to the organizations and assist the organizations to develop in future strategies and goals. The performance management system will generate the performance reviews of the employees and also the managers. The performance reviews or performance appraisals are actually part of the SWOT analysis. It is because the performance review is a report that outlines the internal strengths and weaknesses of the organization as the employees are the assets that are very important for an organization to survive in the marketplace.

           How to enhance the effectiveness of Performance Management System? According to Ittner et al. (2003), the effectiveness of performance management system can be enhanced by using the multidimensional performance measures. Multidimensional means that that the performance management system measures the performance by using more than one dimension. Multidimensional performance management system allows the managers to measure the performance of the employees in various areas.It provides the information and signals for the improvement in crucial activities and the performances.

(453 words)

References:

Aguinis , H. (2009), Performance Management, Second Edition. New Jersey: Pearson
           Education Inc.

Neely, A., Gregory, M. and Platts, K. (1995) Performance Measurement System Design: A

Literature Review and Research Agenda, International Journal of Operations and

Production Management, (25)(12), 1228-1263.

Tung, A., Baird, K., and Schoch, P. H. (2011) Factors Influencing the Effectiveness of

Performance Measurement System, International Journal of Operations and

Production Management, (31)(12), 1287-1310.

Langfield-Smith, K., Thorne, H. and Hilton, R. (2009) Management Accounting: An
            Australian Perspective, 6^th ed., Sydney: McGraw-Hill.

Ittner, C.D., Larcker, D.F. and Randall, T. (2003) Performance Implications of Strategic

Performance Measurement in Financial Services Firms, Accounting, Organizations and

Society, (28)(7/8), 715-741.