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Performance Management methods



Performance management is the process of recognizing, evaluating, managing and evolving the enactment of the human resources in a given organization, Srinivas, S. (2009). Every firm, in accordance with their line of business, applies different methods of performance management to enable them to achieve their goals. Therefore, it is important to note the differences of the firm that enable it standout from other firms in the same line of business in order for them to choose the method that best suits their line of business. According to, Systems, S. (2011), performance management methods contain a management system playing critical roles;

Communicating the anticipated competencies, behaviours and outcomes to the employees so as the firm is able to achieve its strategic goals by group effort.

Build better relationshipsbetween internal and external investors.

Observe and measure individual and group performance through fair, reliable and valid methods.

Keep track of performance by proving employees with feedbacks on their performance together with the areas that require improvement on time to enable employees to put more effort in running the business activities in the firm.

Develop bothindividual and group performance capabilities

Assess staff and those who are qualified for the promotion as well as employment purposes and also rewarding employees according to their performance.

According to, Adedeji, E. (2014), an effective performance management system should therefore be;

Valid; according to a method of measurement should be considered valid

Cost effective; the managers should consider a method that is cost effective.

Fair; the methods should consider every aspect in the performance circle before judging the employees’ performance and considering them to be under-performers.

Reliable in the sense it should be easily accessible at any given moment.

In order for the firm to achieve its set objective, the human resource team should come up with strategies on how to utilize the available resources to realize the firm’s goals which could include; selective hiring, extensive training of employees as well as reducing status differences between workers to encourage teamwork.

Measurement of performance faces challenges such as lack of enough resources especially in small firms, poor management and also lack of coordination among managers, Sakapurnama, E. (2012).

As much as firms apply different methods of performance management, the methods contain similarities as well, Caldeira, A., et al (2013).

Similarities of performance management methods

No matter the organization’s form of business, the firms tend to employ the same methods to measure performance among its workers. According to

The Management by Objective Method: this method is used by organizations to evaluate staffs based on a list of SMART goals. The employees and their managers set their SMART objectives at a given period say the beginning of the year and work towards achieving their set objectives.

The firms apply the cost accounting method where the performances of employees are evaluated in monetary returns to the organization. This can be well illustrated using departmental performances of the firms.

The firms use confidential records; in this method, the company utilises the Annual Confidential Report rating an individual on the basis of; attendance, assertiveness, team work, leadership skills, one’s creativity levels, technical and reasoning ability and also how resourceful an individual is towards achieving the company’s goals.

The use of Performance Tests & Observations:This method is intended to test both knowledge and skills of employees in their areas of work in the form of a presentation or written article. This method is important since it helps managers to obtain first-hand information on the performance of workers making it easier to evaluate them when writing reports and rewarding them on their performance towards the betterment of the organization.

The use of the field review report: this is in most cases applied by the Human Resource department in cases of promotions in the company. It can also be done by hiring a specialist to review company reports which can turn out to be expensive in terms of cost and time especially if the specialist is not familiar with the company’s working conditions.

Critical Incidents Method: The approach focuses on certain critical actions by employees which may greatly affect their performances in the company which are recorded by the concerned supervisors immediately the incidents occur. This method is important since the evaluations are based on behaviours in the work place making it easy for the supervisors to get feedback from the affected employees and therefore there are high chances of worker-improvement.

Checklist: Under this method, a checklist of reports concerning traits of an employee is prepared in the form of Yes or No questions. Here the person rating the employees only reports the findings to the Human Resource department for evaluation.

The Rating Scale Method: This method involves managers or company owners coming up with their system for grading employees and assesses their performance thereafter. This method enables the managers to be able to track employee performance in a more effective way.

All the above methods are used by organizations to measure the performance of employees in the company.

Differences between performance management systems

Even though the performance management methods play the same role in organizations, they tend to differ in their application and performance;

According to, Biron, M., Farndale, E., & Paauwe, J. (2011), this method is effective in large financial companies where it is most effective due to the huge number of transactions they make while, Haines, V., & St-Onge, S. (2012), argues that this method can be applied by any company be it they are large or medium in nature.

According to, Biron, M., Farndale, E., & Paauwe, J. (2011), the cost accounting method is effective in measuring performance especially by large companies while, Haines, V., & St-Onge, S. (2012), argues that it is not fair to measure performance in monetary terms claiming that it makes workers question their worth in the company which may lead to poor performance.

Haines, V., & St-Onge, S. (2012), claims that, confidential records contain employee information based on their assertiveness, attendance and therefore important in measuring employee performance, Biron, M., Farndale, E., & Paauwe, J. (2011), while argues that judging employee performance based on their attendance, leadership skills and assertiveness may not be effective since it requires more than the named factors to measure employ performance.

According to, Haines, V., & St-Onge, S. (2012), the use of field review reports may be effective in performance measurement when done by the Human Resource department in the company while, Biron, M., Farndale, E., & Paauwe, J. (2011), argues that this method may be ineffective especially if the review is done by a specialist who has no knowledge of the company employees and the day-to-day activities of the company.

Biron, M., Farndale, E., & Paauwe, J. (2011), argues that employee behaviour in the work place contributes a great deal towards their performance.Therefore, it helps for the employees to carry out themselves well in the work place while, Haines, V., & St-Onge, S. (2012), argues that, behaviour and performance are two independent variables in the work place and hence performance should not be measured using employee behaviour.

Haines, V., & St-Onge, S. (2012), claims that some companies use a YES/ NO criteria in measuring employee performance. According to this method can be effective only if the employees are honest which can be difficult given the fact that one can lose their job in the process while, Biron, M., Farndale, E., & Paauwe, J. (2011), is of the opinion that this method is effective since the company uses employee traits in their rating system.

According to Biron, M., Farndale, E., & Paauwe, J. (2011), the rating scale is an effective method of measuring the performance of employees while, Haines, V., & St-Onge, S. (2012), argues that it may not be that effective in cases of family relations and favouritism between managers and employees.

According to, Kapucu, N. and Demiroz, F. (2011), when measuring performance, it is important to consider the employees working conditions. The working environment may encourage or discourage hard work hence it is important for the management team to look at the employee working conditions. In addition, incentives and rewards also encourage better performance and also encourage competition among workers. This will enable workers to improve their performances in order to be rewarded while improving the returns of the company. In addition, management should also look at the salaries and wages of the employees especially the subordinate staff, this group of employees do the most work in the company but are poorly paid, it will help in the performance of the company if the management team would consider an increase in their salaries and wages to encourage them in the perform their duties better.


Measurement of performance in any business is important. Companies should consider all its employees equal so as to encourage team work which pushes towards the achievement of the set objectives. Therefore, in order for the company to realise its set objectives, it should not only consider the high ranking officers in the company but also the subordinate staff who happens to play a major role in the company without whom the company may be a stand still.


Adedeji, E. (2014). A Tool for Measuring Organization Performance using Ratio Analysis. Advances in Social Sciences Research Journal, 1(8), pp.89-97.

Biron, M., Farndale, E., & Paauwe, J. (2011). Performance management effectiveness: Lessons from world-leading firms. The International Journal of Human Resource Management, 22(6), 1294-1311.

Caldeira, A., Gassenferth, W., Pacheco, G. and Machado, M. (2013). Performance Indexes: Similarities and Differences. Independent Journal of Management & Production, 4(1).

Haines, V., & St-Onge, S. (2012). Performance management effectiveness: Practices or context? The International Journal of Human Resource Management, 23(6), 1158-1175

Kapucu, N. and Demiroz, F. (2011). Measuring Performance for Collaborative Public Management Using Network Analysis Methods and Tools. Public Performance & Management Review, 34(4), pp.549-579.

O’Connor, N. (2012). The Determinants of Inter-Organization Performance Measurement Alignment. SSRN Electronic Journal.

Sakapurnama, E. (2012). The Challenges and Obstacles in Measuring Performance for Public Sector Organization: Study in Indonesia. SSRN Electronic Journal.

Sleezer, C., Hough, J. and Gradous, D. (2008). Measurement Challenges in Evaluation and Performance Improvement. Performance Improvement Quarterly, 11(4), pp.62-75.

Srinivas, S. (2009). EFFECTIVE PERFORMANCE MANAGEMENT. Journal of Business Logistics, 30(2), pp.85-100.

Systems, S. (2011). HR Field Guide: 5 Tips for Effective Performance Management. SSRN Electronic Journal.

Thum, Y. (2003). Setting Performance Standards: Concept s, Methods, and Perspectives. Applied Psychological Measurement, 27(4), pp.305-307.