Performance Management as a HR Management Concept

The very mention of appraisals, reviews and ratings is enough to make seasoned professionals cringe and rejoice alike. For some, these are occasions when they would come out smiling out of the review whereas for others, there is nothing memorable about the whole process. So, what is it that is so important about performance management? For starters, performance management is the process of reviewing an employee’s performance during the preceding year or cycle and deciding where he or she stands as far as their peers in the same band are concerned.

The process of reviewing results, arriving at a rating and then deciding upon the bonus or salary hike is what performance management is all about. Before we look at the topic sentence, it is important to understand what goes into the decision making process and who is involved in the same.

Typically, the process of performance management starts a month or two before the appraisal cycle ends. The appraisal cycle can be half-yearly or yearly depending upon the policies of the organization. Further, the appraisal cycle can be based on the calendar year or the financial year i.e. it can run from April to March of the following year or January to December of the same year. In the same vein, it can be half-yearly as well.

There are different rounds to the appraisal process.

  1. In the first round, the people who participate in an employee’s appraisal are the employee and his or her manager. In this round, the manager gives a frank assessment of the employee’s performance after giving a chance to the employee to self-assess.

  2. The second round consists of the manager and the manager’s manager. This round is mostly about deciding the band in which the employee falls post the rating and in comparison with his or her peers. This process of rationalizing the employee’s performance with others is called “normalization”. In some organizations, this takes place in the third round where the HR manager is involved as well. In any case, the ratings cannot be decided without the HR manager’s assent to the same. Once these rounds are over, the bonus level or the salary hike are decided.

What we have described in the above paragraphs is the way the system “ought” to work. However, as any HR professional or Industry magazines would tell you, the performance management process as it exists in many organizations leaves a lot to be desired. In fact, surveys and studies have found that the majority of employee’s who quit organizations do so because of differences over their ratings. In other words, attrition is in many cases a direct consequence of the way in which the performance management process is managed.

The question as to why this happens can be best understood if we understand the dynamics inherent in the process. For instance, despite exhortations from HR professionals and experts about letting personal biases and prejudices affect the process, in many cases, if the manager and the employee do not see eye to eye on many issues, the appraisal and the ratings are the place where this difference of opinion comes out into the open. Further, the organizations are themselves to blame in some cases as the process of “normalization” means a “winner takes all” approach which leaves the moderate performers bracketed with the poor performers. The point here is not to belittle the competitive environment that is the reason for this. On the other contrary, what is needed is a more holistic approach towards performance management that takes into account the varying needs of employee’s and a broader appreciation of differing working styles and motivations.


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