performance management in public sector organisation

7/30/2019 PERFORMANCE MANAGEMENT IN PUBLIC SECTOR ORGANISATION

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PERFORMANCE MANAGEMENT IN PUBLIC SECTOR ORGANISATION

Author: Pratiwi Ngasaratun (Bradford University)

Introduction

The emergent of Strategic Human Resources Management has brought a new insight that

people are considered as the critical investment in the whole system of the organisation,

and that they give the biggest contribution in the organisational achievement (Analoui,

2007). Thus, the way in which the employees are managed at their work has a significant

influence in improving organisations performance, and therefore, employee’s performance

management should be carefully planned, implemented, and regularly evaluated (Mondy,

1996, cited in Analoui and Fell, 2002 , Armstrong, 2006).

Moreover, the focus on performance management also has increased as the result of

globalisation and rapid growth in the international market that require organisation to

create and sustain its competitive advantage and increase its productivity so that it will

survive and win the competitions. Every organisation whether profit or non profit are facing

several challenges to improve its productivity and to meet their strategic objectives

(Analoui, 2007). For example, in the public sector, the government now are facing pressures

to improve service quality, reduce cost as well as become more accountable, transparent,

and responsive to the needs of the society. Since performance management is considered

as a critical success factor in the organisation, hence the challenge is how to ensure the use

of PM effectively with regard to the context of the organisation.

This essay will attempt to examine the value of performance management in organisations.

In the next section, it will review the concept of SHRM by emphasizing on performance

management as the key functions in HRM. The third section will consider the performance

appraisal method and its impact in the organisational performance. It will analyse the linking

between performance management and reward system and organisational commitment.

Examples will be provided from the public sector organisations. Finally, the conclusion will

provide some concluding remarks that show the importance of performance management

in the organisation.

Human Resources Management (HRM)

The successful achievement of an organisation relies on the utilisation of its human

resources (HR) (Analoui, 2007). Employees now are considered as the most crucial factor in



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the organisation, and a source of competitive advantage within it (Armstrong and Baron,

2005). However, these views have not always been the case. During the classical

management era, organisation was viewed as a ‘machine’ that operating based on scientific

law and general principles (Analoui, 1998). Employees were regarded as one of the

components of the machine, and motivated by money and financial incentives. Therefore,

there was no one within organisation was employed as a personnel specialists (Analoui,

1998). These views were widely criticized as it ignores the social aspects and complex needs

of employees as human being in the organisation. However, it has put an essential

background in the management theory and remains influential until today.

In the next development of the managerial perspective, which is the human relations,

awareness arose that people, along with tasks, should be considered as an element within

an organisation that needed to be managed. It believed that despite financial incentives,employees were motivated by the community within organisation and psychological factors

(Analoui, 1998). Personnel Managers were created as the specialists who were charged with

several tasks such as to look after employees’ welfare at work, to maintain and develop

employees’ loyalty to the owner, and to ensure that the employer’s policies suited the

employees’ culture and expectation (Analoui, 2007). According to this perspective, such

approaches would increase employees’ job satisfaction and productivity. However, rarely

did the employer involve Personnel Managers while determining the organisation objectives.

Obviously, this has caused a separation between human resources policies and practices

and the organisation business. As a result, the roles of Personnel Managers are all about

administration and procedures (Analoui, 1998).

This perspective was challenged by the contingency system that views organisations as an

organic structure and therefore, concerns with the task performance, the relation with the

environment, and the internal activities that related with organisation strategy and

operation system (Analoui, 2007). It has forwarded Human Resources Management (HRM)

that considers employees as a part of the complex system who have abilities to learn and

develop as well as to manage themselves. Therefore, it creates the HR manager who deals

not only with the need of the HR as an individual but also those as the whole entities of the

organisation (Analoui, 1998). One important aspect in this approach is the emphasizing on

the environment, which means that organisations needs to strategically adapt to the

external and uncertain factor by changing the structures and processes including its policies

and procedures of its internal components while determining objectives (Analoui, 1998;

Analoui, 2007).



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However, there was a view that HRM is only a new fashion of Personnel Management so

that both of them were actually the same thing (Cowan, 1988; Klatt, 1989, cited in Analoui,

1998). Thus, a debate in this subject is unnecessary since HRM might be a complement to

Personnel Management (Cowan, 1988, cited in Analoui, 1998). But, as Analoui (2007) argues

that Personnel Management is emphasizing on compliance of the employee while HRM

concerns with employee’s commitment to the organisation.

Moreover, according to Analoui (2007), HRM has several activities within organisations

which are: planning, recruitment and selection, HR development, reward system,

performance appraisal (PA), and retirement. All these functions are interconnected in a

sense that one function is integrated with others so that organisations will perform

effectively. Fombrun, Tichy and Devana (1984, in Torrington and Hall, 1998) present a

simple HRM model as shown in figure 1. It is implied that all functions in HRM are linkedeach other. For instance, PA should be conducted to ensure that employees’ performance is

in line with organisation goals, proper training and development are carried out to provide

employees with knowledge, skills and capacities to do the job, and that successful

performance is rewarded and reinforced.

Figure 1 The Human Resources Cycle

Source: Fombrun, Tichy, and Devana, 1984, cited in Torrington and Hall, 1998 p. 36

However, this model fails to consider the stakeholders interest, the situational factors and

the recognition of strategic choice. For example, the strength, the weakness and the



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potential of the HR and whether or not they will change their choice or behaviour in

responding a particular circumstances that occur within the organisation (Analoui, 2007;

Torrington and Hall, 1998).

A more inclusive model is developed by Analoui (2002) who views the importance of senior

managers as the choice makers in the organisation. He emphasizes that HRM has to be

implemented as a cycle which consists input, process and output/outcome.

Figure 2 The Choice Model for Effective HRM

Source: Analoui, 2002 p. 30

According to Analoui (1999), the quality of job performance is basically influenced by three

variables: the individual, the organisation, and the environment. Thus, senior manager has

her own personal source and is affected by internal as well as external sources in

determining and formulating policies and frameworks (Analoui, 2002). Hence, the quality of

the HRM policies directly relates to their managerial effectiveness. These policies will be

carried out by the line managers and as a result, it will improve the quality of work and life

as well as the overall performance at the individual level (output), organisational level

(outcome) and societal level (impact). Performance Management (PM), therefore, is the

main point that has to be considered in the HRM and need to be integrated with other

functions in order to gain maximum advantages of the HRM process (Armstrong and Baron,

2005).



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Performance Management (PM)

Performance is usually defined as the achievement of any objective that can be measured

both in quantitative and qualitative methods (Armstrong and Baron, 2005). It considers not

only the matter of results, but also the efforts that people carry out to achieve these. It

refers to the total contribution of the employee to achieve the strategic objectives of the

organisation (Analoui, 2007). Excellent performance is the result of proper behaviour as well

as the effective use of knowledge, skills and competencies (Armstrong and Baron, 2005). PM,

therefore, have to address the question ‘how is the result achieved?’ to gain appropriate

information needed to consider what should be done in order to improve performance.

Dessler (2005) defines PM as a process that integrates goal setting, PA, and development

into a single, universal system. It aims to ensure that the employees’ performance is in line

with organisation’s strategic objectives. It emphasizes on appraisal of employees’

performance. However, Armstrong and Baron (2005) argue that such approach should be

comprehensive, continuous, and flexible to the management of organisations, teams, and

individuals. It also has to involve communication between those who are concerned. Thus,

PM is a system on monitoring and evaluating the performance of all levels within

organisation with PA as the key part of the system. Figure 3 below shows typical PM system.

Figure 3 Four Stages of a Typical PM System

Source: Torrington and Hall, 2005, p. 330

According to Torrington and Hall (2005) four main stages of PM system are:

1. Business role definition consists of job description and organisation objectives. A more

specific group goals need to be determined, agreed, and regularly reviewed.



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2. Individual objectives are drawn from the first step. They had to be in line with the group

as well as organisation strategic goals. These objectives are emphasized on the output

of the performance.

3. A detailed individual development plan which consist the objectives and specific

activities is set up by manager in order to support and to coach the employees in

achieving the stated objectives.

4. Assessment of objectives achievement is the last stage. The ongoing appraisal is created

to motivate the employee and review the developmental problems that arise during the

process. An annual review usually takes place to devise the manager with information

regarding to the payment policies. However, many organisations face difficulties to

design a performance-related pay system.

This system gives a strong emphasis in the result of performance rather than the task bywhich the output achieved (Torrington and Hall, 1998). However, Armstrong and Baron

(2005) argue that if organisation is about to implement comprehensive PM, then the tasks

performed by the employees should be taken into account. Hence, it means that effective

PA should consider the process as well as the results achieved.

Performance Appraisal (PA)

As previously mentioned, PA is the centre of the PM process. However, a lot of questions

such as what appraisal is and how it should be carried out and managed need to beaddressed (Khoury and Analoui, 2004). To appraise means to give worth and value, to

determine quality and usefulness (Analoui and Fell, 2002). In this context, appraisal can be

described as a way to measure the employees’ contribution towards organisation’s

achievement. Analoui (2007:201) defines PA as:

“a process where an individual employee’s past and current performance is evaluated,

usually by their immediate line manager, normally against certain predetermined criteria

such as minimum standards expected and/or skills required for a particular position”.

However, these specific criteria required have to be determined and agreed by both of thesupervisor and the subordinates (Torrington and Hall, 1998). Also, regarding to the changing

of external environment, they need to be reviewed regularly in order to adapt and adopt

those changing. Moreover, they argue that there is a conflict in the role of the manager. On

the one hand, she has to act as the appraiser who obliged to judge her subordinates’

performance, and on the other hand, she is a helper who has to develop the employees. It

is, therefore, important to involve several sources in measuring performance such as the

supervisor, the supervisor’s supervisor, the peers, and the appraisee itself rather than rely

on one person (Torrington and Hall, 1998).



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Ahmad and Ali (2004) reported that several problems occurred due to the implementation

of PA in the Public Service Department of The Government of Malaysia. During 1992-2002,

the Government had established a new PA system (Ahmad and Ali, 2004). The system

consist several steps:

1. Defining institutional objectives based on central government policy, planning,

budget and facilities.

2. Determining the civil servants’ target by the assessors/raters.

3. The mid-year performance review conducted in June to see the staff’s performance

against the determined target.

4. Performance revision, if necessary planning and/or targets could be changed due to

the problems and constraints that influence the performance.

5. PA report by a Performance Appraisal Committee (PAC). The civil servant shouldcomplete self assessment evaluation form, and then the first assessor (immediate

supervisor) would assess her based on the evaluation form. Next, the second

assessor will evaluate overall departmental evaluation. The PAC will convert the

result into the mark.

6. Linking the appraisal result with salary movement by the Board of Salary Movement

(BSM).

The study exposed that about 90% civil servants expressed their dissatisfaction regarding to

the PA process that had been take place for 10 years since 1992 (BERNAMA, 2002, cited in

Ahmad and Ali, 2004). According to them, the appraisers tend to be subjective, bias and

unfair. Moreover, they also criticize that the appraisers seemed to be unskilled and ignorant

(Ahmad and Ali, 2004).

Moreover, Khoury and Analoui’s (2004) conducted a research in five Palestinian Public

Universities which employed a traditional PA approach in evaluating their faculty members

(Khoury and Analoui, 2004). The finding revealed that, according to the faculty members,

unclear performance standards, emphasis on students’ assessments, poor feedback, thelack of appraisers’ competency, failure to apply appraisal results to administrative decisions

and poor top management support were mentioned as the main factors of dissatisfaction

expressed due to the appraisal process in these universities. Obviously, although the

employees did not want to leave their current job, this dissatisfaction might affect their

motivation at work, and in turn, it will result on poor performance and low productivity

(Khoury and Analoui, 2004). Thus, effective PA is needed in order to get the most out from

the process.



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There are diverse methods of assessing performance by which organisation need to choose

the most suitable one with regards to its system, character and objectives. For example,

written or essay appraisal is a method by which appraiser measures employees strengths,

weakness, and past performance through written statement (Analoui, 2007). This method is

widely criticized. First, it is difficult to compare individual within organisation by using

written statement, and secondly, there is no standardized method in writing the appraisal

result since every appraiser has her own style so that it will vary in content and length

(Analoui, 2007). However, this qualitative method is viewed to be useful while combined

with other appraisal methods.

Another example is behaviour-based appraisal, such as behaviourally anchored rating scale

(BARS). The scales describe important job behaviour ‘anchored’ alongside a rating scale

(Bratton and Gold, 2007). Derived from the explanation given by people who know the job,the scales cover several clusters of effective and ineffective behaviour of the job. Then, it is

used to assess employees by determining their level of performance based on whether or

not they present specific behaviour required to perform their job (Analoui, 2007). Bratton

and Gold (2007) point out that BARS can lead into a relevant measurement of performance

since it is derived from employees’ specific behaviour. However, an evaluation by the job

expert as the source of job ‘anchor’ is likely to be subjective and a single behaviour required

to do the job tends to be bias (Bratton and Gold, 2007).

Other PA method is Management by Objectives (MBOs). It is based on objectives that have

to be achieved between limited period and agreement between subordinates and

supervisor is (Analoui, 2007). MBOs involve several stages: goal setting, action planning, self

appraisal, and periodic review by breaking the task to monitor the progress done by the

employees. MBOs is dynamic, and it has potential to increase motivation and productivity if

delivered successfully. However, Bratton and Gold (2007) challenge this perspective by

stating that MBOs is a self-defeating approach because it emphasizes on the people

regardless to the real choice of objectives. Moreover, they argue that this method tends to

fail when managers are not concerned about the process by which the objectives are set up.

Recent trend in the PA method is the emergent of ’360 degree feedback’ which is believed

as a supplement or even replacement towards the traditional appraisal system (Armstrong

and Baron, 2005; Redmann and Wilkinson, 2009). The 360 degree feedback is a multi-rater

system using various perspectives and all-encompassing direction of feedback such as peers,

subordinates, supervisors as well as internal and external customers (Redmann and

Wilkinson, 2009). Several advantages are mentioned as a result of the successful

establishment of this method, for instance, broader perspective on what employees



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achieved and how others perceived them, more reliable feedback is provided for the

manager and open feedback that will provide new insight to the employees (Armstrong and

Baron, 2005). However, Bratton and Gold (2007) argue that there has been only little

evidence that shows the impact of the multisource feedback into organisational

performance. Moreover, it is difficult to implement this method since it tends to be time

consuming and involves several elements.

There are many other diverse methods in measuring employees’ performance. However, as

Khoury and Analoui (2004) assert that effective PA should relevant with job description,

culture and context of the organisation, sensitive to determine poor versus good

performance, reliable, acceptable by both supervisor and subordinates, easy to implement,

and predictive.

It is, therefore, almost impossible to expect all these criteria from one single method. With

regards to this problem, Khoury and Analoui (2004) develop the SOFIA model that derived

from the principles of MBOs, critical incident, 360 degree feedback, and essay appraisal

(Khoury and Analoui, 2004). It involves five stages: Setting the ground rules-standards; On-

going informal appraisal; Formal appraisal; Interview and Action.

I. Setting the ground rules-standards. In the first stage, supervisor identifies performance

standards with regards to the employees’ competences, and communicates these to the

employees. A written agreement is documented after both of them approved thestandard of measurement.

II. On-going informal appraisal aims to develop a partnership between supervisor and

employees. At this stage, supervisor should be willing to coach, help, and give employees

feedback regarding their performance against predetermined standards. It must be

conducted regularly in informal way to help employees to adjust their performance.

Supervisor can use the critical incident method to record all positive and negative

incidents of each employee.

III. The formal appraisal process which carried out before the end of the second semester. It

is based on the input invested in the job, and the output gained from the job. It is started

with self assessment activity by the employee, including reviewing tasks that have been

done, achievements, strengths, weaknesses, and any other problems that might affect

overall performance. Then, the appraisal information is gathered from multi sources or

often referred as 360 degree feedback. Hence many appraisers are involved, such as

supervisors, peers, high level managers, external and internal customers, and the

appraise herself.



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IV. Interview conducted by the supervisor to provide the employees with feedback gained

during the formal appraisal process. Before the interview session, it is important to

ensure that the employees have well prepared, that the supervisor is equipped with skill

and knowledge necessary through training course, and that the process is confidential.

V. Action. This is the last stage where supervisor have to make a decision based on the

previous result. The employees performance might be satisfactory and matching the

standards, dissatisfactory or below the standards and extraordinary or above the

standards. It is extremely important to understand all the internal and external factors

that affect on the individual performance.

However, even though the appraisal method has been well constructed, there are still many

challenges to face. Some problems are identified by Dessler (2009) such as halo effect,

central tendency, strictness and bias. Halo effect refers to the problem when the appraiser

rates the employee on one trait influenced by her perception on other traits. Central

tendency occurs while all employees are given average rates. Strictness arises when the

appraiser constantly rates her subordinates low or high, and bias is happened while the

appraiser is influenced by other factors such as age, race, gender, while measuring her

subordinates’ performance. Dessler (2009) also suggests that ranking method is the best

way to avoid these problems, in particular to overcome central tendency and strictness

since it is forced the appraiser to distinguish between good and poor performance.

The Impact of PM in Organisation Performance

If appropriately followed, the appraisal process is expected to be more meaningful, effective

and its benefits may exceed its costs (Khoury and Analoui, 2004). As Fisher (1995, cited in

Analoui and Fell, 2002) argues that employees can be motivated by recognition, praise and

opportunity to develop and make the best use of skills and competences they possessed.

Thus, concern and recognition to the employees who perform consistency are very

important. This recognition might be shown through reward system that based on

performance (Performance Reward Payment/PRP). Many organisations consider PM have to

be linked to reward system because it serves as motivation for better performance;

reiterates the importance of good performance within an organisation; and serves as a fair

means of rewarding performance (Armstrong, 2000).

PRP involves the determination of bonuses or pay increment to the assessed performance

of the individual or team, as a way of rewarding performance. Armstrong and Baron (2005)

states that PRP provides individuals with financial rewards in the form of increases to basic

pay or cash bonuses that are linked to an assessment of performance, usually in relation toagreed objectives.



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However, Armstrong (2000) argues that PRP may not be the best way of motivating

employees to perform better. CIPD survey on 2003 also demonstrates that PM is not

inevitably associated with pay, though it is often assumed to be the case. It revealed that

only 42 percent of respondents to the survey had contingent pay (Armstrong and Baron,

2005). Another impact of the successful PM is the improvement of the employees’

commitment to the organisation by integrating employees and organisations objectives in

the beginning of PM process (Armstrong and Baron, 2005). The rising of individual

awareness about the organisation’s goal will ensure that all behaviour within the

organisation is performed in order to achieve its objectives.

Moreover, as Khoury and Analoui (2004) illustrate that information gained from the PA has

two purposes:

1. Administrative function, such as for organisational and HR planning and evaluation

as well as research purposes in order to set better future objectives.

2. Development function, for example to improve employees’ current performance and

productivity, to reward them, to employees’ potential identification, and to improve

job satisfaction at the workplace.

Therefore, the information can be used as the basis of employees career development in

the future (Bratton and Gold, 2007), which will increase their motivation at the workplace,

perform better and in turn will improve organisation productivity.

Conclusion

In conclusion, the practice of HRM in the organisation has improved concern towards the

importance of people as the source of competitive advantage and the biggest contributor in

the organisation achievement. PM is one of the key functions in the HRM, with appraisal

method as its tool in measuring employees’ performance. Several advantages can be

obtained from the successful PM. It will improve employees’ commitment to theorganisation by integrating individual goals to the organisation’s objectives. Moreover,

employees will be motivated to achieve high performance by linking PM with reward

system, assessing their potential and recognising their skills and abilities as well as providing

them with opportunity to develop their career.

However, even though PM had been perfectly designed, it might be fail if the

implementation is separated with other function of HRM. It is also important to realise that

PM is dynamic, therefore, organisation need to be aware with changes in the environment.



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Overall, successful implementation of performance management will benefit individual

performance and commitment and in turn, it will improve organisational performance and

productivity.



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References

Ahmad, R. and Ali, N.A. (2004) Performance Appraisal Decision in Malaysian Public Service.

The International Journal of Public Sector Management. 17 (1) pp. 48-64

Analoui, F. (1998) Human Resource Management Issues In Developing Countries. Aldershot:

Ashgate.

Analoui, F. (2002) The Changing Patterns Of Human Resource Management. Aldershot:

Ashgate.

Analoui, F. (2007) Strategic Human Resource Management. London: Thomson Learning.

Analoui, F. And Fell, P. (2002) Have You Been Appraised? A Survey Of The University

Administrative Staff. The International Journal Of Educational Management, 16 (6),

279-287.

Armstrong, M. (2006) Performance Management: Key Strategies and Practical Guidelines.

3rd ed. London: Kogan Page.

Armstrong, M. And Baron, A. (2005) Managing Performance: Performance Management In

Action. Developing Practice. London: Chartered Institute Of Personnel And

Development.

Bratton, J. and Gold, J. (2007) Human Resource Management: Theory and Practice.

Basingstoke: Palgrave Macmillan

Dessler, G. (2009) Fundamentals of Human Resource Management: Content, Competencies,

And Applications. Upper Saddle River, N.J.: Prentice Hall

Khoury, G. and Analoui, F. (2004) Innovative Management Model for Performance

Appraisal: The Case of the Palestinian Public Universities. Management Research

News. 27(1/2) pp. 56-73

Redman, T. and Wilkinson, A. (2009) Contemporary Human Resource Management: Text and

Cases. Harlow : FT/Prentice Hall

Torrington, D. and Hall, L. (1998) Human Resource Management. 4th ed. London: Prentice-

Hall.



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Appendix 1

Abbreviations Used

HR: Human Resource

HRM: Human Resource Management

PA: Performance Appraisal

PAC: Performance Appraisal Committee

PM: Performance Management



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Appendix 2

List of Figures

Figure 1 The Human Resources Cycle

Figure 2 The Choice Model for Effective HRM

Figure 3 Four Stages of a Typical PM System

performance management in public sector organisation

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