How To Improve A Performance Management System

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1 AN ANALYSIS OF THE STAFF PERFORMANCE MANAGEMENT SYSTEM AT THE GENE LOUW TRAFFIC COLLEGE A thesis presented in partial fulfilment of the requirements for the degree of Master of Public Administration at the University of Stellenbosch By Patrick Andrew Oliver Study Leader: Ms Babette Rabie Date : March 2008

2 DECLARATION I, Patrick Andrew Oliver, hereby declare that this thesis is my own original work and that all sources have been accurately reported and acknowledged, and that this document has not previously in its entirety or in part been submitted at any university in order to obtain an academic qualification. P. A. Oliver March 2008 Copyright 2008 Stellenbosch University All rights reserved -ii-

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4 Abstract The Staff Performance Management System (SPMS) was introduced and implemented in the public service at the start of the 2003/2004 financial year. Apart from being called to align with the Constitution and other relevant acts, it signalled a change in approach and philosophy to measure performance. One of the aims of this new system was to assist in communicating and reinforcing the organisation strategies, values and norms and to integrate individual and corporate objectives. It also aims to ensure that employees are evaluated in terms of a system that is fair, objective, transparent and which provides equitable rewards and recognition. Prior to the implementation of the system it was envisaged that the SPMS should be a system that is characterised by the following: Managers/supervisors provide leadership and integrate performance with other aspects of their work by accepting primary responsibility to manage the people entrusted to them. Employees understand that their performance directly contribute to the ongoing success or the organisation. Individual employees have a full understanding of their work responsibilities and the standards of work expected of them. Individual employees receive regular and structured feedback on their performance. Valued performance is recognised and rewarded. However, when the system was implemented no norms and standards were developed against which performance of staff at the Gene Louw Traffic College could be managed. The focal point of this study was to collect data on the current practices of the SPMS as implemented at the Gene Louw Traffic College in order to analyse the data and to identify possible challenges. The key question that stimulated this study is How can the SPMS be improved to prevent low morale? Recommendations are made regarding the proper implementation of the system, development of norms and standards, SPMS training and incentives in order to alleviate low morale and inefficient performance. -iii-

5 Opsomming In die openbare sektor is die personeelprestasiebestuurstelsel bekendgestel en geïmplementeer aan die begin van die 2003/2004 finansiële jaar. Behalwe dat dit in ooreenstemming met die Grondwet en ander relevante wette moes wees, het die stelsel n verandering in die benadering en filosofie van prestasiemeting meegebring. Een van die funksies van hierdie nuwe stelsel was om te help met die oordrag en verstewiging van waardes en norme van die organisasie om individuele en korporatiewe doelwitte te integreer. Die stelsel het ook ten doel om te verseker dat werknemers geëvalueer word ingevolge 'n stelsel wat regverdig, objektief en deursigtig is sodat gelyke beloning en erkenning verseker word. Voor die implementering van die personeelprestasiebestuurstelsel is verwag dat die stelsel die volgende kenmerke behoort te bevat: Bestuurders en toesighouers neem die leiding en integreer prestasie met ander aspekte van hulle werk deur hoofsaaklik verantwoordelikheid te aanvaar vir die werkers wat aan hulle toevertrou is. Werkers verstaan dat hul prestasie n direkte bydrae lewer tot die volgehoue sukses van die organisasie. Dat individuele werknemers ten volle verstaan wat hul verantwoordelikhede teenoor hul werk is en die standaard van werk wat van hulle verwag word. Individuele werknemers ontvang gereelde en gestruktureerde terugvoering omtrent hul prestasie. Dat gewaardeerde prestasie erken en beloon word. Hoe dit ook al sy, met die implementering van die stelsel is geen norme en standaarde ontwikkel waarteenoor prestasie van werknemers by die Gene Louw Verkeerskollege gemeet kan word nie. Die fokus van hierdie studie was om inligting te versamel in verband met die huidige praktyke van die personeelprestasiebestuurstelsel soos geïmplementeer deur die Gene Louw Verkeerskollege om sodoende die inligting te analiseer en om moontlike uitdagings te identifiseer. Hierdie studie is gestimuleer deur die volgende vraag: Hoe kan die personeelprestasiebestuurstelsel verbeter word om lae moraal te voorkom? Aanbevelings word aan die hand gedoen met betrekking tot die implementering van die stelsel, ontwikkeling van norme en standaarde, opleiding m.b.t. die stelsel en finansiële aansporings om sodoende lae moraal en oneffektiewe werk lewering uit te skakel. -iv-

6 ACKNOWLEDGEMENT I wish to express my appreciation to: 1 God, who is Father, Son and Holy Spirit for the gift and privilege to learn. 2 My wife Ursula and children Nathan and Brandon for their understanding and moral support. 3 My study leader, Ms Babette Rabie, for her guidance, patience and motivation. It was a privilege to learn from her 4 My friends and colleagues Tobie and Dr. Elise Engelbrecht for learning from them and for their inspiration throughout this study. 5 All members of staff at the Gene Louw Traffic College for making this study possible 6 All my fellow students during both the Hons-BPA and MPA study years especially to Steven Henkin for the support and encouragement. 7 My late mother for the supportive role she played in my life. -v-

7 TABLE OF CONTENTS SECTION TITLE PAGE Content page Declaration Abstract Opsomming Acknowledgements Table of contents List of tables List of abbreviations i ii iii iv v vi-xii xiii xiv CHAPTER 1 INTRODUCTORY ORIONTATION INTRODUCTION BACKGROUND/ RATIONALE RESEARCH OBJECTIVES RESEARCH PROBLEM RESEARCH DESIGN RESEARCH METHODOLOGY OUTLINE OF CHAPTERS 6 CHAPTER 2 PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR INTRODUCTION 8 vi

8 2.2 DEFINING PERFORMANCE MANAGEMENT Performance management Difference between PM and PA THE ORIGIN OF PERFORMANCE MANAGEMENT PURPOSE AND OBJECTIVE OF PM PM as a management tool to improve results PM as development tool PM and organisational change BENEFITS OF PERFORMANCE MANAGEMENT THE PM PROCESS PM cycle Performance planning Design of the organisation Managing performance Reviewing performance Rewarding performance Methods for assessments Ranking Forced distribution Paired comparisons Essay method Forced choice scales 34 -vii-

9 Critical incidents Graphic rating scales Behaviourally anchored rating scales (BARS) Management by objectives ( MBO) GRIEVANCES ENSURING EFFECTIVE PM CHAPTER REVIEW 40 CHAPTER 3 A REGULATORY FRAMEWORK FOR THE PM SYSTEM IN THE GENE LOUW TRAFFIC COLLEGE INTRODUCTION LEGISLATION THE CONSTITUTION OF THE REPUBLIC OF SOUTH AFRICA, ACT 108 OF THE PUBLIC SERVICE ACT, ACT 103 OF THE PUBLIC SERVICE COMMISSION THE PUBLIC SERVICE REGULATIONS OF THE REPUBLIC OF SOUTH AFRICA OF THE LABOUR RELATIONS ACT, ACT 66 OF THE PUBLIC FINANCE MANAGEMENT ACT (PFMA) ACT 1 OF NATIONAL TREASURY REGULATIONS (NTR) OF viii-

10 3.2.8 THE DEPARTMENT: PUBLIC SERVICE AND ADMINISTRATION (DPSA)- EMPLOYEE PER FORMANCE MANAGEMENT AND DEVELOPMENT SYSTEM (EPMDS) THE STAFF PERFORMANCE MANAGEMENT SYSTEM (SPMS) REVIEW 48 CHAPTER 4 A CASE STUDY OF THE STAFF PERFOR- MANCE MANAGEMENT SYSTEM AT THE GENE LOUW TRAFFIC COLLEGE INTRODUCTION THE SPMS PROCESS AS IMPLEMENTED AT THE GENE LOUW TRAFFIC COLLEGE THE SPMS CYCLE Documents needed for SPMS Job description The individual performance and development plan ( IPDP ) The individual development plan ( IDP ) and quarterly review meetings THE ANNUAL PERFORMANCE APPRAISAL PROCESS INCENTIVES REVIEW OR APPRAISALS BY COMMITTEES SPMS GRIEVANCE PROCEDURE CURRENT SITUATION AT THE COLLEGE 59 -ix-

11 4.8.1 Services rendered by the college and staff members Management of SPMS REVIEW 61 CHAPTER 5 RESEARCH DESIGN, METHODOLOGY AND FINDINGS INTRODUCTION RESEARCH DESIGN SAMPLING METHOD DATA COLLECTION INTERVIEWS RELIABILITY, TRUSTWORTHINESS AND VALIDITY OF THE RESEARCH METHODS USED IN THIS STUDY Reliability Validity Trustworthiness DATA ANALYSIS AND INTERPRETATION Introduction Summary of participants Findings in the interview data Responses and themes INTERPRETATION OF INTERVIEW DATA INTERVIEW DATA REVIEW 86 -x-

12 CHAPTER 6 CONCLUSION AND RECOMMENDATIONS OF THE STUDY INTRODUCTION Overview of the study CONCLUSION AND RECOMMENDATIONS Implementation of the SPMS system SPMS training Performance bonuses Performance reviews and remedial Development of norms and standards Grievance procedure Management bias/ interference RECOMMENDATIONS SPMS training Grievance procedure Incentives Developing norms and standards Appraising performance LIMITATIONS OF THE STUDY RECOMMENDATIONS FOR FURTHER RESEARCH CONCLUDING REMARKS 97 -xi-

13 CHAPTER 7 LIST OF REFERENCES PUBLISHED SOURCES Books Legislation UNPUBLISHED SOURCES Research papers Web pages Interviews Official documents 104 ANNEXURES xii-

14 LIST OF TABLES PAGE Table 1 SPMS Cycle 50 Table 2 Relevant components of the IPDP 52 Table 3 Departmental incentives 57 Table 4 Tesch s eight step process for data analysis 67 Table 5 Outline of the participants who were interviewed 70 Table 6.1 Structured interview questions 71 Table 6.2 Questionnaire for the focus group interviews 72 Table 7 Themes and responses by participants 73 -xiii-

15 LIST OF ABBREVIATIONS BARS DPSA EPMDS IPDP JD KPAs MBO PA PM : Behaviourally anchored rating scales : Department of public service and administration : Employee performance management and development system : Individual performance development plan : Job description : Key performance areas : Management by objective : Performance appraisal : Performance management PFMA : Public finance management act (Act 1 of 1999) PRP SPMS : Performance related pay : Staff performance management system -xiv-

16 CHAPTER ONE 1.1 INTRODUCTION A new appraisal system, the Staff Performance Management System (SPMS), was implemented in the public service at the beginning of the 2003/2004 financial year. Since then performance evaluation of staff could only be done in terms of the SPMS system. The change from a system of personnel assessment (used in the public service for several years) to a new SPMS signalled a change in approach and philosophy apart from being called for to be, aligned with the Constitution of South Africa (Act: 108 of 1996), the Skills Development Act (Act: 97 of 1998), the Labour Relations Act (Act: 66 of 1995) and the Employment Equity Act, (Act: 55 of 1998). The SPMS was implemented as a way for managing, developing and rewarding performance in a participative and consultative manner. A particular benefit of the SPMS is the manner in which it establishes clear links between the overall objectives of the PGWC, its departments and the individual work objectives of the employee. Performance management in the SPMS is located firmly within the strategic framework for effective human resource management and development. Nel, Gerber, van Wyk, Haasbroek, Schultz, Sono, and Werner, (2001:516) state that when performance management systems are tied into the objectives of the organisation, the resulting performance is more likely to meet organisational needs. Performance management should be line driven rather than personnel department driven in order that it may be effective. The development of a performance management system should be a joint effort between line management, human resources management and the employees. It would offer line managers and the employee ownership of the system and ensure stronger commitment. 1.2 BACKGROUND/RATIONALE During 2003 the Department of Public Service and Administration (DPSA) issued a circular regarding, An Integrated Performance Management and Development System for use in the Public Service to assist departments in the implementation of the SPMS evaluation of staff members (DPSA circular 1/7/1/4/1:2003). This Integrated Performance Management System is used as a guideline in determining indicators and measures with regard to performance management of public servants. 1

17 In terms of the SPMS W.C. Provincial Guide Final (2005:5), the system should identify, evaluate and develop staff performance in order for: - The department's mission and objectives to be achieved. - Its values to be practised, and - Staff to benefit through clarifications of expectations, recognition of their efforts, feedback on their performance, improved training and development and enhanced career planning. However, although it is a pre-requisite in terms of the SPMS guidelines that all supervisory staff members need to be trained in terms of the SPMS processes and that norms and standards have to be determined when key performance areas (KPAs) are written in job descriptions, this is still lacking in some of the directorates within the Department of Community Safety in the Western Cape Government. One particular directorate where norms and standards have not been introduced to properly assess staff members is the Directorate of Safety Training and Development. The Gene Louw Traffic College is a sub directorate within the Directorate Safety Training and Development. The fact that norms and standards have not been set, may lead to the incorrect application of the system with the result that staff could be assessed improperly and in an unfair manner. Where standards and norms have not been set when performance agreements are made between staff members and their supervisors at the beginning of a SPMS cycle, it is better not to measure candidates at all. The wrong application of the SPMS system could well bring about unhappiness and low morale amongst staff members, which could in turn have a negative effect on service delivery and the Western Cape Government s vision of a home for all RESEARCH OBJECTIVES The specific objectives of this study are as follows: To analyse the theory on Staff Performance Management in order to determine best practices in individual performance. To objectively analyse the SPMS process of the Gene Louw Traffic College to identify possible management challenges. 2

18 To collect data on the current practices of the SPMS as implemented at the Gene Louw Traffic College. To make recommendations based on existing literature and the results of individual and focus group interviews. 1.4 RESEARCH PROBLEM No specific standards and norms have been implemented in the SPMS process at the Gene Louw Traffic College. This amongst other factors such as the slow implementation of the new organogram and the non-filling of vacant posts could contribute to low morale and poor work performance. Although there are other factors as mentioned above, the non-existence of standards and norms in the SPMS process at the College is undoubtedly one of the major contributing factors to low morale at the college. Therefore, the researcher proposes to analyse the SPMS process at the Gene Louw Traffic College in order to answer the following question: How can the SPMS be improved to prevent low morale and enhance individual staff performance? The researcher intends to analyse all gathered information in a manner that is not prejudiced towards the Department of Community Safety, but beneficial to the Department. Based on the analysis of all data, the researcher will offer some recommendations in this study's conclusion to address the question in the research problem. 1.5 RESEARCH DESIGN Mouton (2001:49) states that the research design concentrates on the fundamental question of what kind of study will be undertaken in order to furnish acceptable answers to the research problem or question. The researcher should thus indicate what kind of research design is followed during the study and for what reason this research design was chosen and what likely demands or restrictions in the design will need some further attention. The researcher will follow a case study design. This will include individual and focus group interviews to be conducted with the director and staff at the Gene Louw Traffic College that consist 3

19 of about 32 employees. Mouton (2001:149) states that case studies are usually qualitative in nature and aim to provide an in-depth description of a small number (fewer than 50) of cases. To do justice to the research problem, a qualitative research design will be selected for the study. The researcher will scrutinise legislation, literature, SPMS training manuals, reports and publications to contribute to a better insight of the current schools of thought and compare these to the results of the interviews and focus groups. 1.6 RESEARCH METHODOLOGY Creswell (1998: 78-87) describes three ideological perspectives most associated with qualitative research, namely: postmodernism, critical theory and feminist theory. Critical theory includes themes that have methodological implications and promote certain methods above others (Creswell, 1998:80). According to Thomas (1993), the critical reader might design an ethnographic study to include changes in how people think, to encourage people to interact, form networks and actionoriented groups, and to help individuals examine the conditions of their existence. A case study would very often be used in this context. The reason for selecting the qualitative design is thus explained by the above. It is stated in Mouton (2001:56) that research methodology concentrates on the research process and the type of instrument to be used. It encompasses as a departing point the particular tasks that may be data collection or sampling at hand. The researcher will explore the problem with regard to the SPMS in the Gene Louw Traffic College Brackenfell that is a sub directorate within the Department of Community Safety and will, therefore, draw participants from that particular institution. Data collection will take the form of individual interviews with the management component that consists of the director, the head of training, the head of the support component and two programme managers. The structure of the Gene Louw Traffic College is divided into three groups, namely the support staff unit, the basic training unit and the specialised training unit. Focus group interviews will also be conducted with three groups of five members from each unit. Participants will be selected in terms of their post levels, from the lowest to the highest in order to reach staff members on all levels at the college. According to De Vos, Strydom, Fouché and Delport (2004: ) 4

20 researchers use semi-structured interviews to gain a detailed picture of a participant s beliefs about, or perceptions or account of, a particular topic. The interview may well move away from the questions on the schedule. The researcher has to decide how much deviation is acceptable. Vos et al. (2004:305) indicate that focus groups are tantamount to group interviews. They are a means of better understanding how people feel or think about an issue, product or service. Participants are selected because they have certain characteristics in common that relate to the topic of the focus group. A set of predetermined questions will be drawn up by the researcher to engage the participants. According to Holstein and Gubrium (1995:76) a questionnaire written to guide interviews is called an interview schedule or guide. This provides the researcher with a set of predetermined questions that may be used as an appropriate instrument to engage the participant and designate the narrative terrain. Producing a schedule also forces the researcher to think of difficulties that could be encountered. For instance, in terms of question wording or sensitive areas, a possible question that the researcher could pose is: It is four years after the implementation of the SPMS. In your opinion was it properly implemented in terms of the DPSA guidelines? With the permission of the participants the researcher will record all the interviews on a battery operated a tape recorder that allows a much fuller record than notes taken during the interview. If possible, an electrical tape recorder will also be used to ensure continued data capturing. Smit et al. (1995:17) suggest that and if permission is obtained from the participants, the researcher should record interviews on tape or video. Data from both the individual and focus group interviews will be transcribed. The researcher will use the process to analyse qualitative data as developed by Tesch (1990: ) To get a sense of the whole and read through transcriptions carefully. To write down some ideas as they come to mind. Thereafter to select one interview, go through it and determine what it is all about. To get the underlying meaning of the information at hand and write the thoughts down in the margin of a worksheet. After going through all the interviews a list of the topics that emerged will be made. The researcher will cluster together similar topics and arrange these topics in columns of major, unique, and left 5

21 over topics. The researcher will then find the most descriptive wording of the topics and turn them into categories. After this the researcher will assemble the data material belonging to each category in one place and perform an analysis. The information that emerges from the interviews will be tested against existing literature and legislation that will inform the recommendations. All responses during interviews will be treated confidentially. The focus is on individual performance at the Gene Louw Traffic College. Welman and Kruger (2001:46) explain that the population of a research problem is the study object, which may be individuals, groups, organisations, human products and events. The aim is to receive important information from the participants that will inform an analysis of the SPMS at the Gene Louw Traffic College and consequent strong recommendations. 1.7 OUTLINE OF CHAPTERS Chapter 1 With this chapter the research study will be initiated and will include the introduction to the research study and followed by the background and rationale for doing the study. It will also include the problem statement as well as the objectives of the study and research question. After this the research design, methodology and a chapter outline will follow. Chapter 2 This chapter will provide a review of the relevant literature during which an outline of all consulted literature will be furnished. The researcher intends to consult extensively to arrive at tangible results from the literature and other available theory on performance management, which could assist in the final analysis of the problem being examined. Chapter 3 Chapter 3 provides an explanation of the required regulatory framework for performance management in public service departments, such as the Gene Louw Traffic College. 6

22 Chapter 4 Chapter 4 provides for a case study of the Staff Performance Management System in the Department of Community Safety with special focus on the Gene Louw Traffic College. In this chapter the theoretical outline for the research problem as it connects to existing literature will also be presented, followed with a rundown of the chapter. Chapter 5 In this chapter an in depth account of the research methodology and design that will be used in carrying out the research will be furnished. The qualitative research method will be argued for the case study design. The outcomes of the individual interviews and focus group interviews will be analysed in this chapter through the Tesch method and then be interpreted. A review and analysis will be done of the key findings of this study in order to consider the implications for the SPMS process. Chapter 6 Chapter 6 will provide a synopsis of the chapters of the research followed by suitable recommendations, which will bring the study to a close. Chapter review Chapter one introduced an overview of the present study and focused on the background as well as the purpose of this research study. The specific research objectives were recorded. This chapter concludes with an explanation of the development of the study and a short description of each chapter that follows. 7

23 CHAPTER TWO PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR 2.1 Introduction Performance management (PM) is based on three levels, namely individual performance, organisational performance and performance within teams. Hartle (1997:58) argues that the PM process should not be isolated within the organisation. It should be integrated into the way the performance of the business is managed and it should be linked with other key processes, such as business strategy, employee development and total quality management. However in order for organisations to be successful with their aims and objectives, they need the total buy-in of individual employees into their performance plans. If individuals in organisations, whether they work on their own or in teams, do not accept the implemented performance plan, the business of the organisation would be affected. On account of the important role that the individual plays in an organisation the researcher will focus on individual performance during this study. Chapter 2 attends to the literature review. This chapter will conceptualise performance management within the following framework: The chapter starts with the conceptualisation of PM, followed by a discussion of the difference between PM and performance appraisal (PA). Thereafter the researcher will discuss literature pertaining to the origin, purpose and objective and ensuring an effective PM. Finally a discussion on the benefits of PM, the PM process, and a review will conclude this chapter. 2.2 Defining Performance Management Performance Management According to Armstrong and Baron (2000:7) performance management is a strategic and integrated approach to delivering sustained success to organisations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors. 8

24 Bacal (2004: viii) defines performance management as an ongoing communication process, undertaken in partnership between an employee and his or her immediate supervisor, that involves establishing clear expectations and understanding about the following: The employee's essential job functions How the employee's job contributes to the goals of the organisation What it means, in concrete term, to do the job well How job performance will be measured What barriers hinder performance and how they may be minimised or eliminated How the employee and the supervisor will work together to improve the employee's performance Performance management is a process for establishing a shared understanding about what it is to be achieved, and how it is to be achieved, and an approach to managing people that increases the probability of achieving job related success Hartle (1997: 12). According to Swanepoel, Erasmus, Van Wyk and Schenk (2003:372) performance management may be defined as a formal and systematic process by means of which the job relevant strengths and weaknesses of employees are identified, observed, measured, recorded and developed. Swan (1991:11) posits that performance management means more than assessing an employee s performance at regular intervals. It invites a number of related tasks: monitoring, coaching, giving feedback, gathering information, and assessing an employee s work. It accomplishes those tasks in the context of objectives, the immediate objectives of the department and the overall goal of the organisation. And it carries them out systematically, throughout the year. According to Spangenberg (1994:viii) performance management is traditionally viewed as an approach to managing people that entails planning employee performance, facilitating the achievement of work related goals, and reviewing performance as a way of motivating employees to achieve their full potential in line with the organisation's objectives. Performance management is a means of getting results from the organisation, teams and individuals by understanding and managing performance within an agreed framework of planned goals, objectives and standards (Murlis and Armstrong 1996:205). 9

25 Stiffler (2006:70) suggests that it is the individuals working within an organisation who collectively define the organisation s performance and its progress toward achieving its strategic objectives. Organisational objectives should thus be linked to individual activities and goals. Fletcher (1998: 56) argues that performance management is managing, controlling, supporting and continuously improving the success of any business. It is at the same time work performance linked to business performance at every level and establishing the systems and processes to support assessment review and evaluation. According to Fletcher (2004:31) there is no single, universally accepted definition for performance management. The most prevalent notion of PM is that of creating a shared vision of the purpose and aims of the organisation, helping each individual employee to understand and recognise his or her part in contributing to them, and thereby managing and enhancing the performance of both individuals and organisations. Fletcher (2004:31) states that Performance Management emerged from the 1990s onward and that for many organisations, the term performance management is synonymous with performance appraisal, or with performance related pay (PRP). Performance Management is, however, more than either or both of these. The most accepted understanding of performance management is that of creating a shared vision of the purpose and objectives of the organisation, assisting each individual worker to understand and recognise his or her part in contributing to them, and thereby managing and enhancing the performance of both individuals and the organisation. Fletcher (2004:31) further states that the main building blocks of such an agreement are: The development of the organisations mission statement and objectives. Linked to this, the development of a business plan (business being interpreted in the broadest sense of the word). Enhancing communications within the organisation, so that workers are not only aware of the aims and the business plan, but may add to their formulation. Clarifying individual responsibilities and accountabilities (which means, among other things, having job descriptions, clear role definitions and being willing to be held accountable). 10

26 Defining and measuring individual performance (with the intention on being measured against one s own objectives rather than being compared with others) Implementing appropriate reward strategies Developing staff to improve performance further, and their career progression, in future. Fletcher (2004:32) points that from the above list it could be seen that performance appraisal and possibly (but not necessarily) performance related pay (PRP) may be part of performance management, but integrated into a much broader approach. Other underlying performance management principles are: That performance management is supposed to be owned and driven by line management, and not by the HR Department or one or two directors, which is in marked contrast to many appraisal systems. There is an emphasis on shared corporate goals and values. Performance management is not a package solution; it is something that has to be developed specifically and individually for the particular organisation concerned. On condition that the performance management approach is successful, then it should reflect some positive result in more than just an improvement in the bottom line or the delivery of services: Those working in it should show clearer results and more readily identify with the culture of the organisation. It should lead to higher levels of job satisfaction, job involvement and organisational commitment. It could be expected to have a positive impact on recruitment and retention, on quality issues, and on general human resources policy. Fletcher (2004:127) argues that the notion of government policy and the way it affects the public sector are probably no greater that those of the market place and the City and their efforts on the private sector. Huge parts of the private sector are providing services, just as the public 11

27 sector is. The kind of organisational structures found in the two sectors have also become more similar. However, there are some important distinctions to be drawn. Assessing the output and effectiveness of public sector organisations is much more complex than with the private sector. How society should judge the effectiveness of an individual police officer and of his police service as a whole is generally seen as a more contentious issue than how the effectiveness of managers and commercial companies are assessed. Much of the public sector has to run appraisal on very limited resource budgets. According to Sloman (1997:167) in Nel (1997: ) performance management systems are considered to be operating when the following conditions are met: A vision of objectives is communicated to employees Departmental and individual performance targets are set within wider objectives A formal review of progress towards targets is conducted; and The whole process is evaluated to improve effectiveness In the above definitions and terminology it is apparent that performance management is a process during which planning, monitoring regular reviews and feedback plays a fundamental role in order to arrive at a proper appraisal interview between the employee and his/her supervisor towards the end of the performance cycle. It is also clear that ongoing communication forms an integral part of the performance cycle. The researcher would thus base his study on the following definition: Performance management involves a partnership between the individual and manager to identify and agree on performance objectives, and discuss and implement a joint action plan to meet them. It also includes monitoring, reviewing and recording the individual s performance and results regularly in order to guide future actions (Naisby 2002:5) Difference between PM and Performance Appraisal During the performance management process the cart cannot come before the horse. Bacal (2004:5) points that people often confuse performance appraisal and performance management, 12

28 believing that they are one and the same. Performance evaluation is, however, just a small part of performance management and perhaps even the least important part. Naisby (2002:4-5) argues that performance should first jointly be managed between the individual and the manager; and only then can it be reviewed and appraised. In considering the above one could argue that performance appraisal forms part of the tail end of performance management. During the evaluation of performance management, any personnel decision that affects an employee s retention, termination, promotion, demotion, transfer, salary increase or decrease, or admission into a training programme should be tabled and discussed (Latham and Wexley1994: 4-6). According to Naisby (2002: 5-6) the appraisal involves a yearly or six monthly formal meeting between the individual and the manager to review the individual s performance and results. Discussions, objectives, outcomes, future action plans and development needs are recorded on a form during this meeting. Shorter, regular review meetings to monitor progress and results could support this meeting. Spangenberg (1994:14), however, argues that performance management is a much wider concept than performance appraisal and comprises a set of techniques used by a manager to plan, direct and improve the performance of subordinates in line with achieving the overall objectives of the organisation. Swan (1991:9) points out that while performance management is considered as an ongoing yearlong process of setting goals and objectives and giving ongoing coaching and feedback, performance appraisal is the codification of this ongoing process. Performance appraisal according to Fletcher (2004:33) has a central role to play in performance management systems (PMS). It is the usual vehicle by which the organisational goals and objectives are translated into individual objectives. It also remains the chief means of discussing and acting on the development of the individual. However, the difference is that, within the context of a PMS, appraisal is much more closely linked with the broader business context. There is also a risk of encouraging individual achievement at the expense of team effort and cohesion when creating a performance culture. This risk could be overstated, but it is important that when objectives are set in the appraisal, they reflect the priorities of the unit and not solely the narrower focus of the individual. This suggests there has to be a clear understating of the team goals before individual appraisals are carried out. 13

29 Given the above, it can be argued that appraisal is not simply an assessment of the past, but that it should at the same time focus on the future and on the improvement of an individual s performance. However, since many organisations moved away from a performance appraisal system and adopted a performance management system, which is a much wider concept than the aforementioned, the researcher wishes to briefly provide a historical overview of where PM originated. 2.3 The Origin of Performance Management Performance evaluation and reviews, although performed in a biased manner because employees were seldom rated according to their merit, but always according to their likes and dislikes, may be traced back to the Wei Dynasty in China ( A.D). The first modern rating plan is often attributed to the editors of the Dublin Review who published during 1780 a method of evaluating the effectiveness of each member of the Irish legislative (Lopez 1968:28). According to Lopez 1968:28) the earliest formal employee performance evaluation programme is thought to have originated in the United States military establishment shortly after the birth of the republic, when senior officers were required to submit evaluation reports of their junior officers. Landy, Zedeck and Cleveland (1983:2-3) point out that the measurement of performance has occupied the attention of applied psychologists for several decades. The graphic rating scale was introduced in During the 1930s and 1940s a great deal of research was devoted to the format, method, and physical characteristics of performance-measurement systems. In 1952, the late Robert Wherry according to Landy, Zedeck and Cleveland (1983:3) produced some reports for the United States Army that directly addressed the rating process of performance. During the last number of years there have been several review papers that called for a broader consideration of the phenomena that comprise interpersonal evaluation. These reviews suggested borrowing from other sub-disciplines and other allied fields of behavioural science. Hartle (1997:51-52) states that performance appraisal problems came to a head in the United States during The appraisal system used at the time did little to support the important new issues of focus on continuous improvement and greater employee development. An industrial gas manufacturer in the United States replaced this ineffective appraisal system with an on-going performance management process. It was from this historical context that the structure, the purpose and objective of PM emanated. 14

30 2. 4 Purpose and objective of Performance Management The purpose and objective of PM includes the following: PM as a management tool to improve results PM as development tool PM and organisational change PM as a management tool to improve results It is the cardinal objective of PM to improve employee performance so that an organisation may be successful and to be a frontline driver in effectively rendering a service to its clients, whether in the private sector or in public service. According to Spangenberg (1994:23) the purpose of performance management can focus on employees or on improving performance. On the assumption that it is directed towards the employee, the focus is on the impact of work requirements and individual abilities, needs, values, and motivation on individual performance. This situation represents the lowest level of impact on performance. On the other hand improvement orientation by its very nature involves improvement in systems and processes, e.g. quality, customer service etc, improvement in structure in order to implement organisational strategy, and improvement of management practices. When the purpose of performance management is improvement, the level of impact has clearly moved higher. Management, and specifically top management, is primarily responsible for positioning the organisation in the external environment, for deciding its mission and strategy. Hence, if management accepts performance management as a viable system, it will become part of the leadership and change process and be aligned to the business strategy (Spangenberg 1994:24). Bacal (2004:7) proposes that managers and their employees should combine their knowledge in order to improve their performance. Employees should be involved as equal contributors in the performance management process, especially during performance planning, performance reviews and problem solving. It will not only create opportunities for the best use of available information, but it will inform employees that their knowledge and insight are highly regarded. This is essential if employees are to become active and enthusiastic participants in performance management. Williams (2002:19) suggest that it is the fundamental aim of performance management to develop the potential of staff, improve their performance and, through linking 15

31 employee s individual objectives to business strategies, improve the organisation's performance. Another useful area of PM is that it transform into a development tool during the process of planning, performance reviews and remedial action PM as development tool Bennett and Minty in Nel et al (2001:516) state that there are generally three major purposes of performance management: It is a process for strategy implementation It is a vehicle for culture change; and It provides input to other human resources systems, such as development and remuneration. Carrell et al (1998:260) state that performance appraisals that are a sub-component of performance management are a key element in the use and development of an organisation's most vital resource its employees. Together with formal reviews, performance appraisal as a component of performance management will also highlight needs and opportunities for growth and development of individuals. An indication of the worth of a training programme can sometimes be determined by an analysis of employee performance (Walters and Bouwer, 2003:31). According to Swanepoel et al., (2003:373) performance management at the evaluation stage can serve individual development purposes by: Providing employees with feedback on their strengths and weaknesses and how to improve future performance; Providing career planning and development; and Providing inputs for personal remedial interventions, for example referral to an Employee Assistance Programme. Jerome (1998:57) suggests that an employee development profile could also be used to help employees acquire skills for new roles, responsibilities, projects and opportunities. The employee development plan, which forms part of the performance management process also substantially increases the chances of employee development taking place, because there is a plan in writing to which both the supervisor and the employee agreed and committed themselves. This development plan has to be a workable one that is aligned to the 16

32 organisation's budget and other resources so that actual development may happen. Plans can easily be compiled and forgotten about or ignored during the performance cycle. Smither (1998:445) is of the opinion that with the rapid diffusion of technological advance and the move toward a service economy, it is the quality of the people in the organisation that gives companies the edge in a competitive marketplace. The development and retention of talent has become for many companies the key to survival. With rapid change taking place continuously, organisations are attempting to anticipate the skill requirements for future work and prepare their workforces. Effective performance in last year s environment may not be strongly predictive of next year s performance if the environment changes significantly. It is, however, possible to evaluate, based on performance displayed over the past year, the extent to which an employee already has the skills that would be required the following year and to take action to avoid deficiencies before they affect future performance. With this both the importance of continuous reviews during the performance appraisal cycle and also the value of performance management as a development tool are reiterated. According to CSB (2007:2) the performance management system is an on-going process. Once employment targets and standards have been agreed on and performance objectives decided upon, the appraisal officer should begin the coaching and development process which threads through performance planning, regular feedback and guidance, interim reviews and performance appraisal. Coaching relies on regular feedback to staff on their performance. It aims at: Giving recognition to encourage and reinforce good performance; and Providing advice and counselling to assist in improving performance, and where relevant, take corrective action. It is the researcher's opinion that employees who are properly trained, developed and given a clear understanding of what is expected of them develop into a contented workforce. This normally leads to a change in the organisation in which a culture of growth and success for both the employees and the organisation is fostered PM and organisational change In the same manner as PM influences work performance through improved results and serves as a development tool in an organisation, it also greatly impacts on organisational change. When 17

33 PM is properly implemented and managed in an organisation the development and better performance by employees normally result in an organisational change that contributes to enhanced service delivery. Stiffler (2006:40) suggests that a performance-driven organisation ultimately revolves around culture, and cultural change is a major undertaking that requires commitment, advocacy, and leadership at the top level of the enterprise. Top management has to be committed to the concepts of performance management and its execution and should support it throughout. Performance management has a powerful impact on the culture of the process of managing performance, e.g. goal setting, coaching, feedback etc. The manner in which these interactions happen will decide the culture of the organisation, for example whether there would be an autocratic participative culture, or a team or individual culture. Performance management becomes an important change management focus (Spangenberg, 1994:41). McLagan in Spangenberg (1994:40) proposed that performance management could serve at least three major purposes: To serve as a vehicle for implementing organisational goals and strategy To serve as a driving force for creating a participative culture To provide useful information for H/R decisions It is against this background of management improvement, employee development and organisational change that PM should be managed and sustained for organisations to remain relevant in the twenty first century. 2.5 Benefits of Performance Management When benefits regarding performance management are discussed or argued about, it often happens that the first thought given to this subject is directed at benefits in terms of incentives for employees. There is a general perception that performance should be rewarded. Therefore, employees are likely to ask during reviews or remedial processes. What is in it for me? The benefits of performance management, however, cover a much wider area than merely rewarding employees. 18

34 According to McNamara ( ) the following are key benefits of performance management: PM focuses on results, rather than behaviours and activities A regular misapprehension among supervisors is that behaviours and activities are the same results. An employee may thus appear very busy, but not be contributing at all toward the objectives of the organisation. An example is the employee who manually reviews completion of every form and procedure, rather than supporting automation of the review. The supervisor may assume the employee is very committed to the organisation and works very hard, and consequently deserving a very high performance rating. Aligns organisational activities and processes to the goals of the organisation Although originally developed as a technique to measure and manage individual performance, PM has since then expanded into a multifaceted system of organisational performance management, whereby organisation goals are translated into subservient goals on task, team and individual level. There is a continual focus on aligning both team and individual performance with the strategy and goals of the organisation (Smit, 2003: 13). PM identifies organisational goals, results needed to achieve those goals, measures of effectiveness or efficiency (outcomes) toward the goals, and means (driver) to achieve those goals. This chain of measurement is examined to ensure alignment with overall results of the organisation. Cultivates a systemwide, long-term view of the organisation According to Swanson in Performance Improvement Theory and Practice (Advances in Developing Human Resources, 1999:1) an effective performance improvement process should follow a systems approach while looking at outcomes and drivers or else the effort would produce a flawed picture. For example, laying off people will likely produce short-term profits. But the organisation may eventually experience reduced productivity, resulting in long term profit loss. Produces meaningful measurements These measurements have a wide variety of useful applications. They are useful in benchmarking, or setting standards for comparison with best practices in other organisations. They provide a consistent basis for comparison during internal change efforts. They indicate 19

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