Performance management vs performance appraisal. What are the key differences? Work performance can be defined as the number of products or services provided by one employee in a given amount of time. It is a parameter that is constantly being measured and verified by organizations. It is a factor that determines a degree of competitiveness in the market and decides on the effectiveness of the run organization. In HR, you can come across two terms, namely performance management and performance appraisal. Although they oscillate around the same concept, they are separate procedures that differ from one another. Read on.
Performance management vs performance appraisal – table of contents:
Performance management is a process that involves controlling KPIs such as profit, return on investment, and operational costs. Performance management covers a broad range of practices, technologies, and methods used for gathering and analyzing the obtained data and results. Performance management is implemented using a strategy to support employees, in order to increase their productivity and achieve the company’s goals.
HR managers are responsible for developing and implementing performance management programs so as to increase employees’ work performance. In order to improve employee performance, it is indispensable to build communication channels between employees and management.
Work progress is subject to ongoing monitoring based on feedback. An effective performance management program consists of several essential steps, which should be developed in a complementary and compatible manner. None of these elements should be omitted or excluded.
The first stage of a business performance management policy involves identifying strategic goals and employee expectations. As mentioned earlier, Performance management plans produce the best results when they involve direct communication between employees and management. Implementation of the adopted strategy should be based on direct training and personal meetings with staff.
The next stage involves monitoring and evaluating job performance. The obtained results should be communicated directly to employees as encouragement rather than criticism, in order to give them a chance to improve their performance and self-realization. Employees should have a realistic view of their work and opportunities for development. An important part of the strategy is a properly structured incentive system that includes bonuses and rewards for the achieved results.
A simplified performance management scheme:
- define objectives and expectations
- monitor and analyze tasks
- create employee development programs
- implement new technologies and improved products
- measure and evaluate performance using KPIs
- remunerate on the basis of achieved results
Benefits of performance management
Performance management strategy is primarily implemented by companies to increase financial returns. By optimizing the measures taken in this area, it is possible to develop sales, reduce costs, increase productivity, determine the real profitability of projects and investments, and keep the set goals updated.
Another positive aspect is to increase employee motivation. Employees who are goal-oriented and aware that their work directly affects the success of the company are more motivated to increase work efficiency. The benefits are mutual, as the company achieves better results and employees have a sense of security regarding compensation and career development opportunities.
Performance management also contributes to the optimal reorganization of management control. It supports administrative processes, systematization of data, reduction of unnecessary bureaucracy, and control of compliance of all areas of the organization’s activities with legal regulations.
Performance appraisal is only a part of performance management. It involves setting work standards and norms and then analyzing the achieved results. KPIs are used for measuring performance. This is a broad set of indicators covering a variety of parameters that each organization can translate into its needs. Each KPI should have a numerical value so you could be able to interpret results more easily.
The general formula for measuring job performance is the result of the quotient of output to input. On the basis of this formula, it’s possible to calculate the individual productivity of the employee or the entire team.Choosing indicators for measurement, keep in mind that productivity is affected by several various factors, which don’t often depend on employees.
When preparing a performance appraisal, it’s necessary to take into account the degree of implementation of innovations (technological progress, computerization, and automation of processes), organizational progress, internal administrative improvements, and economic factors (salary system, promotion).
The organization’s personnel policies have a huge influence on the achieved performance. Performance largely depends on the subjective sense of fair compensation. Remuneration should be adequate to the amount of work done and effort made. In other words, unfair and low pay is often responsible for the decline in productivity. Another factor directly related to productivity is professional development and the opportunity for promotion. Promotion is not only prestige but also an incentive to continue working harder.
Performance management vs performance appraisal – summary
To sum up, performance management is a long-term process, while performance appraisal is only a part of it. At the same time, appraisal itself is inflexible, and based on predetermined standards and values, while management adapts to changes in the labor market and to the needs of the organization.
Another difference relates to the level of responsibility. Managers are responsible for performance management, while HR personnel are responsible for performance appraisal. Performance appraisal is based on what has already been accomplished. Performance management aims to make improvements and increase the effectiveness of future activities. Therefore, it can be said that the terms performance management and performance appraisal refer to the same concept, but are not the same.
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