Performance management has developed over the years, with many organizations moving from traditional models. Unlike conventional models, modern performance management systems analyze employee performance and motivation in real time rather than relying on annual reviews. This can be attributed to the changing workplace environment along with technological advancements. Contemporary organizations depend upon various forms of performance appraisal and employee motivation to achieve their objectives and overall goals. Performance management refers to a range of activities a business engages in to enhance group or individual performance in assigned roles (Aguinis, 2019, p. 1). The core aim of performance management and motivation is to improve the firm performance. Motivated and engaged employees are often believed to perform better than those that are not motivated. Motivation is a critical factor for the success of an organization. In the current fast-paced business environment, performance managers play a pertinent role in assessing individual and team performance and developing strategies to improve these practices. Hence, performance management models are utilized in firms to bring motivation on an individual and departmental level. Consequently, more motivated employees tend to be productive and responsible in their given roles in the business. Organizations engage in performance management for different reasons supported by different models, which directly impact employee motivation and differ from performance appraisal in certain ways.
Reasons for Performance Management in Organizations
Organizations often conduct performance assessments for various reasons. Firstly, it is important to note that businesses rely on performance management and employee motivation system to give employee feedback regarding their roles and help organizations make crucial decisions. For instance, most organizations use performance appraisal models to determine workplace issues such as employee promotions and pay raises (Aguinis & Burgi-Tian, 2021, p. 234). Although performance managers are provided with information regarding individual and group performances in an organization, the practice mainly aims to design creative ways to motivate and engage employees, thus maximizing their productivity. This, in turn, helps the organizations in reaching the set objectives. Therefore, companies use data from this practice to design ways and methods of engaging employees and understanding their views and concerns at the workplace. Most performance managers acknowledge that understanding and giving each employee feedback regarding their performance will eventually impact the whole team and the whole organization. Thus, the information gained through performance management and employee motivation equips managers with strategies to improve performance within various departments and organizations.
Furthermore, performance management is significant in assessing the goals supported by employee feedback. In many organizations, the attention of performance managers must focus on the best-performing employees and those who score lowly. Hence, recognizing factors that cause low motivation and performance in an organization helps to determine the appropriate performance appraisal system (Rodriguez & Walters, 2017, p. 208). Companies set performance criterion which helps employees to perform their duties. Therefore, organizations advertise vacancies with defined job descriptions and skills required to attract qualified candidates. During hiring, the performance managers can openly discuss with the employees what is required of them. Given these roles of performance management and motivation, managers must ensure that adequate training and communication to employees regarding their roles are communicated. Therefore, performance management can be an instrumental tool in evaluating organizational goals.
Motivational Theories and Performance Management
Scholars have proposed many theories exploring how motivation is linked to organizational performance management. For instance, Maslow’s Hierarchy of Needs theory provides that people are often motivated to satisfy lower needs before moving to higher ones (Hopper, 2020, P. 2). The theory categorizes human needs into physiological, safety, social well-being, and self-actualization categories. Performance managers engage in activities that promote employee motivation by meeting their perceived needs. Another instrumental theory is the Expectancy Theory which holds that employee motivation depends on the extent to which the individual requires something. For instance, employees who require promotion or pay raises will likely be highly motivated in their respective work compared to those who are less motivated. Also, the goal-setting theory is often applied in motivation and performance management studies as it connects goal setting with task performance (Debara, 2022, par. 2). It also addresses the setting specific, challenging, reachable, and acceptable objectives between a manager and the employee, reiterating the employee’s importance in setting goals (par. 6). To enhance collaboration, the set goals must be part of the company’s performance plan and clearly disseminated to the employee. Managers can offer periodic feedback concerning the employee’s progress and provide motivation practices, improving organizational performance (Murphy, 2020, p. 14). Therefore, the actual motivation process is shown where employees dedicate certain energy levels to work at any given time and possess various needs that must be satisfied. Specifically, these theories comprise employees allocating more commitment and energy to actions that maximize their needs and cause satisfaction. Importantly, the key to performance management is ensuring that assessments and results are modified and structured to help the employees focus on their actions to align with the organizational culture and objectives. Motivation also means that the employees’ self-esteem and job involvement are enhanced after seeing their efforts leading to organizational objectives. Given this information, the above theories provide managers with a framework to improve organizational employee performance and motivation.
Impacts of Performance Management on Employee Motivation
Employee motivation has significant implications for organizational success. It is worth noting that employees’ motivation is the primary driver for innovation and creativity in a workplace. Therefore, an organization’s clear performance management practice depends on goal-setting, adequate feedback, and a robust consequence management system (Ozkeser, 2019, P. 803). This is because most organizations often focus on excellent performers with elevated potential while ignoring middle and lower performers. Therefore, performance managers must design a proper consequence management framework to address these issues (Ozkeser, 2019, p. 804). Employees are likely to reduce their efforts if no action is taken on lower performers on the team. For instance, setting performance standards for low-performing workers encourage teamwork and group motivation. Performance managers must, as a result, continuously act on low performers at the same rate as the higher performers. Regarding motivation, performance management helps higher-performing employees to continue devising ways of improving their duties hence setting themselves up for promotions and salary raises (Ozkeser, 2019, P. 803). Since employees possess unique abilities, strengths, and experiences, performance management helps them to maximize their hidden potential as they are motivated to achieve their dreams. Ultimately, performance management practices impact employee performance by ensuring that the employees have clear goals and commitments and often receive feedback and training from the managers to improve their performances.
Redesigning Performance Management Processes in an Organization
When a business improves and continues transforming, its respective performance management strategies must also improve. Organizations have many options for effective ways to update their performance management processes. For instance, performance management practice must move from a top-down approach to shared ownership in which managers function as coaches while teams drive performances. Also, organizations can navigate from annual reviews to regular performance assessment activities. This is because the annual employee performance review is susceptible to bias as it depends on memory and employees’ past behavior and performances (Stange, 2022, par.8). Managers should deliver employee feedback instantly, whether positive or negative hence it should not wait until the end of the year. Frequent and real-time employee performance reviews help to address weaknesses and provide instant feedback, which enhances productivity. For instance, managers can conduct monthly meetings with their employees to iron out issues and recommend them depending on their performance. The meetings between managers and employees must be developmentally and future-oriented, transparent, and inclusive. Hence, organizations have various effective approaches to redesigning their performance management process to guarantee organizational success.
Differences between Performance Management and Performance Appraisal
Although these terms are used interchangeably, they differ in various processes and practices. Armstrong (2021, p. 9) defines performance appraisal as the managers’ formative assessment and rating of employees. Unlike performance management, performance appraisal tends to be continuous and more comprehensive (DeNisi & Murphy, 2017, p. 421). Additionally, while performance appraisal is often a top-down approach, performance management is a combined process achieved through dialogues. Furthermore, while appraisals are conducted annually, most performance reviews occur continuously and periodically. Finally, performance appraisals are performed by the human resource department, while line managers conduct performance management. Hence, it is essential to draw a distinguishing line between performance management and appraisal to be able to incorporate performance management to improve motivation successfully.
Conclusively, businesses have discovered the importance of performance management and employee motivation to facilitate their growth and success. Studies also have shown that employee performance management systems have significant implications for motivation. Therefore, providing employees with structures, objectives, and frameworks that help them improve performance also motivates them. Organizations perform performance management for many reasons, including assessing ways of promoting and increasing salaries. Additionally, theories such as goal-setting and Marlow’s Hierarchy of Needs provide a conceptual framework for managers to understand the impact of motivation on employee performance. Employee performance management affects productivity as it addresses goal setting and teamwork, which are crucial for organizational success. Therefore, organizations can redesign their performance management tools to ensure better motivation, but it is fundamental to differentiate performance management from performance appraisal.
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Armstrong, M. (2021). Performance management. https://vulms.vu.edu.pk/Courses/HRM613/Downloads/ARMSTRONG%C3%A2%E2%82%AC%E2%84%A2S%20HANDBOOK%20OF%20PERFORMANCE.pdf
Debara, D. (2022, June 22). Goal-setting theory: Why it’s important, and how to use it at work. Goal-Setting Theory: Why It’s Important, and How to Use It at Work. Retrieved May 4, 2023, from https://www.betterup.com/blog/goal-setting-theory#:~:text=your%20best%E2%80%9D%20approach.-,What%20is%20goal%2Dsetting%20theory%3F,vague%20goals%20or%20easy%20goals.
DeNisi, A. S., & Murphy, K. R. (2017). Performance appraisal and performance management: 100 years of progress? Journal of applied psychology, 102(3), 421. https://www.cbs.dk/files/cbs.dk/denisietal_jap2017.pdf
Hopper, E. (2020). Maslow’s hierarchy of needs explained. ThoughtCo, ThoughtCo, 24, 1-3. http://www.christianworldmedia.com/client/docs/603_1585079540_17.pdf
Murphy, K. R. (2020). Performance evaluation will not die, but it should. Human Resource Management Journal, 30(1), 13-31. https://doi.org/10.1111/1748-8583.12259
Ozkeser, B. (2019). Impact of training on employee motivation in human resources management. Procedia Computer Science, 158. https://doi.org/10.1016/j.procs.2019.09.117
Rodriguez, J., & Walters, K. (2017). The importance of training and development in employee performance and evaluation. World Wide Journal of Multidisciplinary Research and Development, 3(10), 206-212. https://www.researchgate.net/profile/Kelley_Walters/publication/332537797_The_Importance_of_Training_and_Development_in_Employee_Performance_and_Evaluation/links/5cefe41092851c4dd01ba833/The-Importance-of-Training-and-Development-in-Employee-Performance-and-Evaluation.pdf
Stange, J. (2022, July 5). The who, what, why, and how of performance management. Employee Success Software. Retrieved May 4, 2023, from https://www.quantumworkplace.com/future-of-work/performance-management