The transformation of talent management happened across the world in the late 20th century (Leena, 2012). The importance of defining, planning, and managing talent and performance was apparent during the transformation period (Pareek & Rao, 2006 as cited by Leena, 2012). Talent management is a traditional approach assessing the employee’s performance. Though many interchangeably used the term performance appraisal and talent management , however talent management is clearly more than a new name for performance appraisal (Edmonstone, 1996 as cited by Leena, 2012). Talent management is more proactive in comparison to performance appraisal is more of reactive. Performance appraisal more focused on measuring the degree of accomplishment of an individual by evaluating the past work history of the employee whereas talent management focused on the front end planning by considering the current active involvement of employee (Leena, 2012). The welcome change of last fifteen years gradually overtook the performance appraisal when organization prefer to use the term talent management (Pareek & Rao, 2006 as cited by Leena, 2012).
According to Dessler (2013), performance management is a continuous process of identifying, measuring, and developing the performance of the individual and teams and aligning their performance with the organization’s goal. In other words it can be said as a uniquely goal oriented and continuous way to appraise and to manage employee’s performance. Therefore, managing employee’s performance can increase organization’s competitiveness and productivity and thus increase the overall efficiency and effectiveness of the organization. In addition, it also increases employee’s morale and further motivates them to perform at greater heights. Hence why, it is essential for an organization to implement a proper and strategic performance management system. Otherwise, it could lead to detrimental effects which may affect the richness of the organization.
Employee motivation and performance are predetermined factors that drive and boost the productivity of the employee (Anthony, 2012). When an individual is highly motivated, his or her performance would also be high. In other words we can also say that performance is positively related to motivation, however in reality performance. Therefore it is important to understand the link between motivation and performances and what elements that motivates the employee. Managers need to know about the factors that create motivation in order to be able to induce employees to work harder, faster, more efficiently and with greater enthusiasm. They need to provide constant feedback on their performance and also provide solutions such as training and development for the knowledge or skill enhancement of the employee. This will create a sense of belonging for the employee and will take the extra mile to put their best effort in works. As mentioned earlier, motivation is important in an organization as it leads to achievement of the organizational goals. Strategic goal of an organization can be achieved if corporation and coordination takes place simultaneously which can effectively done through motivation (Maimona, 2011). Consequently, this will increase the performance level of the employee, increasing productivity, and reducing cost of operations. Therefore, when the performance level of an employee increases, the organization will also need to recognize the contribution of the employee by providing monetary or non-monetary incentives or even promotion opportunities.
Another importance of performance management is succession planning. Succession planning is an ongoing process of systematically identifying, assessing and developing organizational leadership to enhance performance (Shamaila, 2012). To sustain the growing capability within the team, succession planning is in important tool in ensuring the efficiency of an organization. Moreover, it can be helpful in determining skilled and potential employee to grow within the company. According to Ali (2012), succession planning helps to facilitate the retention of talent skill pool. With a proper performance management tool, managers would be able to identify area of development of an employee and thus help to move up in an organization or to other challenging roles. Therefore performance management system would be able to evaluate the employee’s knowledge, skill, abilities and other required characteristics for a particular job (Ali, 2012). Succession planning involves in identifying the current key needs which comprises the company’s strategic and business plans and also the future key position’s requirements. After identifying the future key position, then the management identify candidates who have developmental potential. Employers develop high potential employees through internal training, job rotation or any regional projects. This is where performance management plays a critical role whereby employers would be able to identify the right person by reviewing the performance level of employee occasionally.
Performance management enhances employee engagement within the organization. It has been seen that employee engagement has increasing become the key determinants for the performance of an organization (Macey, Schneider, Barbara & Young, 2009 as cited by Jamie & Alan, 2011). Apart from succession planning and talent management, employee engagement also increases the retention rate of the organization. In line with that performance management acts as an important contribution of good performance management system. During performance appraisal, managers will discuss professional growth, career direction, acknowledge achievements, re-examining ownership of goals, targets, meaningful work and providing effective feedback. For instances, career planning or programmes can provide a strong incentive for employee to stay with the company. In addition, receiving consistent feedback from managers promotes self-esteem within the employee. Employee feels that they are being more valued and recognized and thus expressing passionate, empowerment and involvement, exhibiting positive attitude and support to the organization. This consequently helps to increase the efficiency and productivity of organization. Moreover, this also promotes healthy culture and work life balance among the employees. Therefore implementing a strategic performance management system will foster employee engagement resulting in satisfaction of employee and thus support recruitment and retention efforts (Jamie & Alan, 2011).
On the flip side, if performance management system is not properly implemented then organization may need to face some challenges as well. One of the challenges is job dissatisfaction. Poor implementation of performance system will cause the assessing instrument not to be seen valid and fair. As a result, employees will tend to express dissatisfaction towards their job. Past research has proven that an employee who enjoys his or her work will have a high job satisfaction level. A healthy job satisfaction level in employee would consequently lead to many positive effects for both employees and their organization. Among the effects are creates healthy working culture whereby employees think strategically towards the organization benefits, develops learning organization that or promotes knowledge management and sharing among employees and also promotes good health as employee have less stress. Therefore, when a healthy and competitive environment exists the performance level of the employee increases. This will help to boost the overall effectiveness of the organization as well. In addition some experts believe that there is moderately positive relationship between job satisfaction and performance (McShane, 2013). However, when the employee is dissatisfied with the job then this will be reflected in the behavior. The employee will voice out their unhappiness and will be criticizing the management in unproductive manner. More suspicious grows on the credibility of the management. In addition, dissatisfied employee would start searching for alternatives and would leave the organization as well. This relatively increase turnover as the employee perceives the process or the management of the organization is not fair or maybe biasness occurs within the organization.
Besides that, performance management system is costly and time consuming as well. It also requires a lot of administrative work. When it is not properly implemented or well maintained then it will only lead to wastage of resources, time and money. It affects the financial of the organization as more money is flowing out of the company. As performance management is used to evaluate and improvise employee’s performance and when the system is not well maintained, then managers will not be able to identify the potential of the employees whom can help to boost the revenue of the company. Therefore, an organization should have trained mangers who are familiarize with the performance management system tool so that they would be able to use it in an effective manner and help to increase the performance of the organization. Likewise, when performance management system is poorly implemented, the managers are unable to use the tool efficiently and this will lead to unclear rating system whereby the generated data from the system will be poorly interpreted. Due to deficiency in the system, there will be communication breakdown as clear understanding on the process of performance management system was not communicated to the employee. Therefore, insufficient information would only hinder an individual in completing a job or task. Moreover, it may also cause conflict and misunderstanding which would affect the communication among all the organization members.
Performance management system needs to posses some ideal characteristics to be an effective, fair and meaningful one. A performance management system needs to achieve standardization in the process. The evaluation criteria and methods need to be standard. Otherwise the tool is not applicable to use to assess employee against a standard variables. Furthermore, it should be evaluated in a consistent manner across people and time. The aspects of the performance management system should be uniform and sustain a level of strictness as it creates reliability towards the tool.
Also, a good performance management system should be error free to ensure no biasness in the system. Moreover, it also should provide a clear rating system so that standardization is not replaced with the personal values. It has to be practical as well in the terms of availability, user friendly and also acceptable to decision makers. On top of that, a good performance management system will be valid and consciences. In line with this, it should only measure valid facets which are relevant to the performance and eliminate irrelevant aspects. It should only measure as per the relevancy of the job function of an individual. In other words, it should be specific whereby a clear and detailed guideline is provided to the employee. This guideline will provide an understanding of what is expected from the employee on how the expectation can be met.
One of the crucial characteristic of an ideal performance management system is strategic congruency. The system needs to be consistent with organization strategy and goal. Also, it should be aligned with the unit and organizational mission and vision. In addition, the performance management system should posses thoroughness as it will be use to evaluate all employees and all major responsibilities that the job role hold. The evaluation also should cover performance for entire review period. Feedback should be given on both positive and negative or rather area of developments. Another important criteria is that, it should be meaningful as well as the standards that are set needs to be relevant. The system must be able to measure what employee can control and evaluation should occur regularly at appropriate time. In addition, the result should have valid consequences that can be used for administrative decision purposes. Performance management system should be acceptable and fair whereby the perception of distributive justice and perception of procedural justice should be aligned with the standardization measures. In the event differences perceived in between work performed and evaluation, and between evaluation received and rewards, then the system is likely to be unfair, fairness in procedures is used to determine ratings and link rating to rewards accordingly. In order to improve all the justice fairness, a clear rule has to be set and applied consistently by all managers.
Moreover, an ideal performance management system should be able to identify and distinguish between effective and ineffective performance in terms of behaviors and result thus providing the ability to identify employee with various level of performance. Performance management system should also provide inclusiveness where the process represents concerns of all involved. When the system is created, employees should help in deciding what and how the evaluation should be measured. In addition, it has to be a two way communication during the appraisal meeting where a clear standard and ongoing communication occur. Hence, performance management system must an open system as well. The most vital characteristic of an ideal performance management system is ethical. Mangers should curb self interest and only proceed to rate his or her subordinates where sufficient information about the performance dimension is obtained.
In conclusion, performance management system is complex structure as in involves employee, supervisor and managerial personnel. Although the system has a broad spectrum of advantages, yet it has to be carefully implemented and closely monitored for smooth functioning.