Effect Of Performance Management On Employee Performance

Project and Seminar Material for Industrial Relations and Personnel Management

Effect Of Performance Management On Employee Performance


Abstract


This study explored the effect of performance management on employee performance. The general objective of the study was to determine the effect of performance management practices on employee productivity with a focus on Nigeria Flour Mill. This study used the descriptive research design. The study adopted a quantitative approach on the effects of performance management practices on employee productivity. The dependent variables included performance appraisals, reward systems and performance feedback, and the implications on employee productivity as the independent variable. The target population comprised of 108 Nigeria Flour Mill employees in Lagos, Kaduna and Kano branches in Nigeria. Stratified sampling was used to divide the population into two strata. Descriptive statistics was utilized as a data analysis tool. The demographic profiles of the respondents were analyzed using percentages and frequencies. Inferential statistics such as correlation and regression analysis established the relationship between dependent and independent variables. The study concluded that effective performance management practices gives employees opportunity to express their ideas and expectations for meeting the strategic goals of the company. Performance management practices could be an effective source of management information and renewal. The use of reward system has been an essential factor in any company’s ability to meet its goals. Effective feedback on performance measurement may translate to improved employee productivity. Feedback enables the employees to be made aware of what exactly is expected from them. The study recommends that the performance management practices should be optimized to improve employee performance. Performance reviews should be focused on the contributions of the individual employees to meet the organizational objectives.


Chapter One


Introduction

1.1 Background to the Study

Organizations are run and steered by people. It is through people that goals are set and objectives are accomplished. The performance of an organization is thus dependent upon the sum total of performance of its members. The success of an organization will therefore depend on its ability to measure accurately the performance of its members and use it objectively to optimize them as a vital resource (Biswajeet, 2009).

In the present highly competitive environment, organizations have to ensure peak performance of their employees continuously in order to compete and survive at the market place effectively (Prasad, 2005). Performance of an individual can be defined as the record of outcomes produced as specified job functions or activities during a specified time period (Bernardin, 2007). It can also be seen as a set of outcomes achieved during a certain period of time and does not refer to the traits, personal characteristics, or competencies of the performer.

Performance management on the other hand can be defined as a systematic process for improving organizational performance by developing the performance of individuals and teams (Armstrong, 2012). According to Briscoe and Claus (2008) performance management is the system through which organizations set work goals, determine performance standards, assign and evaluate work, provide performance feedback, determine training and development needs and distribute rewards. Performance management is a process involving performance planning, performance managing, performance appraisal, performance rewarding and performance development (Deb, 2009). Performance appraisal can be defined as the formal assessment and rating of individuals by their managers (Armstrong, 2012).

Performance appraisal as an element of performance management is often carried out to reveal individual employee’s contribution to the overall organizational objectives. To drive this notion home Biswajeet (2009) asserted that people do not learn unless they are given feedback on the results of their actions. For corrective actions to take place feedback must be provided regularly and it should register both successes and failures.The purpose of appraisal at Nigeria Flour Mill is for annual performance review done once every financial year (Nigeria Flour Mill, 2015).


1.2 Statement of the Study

The process of managing the performance of employees in an organization is often vague, the areas of performance for which an individual is responsible are often unclear and evaluations are often not based on actual performance but on the perceptions and judgment of an employee’s immediate boss. Therefore, an ill-conceived and ill-considered performance management system could create tensions in the organization.

The process of measuring and subsequently actively managing organizational and employee performance in order to improve organizational effectiveness is currently seen as critical to the onward survival and development of organizations (Inyang, 2008). It may be positively dangerous simply to copy schemes used in other organizations, and worse still to copy methods simply because it is the managerial fashion (Agarwal, Angst and Magni, 2009). It is on this background that this research seeks to examine the effect of performance management on employee performance with a special reference to Nigeria Flour Mills PLC.


1.3 General Objective

The primary aim of the study is to examine the effect of performance management on employee performance.


1.4 Specific Objectives

The study was guided by the following research objectives:

  1. To investigate the influence of performance appraisals on employee productivity in Nigeria Flour Mill.
  2. To determine the influence of reward systems on employee productivity in Nigeria Flour Mill.
  3. To examine the influence of performance feedback on employee productivity in Nigeria Flour Mill.

1.5 Significance of the Study

This study would contribute to the wealth of knowledge by focusing on an organization within Nigeria. The results of this study will be useful to the following stakeholders:

1.5.1 Academicians and Researchers

This study will add to the body of knowledge on performance management and particularly as regards the Nigerian case. The information on the subject of performance management and productivity is scanty and many sources do not offer current information therefore this research will play a crucial role in providing current information.

1.5.2 Policy Regulators

Policymakers and stakeholders in the human resource management function such as government and employer organizations such as Federation of Nigeria Employers (FKE) can use the findings of this research to formulate policies and procedures and devise best in class methods of increasing employee productivity from the findings of this case study. The findings can also be used in formulating performance management systems. The study will provide the human resource departments with an assessment of the performance management tools and provide a basis for improvement and also provide constructive feedback on how best to attain organization goals and objectives.


1.6 Scope of the Study

The study focused on the effect of performance management practices at Nigeria Flour Mill on the employee’s productivity. It specifically sought to determine the effects of performance appraisal, performance reward and performance feedback on employee’s productivity. The geographical boundary of the research was three Nigeria Flour Mill stations in Lagos, Kaduna, and Kano. The study focused on the management and non-management staff of the three regions. A census of 108 employees was used for the investigations. The study was conducted between June to August 2015.


1.7 Definition of Terms

1.7.1 Employee Performance

Employee performance refers to their output at a minimal cost from the use of their technical skills, raw materials in carrying out work responsibilities. In this case, employee performance is directly linked with appraisal, rewards and feedback (Mwanje, 2010).

1.7.2 Employee Productivity

Productivity can be defined as “quality or volume of the major product or services that an organization provides” (Moorhead & Griffin, 2012).

1.7.3 Feedback

This refers to the information reflecting past performance and results and given by the manager to the employee (Solmon & Podgursky, 2010).

1.7.4 Performance Appraisal

Performance appraisal is where a superior evaluates and judges the work performance of subordinates (Harter, Schmidt & Hayes, 2012).

1.7.5 Performance Management

Performance management practice is a systematic way of communicating to employees on what they are expected to do and what the performance and productivity parameters (Marsor, 2011).

1.7.6 Performance Management Practice

Performance management practice as a systematic way of communicating to employees on what they are expected to do and what the performance and productivity parameters are (Marsor, 2011).


1.8 Chapter Summary

Chapter one provides the back of the study in relation to the performance management practices. The section is broken down into other sections such as problem statement, general objectives, specific objectives, importance of the study, scope of the study and ends with the definition of terms. Chapter two is on the review of the literature in regards to the raised research objective. Chapter three outlines the research methodology and the steps of how the study was carried out. Chapter four presents the outcome of the research findings. Chapter five is on the research summary, discussion, conclusion and recommendations in regards the findings of the study.


Chapter Five


Discussion, Conclusion and Recommendations

5.1 Introduction

In this section, the researcher provides a discussion on the findings of the research as compared to the findings in the literature review, the summary of the study and recommendations for further improvement on identifying the measures to be taken in investigating the effect of performance management practices on employee productivity. The research is concluded on the basis of the conclusions drawn from the research objectives.


5.2 Summary

The general objective of the study was to determine the effect of performance management practices on employee productivity with a focus on Nigeria Flour Mill. The study was guided by the following research objectives: To investigate the influence of performance appraisals on employee productivity, to determine the influence of reward systems on employee productivity and to examine the influence of performance feedback on employee productivity.

This study considered the descriptive research design. The study adopted a quantitative approach on the effects of performance management practices on employee productivity. The dependent variables included performance appraisals, reward systems and performance feedback, and the implications on employee productivity as the independent variable. The target population comprised of 108 Nigeria Flour Mill employees in Lagos, Kaduna and Kano branches in Nigeria. Stratified sampling was used to divide the population into two strata. Descriptive statistics was utilized as a data analysis tool. The demographic profiles of the respondents were analyzed using percentages and frequencies. Inferential statistics such as correlation and regression analysis established the relationship between dependent and independent variables.

In regards to the influence of performance appraisals on employee productivity, the findings suggested that employee appraisal leads to improved productivity. Performance reviews are focused on employee contributions to the organizational goals. Performance appraisal gives the staff the opportunity to express their ideas and expectations for meeting the strategic goals of the company. Performance appraisal could be an effective source of management information in decision making. An effective appraisal system can enhance the interest and performance of the employees leading to the completion of specified work or for attaining or exceeding specified performance goals.

In regards to the influence of reward systems on employee productivity, the findings suggested that employees can be rewarded to meet target productivity levels. The opportunity by the manager to formally recognize good employee performance leads to work motivation. Reward opportunities encourage staff to be creative and innovative. The use of reward system has been an essential factor in any company’s ability to meet its goals. When good performance is observed and then rewarded, the chances of it being repeated are increased, while poor performance is discouraged to decrease the chance of it happening again. Rewards in the form of bonuses leads to greater task interest and performance. Job promotion can improve the employee performance in the organization.

In regards to the influence of performance feedback on employee productivity, the findings indicated that effective feedback is essential for any organization to meet its target. Effective feedback on performance measurement may translate to improved employee productivity. Feedback enables the employees to be aware of what exactly is expected from them. It is essential to communicate and clearly explain the purpose of the appraisal process for enhanced productivity. An effective performance feedback reflects the contribution of the individual employee performance and their level of efficacy in the attainment of the organization goals. Effective performance feedback between employees and supervisors is the key to successful organization productivity and ventilation. Adequate feedback builds accountability, since employees and supervisors participate in developing goals, identifying competencies, discussing career development and employee motivation.


5.3 Discussion

5.3.1 Influence of Performance Appraisals on Employee Productivity

The results generally reflected that performance appraisal have a positive influence on employee productivity. Performance reviews are focused on employee contributions to the organizational goals. Similarly, Derven, (2010) suggests that the outcomes of performance appraisal can lead to improvements in work performance and therefore overall business performance via, for example increased productivity or customer service. Malcolm and Jackson (2002) add that the benefits of performance appraisal are the identification of high performers and poor performers as well as the identification of strengths and development areas.

A significant proportion of the respondents agreed that the performance appraisal makes them understand what they should be doing. With performance appraisal, the employees’ can find what is expected from them and the consequences of their performance. Ideally they receive a fair and analytical feedback for their performance. Similarly, Derven (2010) explains that performance appraisal helps to rate the performance of the employees and evaluate their contribution towards the organizational goals as well as to align the individual performances with the organizational goals and also review employees’ performances.

A large number of the respondents agreed that with performance appraisal they perform better than what can be expected without appraisal. Similarly, Mullins (2009) suggests that performance appraisal takes into account the past performance of the employees and focuses on the improvement of the future performance of the employees. This means that performance appraisal is valuable to employee productivity in the organization.Mullins (2009) adds that performance appraisal can help to identify inefficient work practices or reveal potential problems, which are restricting the progress of the company. Derven (2010) and Mullins (2009) suggest that performance appraisal can help the organization to identify the talented employees and future leaders in the company. This can directly increase the profitability of the company.

Majority of the respondents agreed that performance appraisal was used as a decision making tool for increasing employee performance. Decision making is separate but linked to the appraisal system. A large number of the respondents agreed that they were satisfied with the current performance appraisal system in the organization. This suggests that effective appraisal can positively impact on employee productivity in the organization. Similarly, Brown and Benson (2013) suggest that performance appraisal can be linked to performance improvement process and the decision to identify training needs and potential, agree on future objectives, support a career development plan and resolve existing problems.

Randell (2014) reports implicitly that when good performance is observed and then rewarded, the chances of it being repeated are increased, while poor performance is discouraged or even punished to decrease the chance of it happening again. However, a proportion of the respondents agreed that they don’t agree with performance appraisal score as there is an appeal process. This may mean that performance appraisal underscores the importance of employee involvement and participation in the ratings of the performance. An effective appraisal system can enhance the interest and performance of the employees leading to the completion of specified targets and attainment of specified performance goals. This means that the lack of a fair appraisal score may make the employees work at a normal pace or work below expectation due to how it is conducted.

5.3.2 Influence of Reward Systems on Employee Productivity

Majority of the respondents agreed that the reward system have a significant influence on employee productivity. The reward system positively caused major variation in employee productivity. This means that there is an appropriate reward system. Similarly, Derven (2010) suggests that rewards through performance appraisal gives an opportunity to the manager to formally recognize good performance and this would lead to motivation. Jackson and Schuller (2012) adds that the provision of rewards in performance appraisal indicates a clear job target, the standards and priorities to ensure more trust in the identification of strengths and the improvement of employee productivity.

A significant proportion of the respondents agreed that the appreciation by managers increases their success at work. The opportunity by the manager to formally recognize good employee performance leads to work motivation (Derven, 2010). It is important to recognize employees’ efforts rather just only results. Supervisors should focus on rewarding positive behaviors and results (Derven, 2010). Also, tangible rewards enhance motivation when they are offered to people for completing work or for attaining or exceeding specified performance goals. A number of the respondents agreed that varied rewards encourage employees to be creative. Similarly, Mone and London (2010) explains that the rewards given for creativity encourage generalized creativity in other tasks; reward systems should support the new dynamics of team-based organizations and reward the right kind of team behavior and performance; reward systems should recognize both the importance of co-operation and the variances in individual performance. Gichuhi, Abaja and Ochieng (2014) however warn that problems can occur when reward systems stress individual results even though people have worked together in teams.

Majority of the respondents agreed that bonuses increases employee performance. Rewards in the form of bonuses leads to greater task interest and performance. Similarly, Randell (2014) reports implicitly that when good performance is observed and rewarded, the chances of it being repeated are increased, while poor performance is discouraged. Most of the respondents also agreed that the rewards provided by the organization sometimes serve to improve their productivity. Important issues that help ensure a successful reward process are used effectively to enhance interest and performance without undermining the performance and interest of the employees. However, small proportion of the respondents agreed that the rewards were varied and satisfactory. Mone and London (2010) suggest that employees should be adequately rewarded for exceptional performance using varied rewards.

A significant number of the respondents agreed that the organization influenced their productivity by linking the reward on job promotion. This suggests that job promotion can improve the employee performance in the organization (Jackson and Schuller, 2012). This also means increased employee motivation. A small proportion of the respondents agreed that the rewards motivate them to timely complete their duties. This may mean that performance feedbacks is delayed and not timely delivered. Few respondents agreed that their wage level was equitable and satisfactory to the degree of their performance. This means that the employees may not be motivated to give their best. Mone and London (2010) study found that that unfair evaluation of employee performance makes them feel insecure or discouraged leading to the development of poor relationship between the employer and employee.

5.3.3 Influence of Performance Feedback on Employee Productivity

There was a significant relationship between performance appraisal and employee productivity. The findings indicated that the performance feedback positively caused major variation in employee productivity. Effective feedback is essential for any organization that has the intention of meeting its target. Effective feedback on performance measurement may translate to improved employee productivity. Regular feedback helps employees focus on their work activities to achieve the organizational goals (Solmon and Podgursky, 2010). Similarly, Derven (2010) suggests that feedback enables the employees to be made aware of what exactly is expected from them and Armstrong (2006) recommends that the appraisal method must be simple and easily understandable for all people in the organization.

A large proportion of the respondents agreed that they enjoy discussing about their performance with people outside. It is essential to communicate and clearly explain the purpose of the appraisal process for enhanced productivity. Derven (2010) recommends that performance feedback should be clearly and timely communicated to the employees for enhanced productivity. Also, the rater may affect the productivity of the employees. A large number of the respondents agreed that their manager give them fair feedback to enhance their productivity. On the other hand, many errors based on personal bias like stereotyping, halo effect may affect the feedback process. Dzinkowski (2010) suggests that for enhanced productivity the rater is supposed to exercise objectivity and fairness in evaluating and rating the performance of the employees.

A significant number of the respondents agreed that the feedback they receive agrees with what they have actually achieved. This means that the organization has formal evaluation systems and the managers to apply the systems in place. An effective performance feedback reflects the contribution of the individual employee performance. A number of the respondents agreed that the current performance feedback in the organization was fair and unbiased. Bannister and Balkin (2010) recommends that performance appraised feedback should have greater acceptance of the appraisal process and makes the employees feel more satisfied with their performance.

Majority of the respondents agreed that they always get adequate feedback on their performance. Effective performance feedback between employees and supervisors is the key to successful organization productivity. Similarly, Jackson and Schuller (2012) suggests that adequate feedback builds accountability, since employees and supervisors participate in developing goals, identifying competencies, discussing career development and employee motivation. However, there are some organizations that fail to provide feedback. Banket (2011) explains that although a few managers may intentionally hold back employee feedback, many are overwhelmed with other management tasks that take up their valuable time.

A large proportion of the respondents agreed that they were satisfied with the way their organization provides them with feedback. Hall, Postner and Hardner (2009) suggest that some organization performance appraisal has been criticized to have discrepancy between the theory and the practical implementation. In addition, very few respondents agreed that their organization seems more engaged in providing positive feedback for good performers than criticizing the poor ones. Mone and London (2010) adds that another portion of criticism comes with the fact that performance appraisal increases the dependency of the employees on their superiors. Where the process is conducted by managers who are often not trained to be appraisers, the genuine feedback is obstructed because it includes subjectivity and bias of the raters, which leads to incorrect and unreliable data regarding the performance of the employee (Jackson & Schuller, 2012).


5.4 Conclusion

5.4.1 Influence of Performance Appraisals on Employee Productivity

The findings suggested that employee appraisal leads to improved productivity. Performance reviews are focused on employee contributions to the organizational goals. Performance appraisal gives the staff the opportunity to express their ideas and expectations for meeting the strategic goals of the company. An effective appraisal system can enhance the motivation and performance of the employees leading to the completion of specified work or for attaining or exceeding specified performance targets.

5.4.2 Influence of Reward Systems on Employee Productivity

The findings suggested that employees can be rewarded to meet target productivity levels. The opportunity by the manager to formally recognize good employee performance leads to work motivation. Reward opportunities encourage staff to be creative and innovative. The use of reward system has been an essential ingredient in any company’s ability to meet its goals. When good performance is observed and then rewarded, the chances of it being repeated are increased, while poor performance is discouraged to decrease the chance of it happening again. Rewards in the form of bonuses leads to greater task interest and performance. Job promotion can improve the employee performance in the organization.

5.4.3 Influence of Performance Feedback on Employee Productivity

The findings indicated that effective feedback is essential for any organization to meet its target. Effective feedback on performance measurement may translate to improved employee productivity. Feedback enables the employees to be aware of what exactly is expected from them. It is essential to communicate and clearly explain the purpose of the appraisal process for enhanced productivity. An effective performance feedback reflects the contribution of the individual employee performance and their level of efficacy in the attainment of the organization goals. Effective performance feedback between employees and supervisors is the key to successful organization productivity. Adequate feedback builds accountability, since employees and supervisors participate in developing goals, identifying competencies, discussing career development and employee motivation.


5.5 Recommendations

5.5.1 Recommendation for Improvement
5.5.1.1 Influence of Performance Appraisals on Employee Productivity

The study recommends that the performance appraisal should be optimized to improve the performance of the employees. Performance reviews should be focused on the contributions of the individual employees to meet the organizational goals. Performance appraisal should be encouraged among the employees to express their ideas and expectations for meeting the strategic goals of the company. Performance appraisal can make the employees’ to be aware of what is expected from them and the consequences of their performance. Performance appraisal should lead to improved employee performance. Performance appraisal should be optimized for effective decision making. This can lead the employees to complete their specified work and exceeding their normal work performance.

5.5.1.2 Influence of Reward Systems on Employee Productivity

The study recommends that the organization should reward the employees for enhanced productivity levels. For every opportunity possible, the manager should formally recognize good employee efforts for enhanced work performance. The reward system should be varied to encourage the staff to be creative to meet the organization goals. This will increase the chances of the performance to be repeated and increased, while pointing out that poor performance will be discouraged. Bonuses should be used to enhance greater task interest and performance. Job promotion can be used to improve the employee performance in the organization. There should be a fair evaluation process to make the employee feel secure for enhanced productivity.

5.5.1.3 Influence of Performance Feedback on Employee Productivity

The study recommends that effective feedback should be used by an organization to meet the organization target. There should be an effective performance feedback that would translate into improved employee productivity. Feedback enables the employees be aware of what exactly is expected from them. It is important to communicate and discuss employee performance for enhanced productivity. Performance feedback must be free from errors based on the personal bias like stereotyping to have a positive effect on employee productivity. An effective performance feedback should reflect the contribution of the individual employee performance. There should be a formal evaluation system and the managers to apply the systems in place to accept the performance scores. Adequate performance feedback should build accountability for enhance employee productivity.

5.5.2 Suggestions for Further Studies

The study suggests that future research can conduct a research on the effect of performance management practices on organizational culture. Also, it is suggested that future researchers can conduct a research in performance management practices in public institutions for comparison with the findings.


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