Management of Organizational Performance: Literature Review

Many broad descriptions of management of performance can be found when one goes through the bulk of management materials available in books, journals and internet. Michael Armstrong 2000 plainly describes management of performance as “a means of getting better results from a whole organization, or teams and individuals within it…within an agreed framework of planned goals.” Whereas Armstrong’s description does not exactly introduce a novel definition in management literature, it captures the extensiveness of the field of appraisal. This field is full of complexities in regards to elucidating the exact scale of practices and mechanisms involved in performance appraisal. Armstrong’s definition sets us on an excellent path when it comes to understanding these complexities. Donna Mitchell in her book Performance Management is more forthcoming in her definition and attempts to cover more ground in the management literature. She adds another dimension to the definition by first including performance measurement in her attempts to exhaustively describe management of performance. She describes performance measurement as “the process of assessing progress towards achieving predetermined goals” (Mitchell, 2007). She goes ahead to describe management of performance as, “building on that process adding, the relevant communication and action on the progress achieved against these predetermined goals” (Mitchell, 2007).

On top of incorporating the aspect of measurement of performance in management, it is notable to appreciate that management of performance is fundamentally about management of people. It is basically an attempt to comprehend the manner in which people in an organization work, both individually and with others. Aspects like supervision, decision making, inclusive employee involvement, motivation and promotion of technological innovations among workers are equally crucial in the development of the organization. Mitchell’s definition is an improvement from Armstrong’s description and more elaborative. It can be observed from the two writers that the field of management is unmistakably composed of several disciplines. Diverse modalities for organizational evaluation are existent and thus various operational methods have been formulated to independently appraise an organization’s development. Financial department policies that specifically deal with accounting are mostly employed in evaluating and controlling the fiscal robustness of organizations. The technical operations department evaluation policies are inherently concerned with enhancing the logistical fluidity of activities and functions in the various departments. The human resource department on its part is largely specialized in enhancing output of personnel. These three offer an insight into the compound realm of management of organizational performance.

The discipline of management that is closely related with the appraisal of organizational performance is the human resources. Nevertheless, other departments have evaluation score cards that respective managers use to review in assessing employee outputs and efficiency. Elaine Pulakos, in Performance Management: A New Approach for Driving Business Results, underscores the significance of management of organization performance being tactical, united, geared towards enhancement of performance and enforced enactment of positive development concepts. But this wide and ambiguous definition of management of organizational performance makes it an increasingly intricate undertaking. The specific appraisal component that is clearly implicit of the progression of performance evaluation is definitely the performance scorecard Rampersad posits that the Balanced Scorecard, as a tool of measurement has evolved into the ultimate unit pointer of progression or regression. He divides the measurement tool into two components; the Personal Balanced Scorecard or PBSC and the Organizational Balanced Scorecard (OBSC) (Rampersad, 2003). The former is for individual employees to evaluate themselves, while the latter is for entire organization to gauge its collective progression.

Whereas different literatures on management will present divergent–though synonymous–descriptions of management of organizational performance, most of them are homogeneous in their acknowledgement of the importance of the practice. To formulate a strategy, a business or organization needs sufficient data that indicate its current status. The current status of the organization will be determined only by a review of the organization’s performance. The performance management similarly aids in management of the process of implementing the conceptualized strategies. In the process of managing the formulated strategies, the scorecard data will caution against making assumptions. In the absence of a scorecard, an organization can easily make assumptions about its position and use the hypothetical data to make skewed and erratic projections about the future. Balanced Scorecards for the individuals and the organization are the only sure means of checking the development or degeneration direction of firm (Thorpe & Holloway, 2008).

The management of organizational performance can help a company ascertain that it is realizing minimum allowable standards that are necessary for continued existence. These could be standards pertaining to environmental safety or legal provisions. Management of appraisals of the company also communicates a clear message of expectation to the employees. As such, employees are conscious of not only their duties and responsibilities, but of performance standards the employers expect them to deliver. Stakeholders are also informed of the company’s sense of direction; such stakeholders include current and prospective shareholders, concerned government authorities and clients or customers. Management of organization performance can be a system for the acknowledgement and appreciation of the hard work and outstanding behavior of excellent employees. Appreciating and rewarding excellent employee behavior can be an incentive or a source of motivation for other employees to improve on their delivery and output.

Clear as the benefits of management are, there exist two performance management precepts. The first is the tactical management of performance and the other is conservative management system. The tactical system which is purely strategic is also intrinsically reactionary and depends on market or environment settings and conditions. The tactical management system is triggered whenever there are drastic changes in the organizational surroundings and the business needs to readjust its activities in the wake of environmental changes. The conservative performance management system on the contrary is a continuous system that is carried out at predetermined regular intervals to self-regulate the firm. The regulation could be a quarterly, bi-annual or yearly process, planned to coincide with specific but organization-wide release of statements, for example production output statements, fiscal position reports or profit announcements (Carton & Hofer, 2006).

Other than communicating the position of the firm to stakeholders, the regular management of organizational performance is critical in inspiring and rewarding exceptional employee behaviors. While in the conventional logic the evaluation of employee performance and the reward schemes have been associated with release of firm’s fiscal reports, some organizations are using the Personal Balanced Scorecard to negotiate salary, wages and compensation for their employees. Niven, 2006 is a big critic of the system that seeks to use appraisal reports in assigning compensation packages for its employees. Niven argues that appraisal results are efficient only if the rewards for good behavior are gifts that supplement an employee’s pay, not if the result is used to calculate and determine the compensation package. Mohan Nair disputes Niven’s argument in his book, Essentials of balanced scorecard. Mohan is of the view that a scorecard is the surest means of keeping employees in check all year round. He, Mohan, posits that an organization has no business providing attractive compensation packages to non-performing employees as the main goal of an organization is to generate profits. Niven is critical of using scorecards to determine compensation packages because they create rivalries among employees within departments and they are also unsustainable.

Niven wants us to imagine a scenario where the performance of an employee keeps fluctuating on monthly basis. If an employee is outstanding on the first month, average on the second and grossly underproductive on the third, does the management keep on updating the compensation package for every of those months and for every single employee in the organization? Matthew Kammerer explores deeper into the pros and cons of balanced scorecards as were developed by the pair of Robert S. Kaplan and David P. Norton. He notes that while Kaplan and Norton were innovative in formulating a system for evaluating performances, he hypothesizes that anomalous employee behavior is most likely to be observed in the long haul. This system will eventually water down on the worth of tactical performance management as it will not be entirely impartial to all employees. Research done by Michael Hammer on the same issue backs up Kammerer’s hypothesis, and points out to the prejudicial nature of scorecards on junior employees. The reward scheme is done by senior organization employees and these superiors will assign themselves favorable points and pocket the bulk of the rewards.

Many departmental managers have raised complaints regarding the partiality of performance rewards scheme, and particularly criticized the criteria employed to settle on rewards. The human resource department is at the centre of this reward scheme and is equally burdened by the tenets to be used in rationally allocating rewards (Hammer, 2007). The big question therefore is, what aspects need to be managed when evaluating the performance of the organization? The quandary of assessing organizational performance is such a demanding undertaking that management experts and observers can only speculate on the best ways forward. Fiscal strategies are conventionally regarded as the easily usable schemes in many firms. With the turn of the millennia however, organizations have become more complex with multifaceted dimensions that need cannot be evaluated by fiscal analysis alone.

Paolo Taticchi reckons in the International journal of Productivity and Performance Management that fiscal analysis, by use of management accounting, is an incomplete tool as a comprehensive organizational performance indicator. Taticchi notes that the use of management bookkeeping information is only enough when reviewing inflows and outflows. The inadequacies of purely financial appraisal systems in performance review have spawned a shift from cost analysis to encompass a wide range of issues such as a review of the firm’s goals. Observers in the appraisal of performance have debated and proposed ways in which organizations can formulate proper assessment systems. From the bulk of management literature available on performance measurement, comprehensive review outlines have the aim of delineating performance in a manner that echoes strategic organization goals (Taticchi, 2010). These outlines possess fundamental attributes that assist in pinpointing the apposite series of standards against which performance is sustainably assessed and managed.

The literature covered in Thorpe and Holloway (2008), and Taticchi (2009) highlight the reality that a series of review measures employed by a firm must depict a ‘crystal’ representation of the firm. These measures ought to echo the fiscal as well as the non-fiscal strategies; the internal and environmental attributes; and the competence and efficiency measures. The generated outline of quantifiable measures must also generate a clear indication of the firm’s performance. Case in point, the minimalism and perceptive basis of the Organizational Balanced Scorecard is regarded as it’s most resourceful feature, as it is simple and readily grasped (Fakhri, Menacere & Pegum, 2011). Outlines need to show the necessity for a firm to employ a series of measures that are multifaceted in dimensions. All areas of organizational performance must be measurable to reflect development or regression in the outline.

The sight of a chief executive officer handling a mass of data that has not been filtered into meaningful information is not so uncommon. Such heaps of data does not present any meaning and insightful account of the performance of individual and departmental units in the organization. To eliminate the occurrence of a scenario where an executive reads heaps of data that bears no informative insight, the department of quality management has to come into action. Some reputable methodologies can be used by the quality management department to cover the apparent inadequacies of balanced scoreboards for example the Demming Cycle (Balanced Scoreboard Institute). Developed by Edward Deming in the mid last century, he held that business processes ought to be scrutinized and gauged to make out the sources of discrepancies which result in manufactured goods digressing from client’s specifications. The Demming Cycle represents just one of the many assessment tools that are not only geared towards fiscal analysis but cover other crucial organizational issues.

The Demming Cycle is simple; place the undertakings and activities of the firm in an incessant feedback loop so that supervisors can make out and alter the activities that need upgrading. To demonstrate the cycle, he used the PDCA (Plan-Do-Check-Act) cycle to keep performance management in continuous check (Averson, 1998). Under the Plan, the management– or whoever is concerned with the review of performance management-devises and revises the organization processes and the associated components (activities) to guarantee continuous development or improvement in results. The Do part of the cycle is concerned with the carrying out of the Plan, and the gauging of processes performance. The Check section is meant for assessment of products’ measurements, and the identification of faults. The results obtained from the Check section are forwarded to the organs of decision making. Finally, the Act part is mainly an action phase. Changes are made at this stage in case faults have been detected in the system.

Tools for quality assessment managers are not few. There is the OODA loop which is an acronym for Observe, Orient Decide and Act that is used as a precept for strategic operations in the organization. The OODA loop appreciates the reality that the process of decision making is continuous cycle that needs regulated periods of observing and acting indefinitely. Similar to the Demming cycle, it is a deterrence mechanism that requires communication in the organizational structure. The six sigma is another management strategy, initially a project of Motorola, which is geared to identifying defects and eliminating them before they impact on the performance of the firm. It incorporates statistical quality management systems. Six sigma has its own share of debatable controversies and has been likened to the balanced scorecard for its lack of creativity by a host of management literatures. Research into the sigma six effects on business quality has revealed that an excess of 90 percent of firms that implemented the quality assessment programs recorded a loss in fortune (Morris, 2006). Others quality assessment tools include COBIT or Control Objectives for Information and related Technology that is specifically used in the information technology organizations and is a creation of the Information Systems Audit and Control Association. AIDA an abbreviation for Attention Interest Desire Action is another tool used in the marketing department to appraise marketing performances (Morris, 2006).

All the management literature reviewed in this paper provides resourceful information in managing the performances of an organization. The literatures clearly indicate that for an organization to unlock its potential it must deal with right quality management tools and they should be applied appropriately to realize their potential. Performance management ought to be cross-sectional and not only target a particular section of the workforce. The exact performances that are being appraised ought to be reflected against expectations, the requisite requirements for outstanding performance and the qualities the clients are looking for. Performance must also be managed and appraised against feasible strategies and goals. A cross-sectional link between the performances of employees in hierarchical organizations should be explicitly assessed, so that the elimination of any possible conflicts in evaluation of employees is carried out. Conflicts are clear stumbling blocks in organizational evaluation. Such conflicts in the form of organizational politics need to be deracinated to ensure that departments with functional dependencies correlate with each other harmoniously.

Organizations must center their performance appraisals systems towards communicating insight to employees, and not just generating raw data on employee productivity. If quality assessment tools are effective and the organization is realizing its objectives without subjecting employees to data about their performance, a positive culture of self drive is calculated amongst employees. On the contrary, if an organization is performing well and the company keeps on generating data for the purpose of rating employees, it creates a rivalry among departments and employees. This consequently results in some employees developing dysfunctional behaviors, either due to paranoia or insecurity over their jobs (Falcone & Sachs, 2007).

Considerable collective organizational effort must be spared to ensure the gradual development of apposite traditions in the firm that promote engagement of the firm’s employees in the processes and objectives of the company. Such a tradition should cultivate the feeling of appreciation among the employees so that employees enjoy their work. In brief, organization performance management will first encompass aspects such as planning of employee roles and demarcation of specific expextations from employees. Second, it involves an incessant process of performance supervision by use of quality assessment tools. Third, it encompasses the development of employees’ aptitude and competence to execute their roles. Fourth, it involves the intermittent positive appraisal of performance of individuals and departments. Finally, it covers the sensitive issue of rewarding employees who are exhibiting excellent organizational behavior and performance.