Question

What are the two primary purposes of performance management? When should each purpose be emphasized? How do an organization’s demands influence its performance management process?

Answer 1

In general, performance management activities may be used for administrative and/or developmental purposes. The first purpose is administrative in nature because it directly affects a firm’s administrative decisions regarding its workforce. Firms use performance evaluations to make decisions regarding their employees’ salary adjustments, merit raises, and incentive rewards. Managers must make decisions regarding the promotions, demotions, transfers, terminations, and even layoffs of individuals. Understanding your employees’ current performance as well as their potential to perform will help you make decisions about the movement of employees within, or out of, your organization. The second purpose of performance management is developmental in nature- using performance evaluation information to help employees improve their performance in order to add more value to the company. A developmental emphasis strives to find out if there are areas in which employees are able to improve their performance and then identify a course of action to help employees meet their potential. A developmental approach may also involve disciplinary actions to signal to employees that current actions or behaviors are not acceptable. A developmental approach can also be part of the succession planning or just employee career development in general.