Performance Management (more long-term focus)

Introduction
Some of the purposes of performance management include:
- providing a strategic link to the organisational goals
- to supply data for an organisation to use, eg feedback
- for staff development purposes
- as a basis for compensation
- as a basis for promotion, etc
Generally it is not well understood and poorly implemented..

Short-term focus on profit
when considering performance management in the context of the business world, there is is too much focus on the short-term financial goals while ignoring and neglecting long-term broader ones around humans, social and environmental sustainability challenges.

This short-term financial focus
"...suggests that improving the financial performance of the company should be the primary rationale that drives decisions around how to manage human resources..."
P. Bulmer et al as quoted by Jane Maley, 2017

With the concentrated focus on short-term financial measures, performance management is being implicitly and explicitly accentuated in the strategic drive for profit. This drive for profit in a capitalistic, free-enterprise approach gives preference to shareholders over all other stakeholders, ie maximise shareholders' benefits at the expense of others. Thus a conflict develops between the interests of different stakeholders, like shareholders and staff, and the shareholders are usually the winners, ie
"...employees' interests in respect to performance management will be overlooked when there is an intense focus on profits......the risk of focusing on short-term profit results in a lack of employee development....Intense short-term focus on profit has an inverse relationship on employee development..."
Jane Maley, 2017

There is a growing body of evidence that shows that  corporations with an intense preoccupation with short-term profit, do not adequately develop their employees capabilities.

Generally, there is a desire to make as much money as possible while conforming to the rules of society; the market mechanism is assumed to be the appropriate way to determine the allocation of scarce resources.

Furthermore, this focus on short-term profitability can result in staff taking unnecessary risks, ie negative risk-taking; with the possibility of losing rather than gaining money and thus increasing public mistrust of corporations. Additionally, chasing the short-term gain encourages breaches of corporate ethics. For example, the Icelandic banking system in late 2008 had a major collapse; part of the reason for this was ambitious financial targets, incentives and big bonuses that encouraged short-term risky trading
"...Employees in the Icelandic banks were given tough annual financial targets and encouraged to take major risks to achieve their ambitious targets..."
N. Popper as quoted by Jane Maley, 2017

In addition to the negative impact on developing capabilities and motivation, it may influence employees' personal lives, ie psychological, social and work-related health aspects can spill over and impact home-life.

Summary
"...when the purpose of performance management focuses unduly on profit it can create performance hazard, entice undue risk-taking, threaten ethical standards, reduce the development of employees' capabilities and affect the personal lives of employees..."
Jane Maley, 2017

Shortcomings of a focus on profitability include:
- increased risk-taking
- lowering of personal ethical standards
- under development of capabilities
- disharmony in personal life
- lack of feedback
- loss of workplace harmony with increased workplace competition
- lowering of job performance
- reduced work satisfaction
- loss of motivation
- not addressing the concerns and needs of employees
- too much focus on shareholders' short-term interests, etc.

Furthermore, some actions that are framed in terms of social responsibility, including investments in activities in local communities or allowing staff to undertake volunteer activities, etc are indirectly intended to further financial results, which will ultimately benefit the owners of the organisation, not employees. Sometimes organisations do these activities to protect their corporate reputation at the expense of their employees resources.
Furthermore, some organisations may attempt to offset the cost of these external activities by compromising employees' welfare, their working conditions, their professional and personal development, etc.
In short, it has been found that an organisational performance management process with a short-term financial focus ultimately ignores the development needs of its staff.

When an organisation has a
"...persistent short-term profit focus, it regularly overlooks development of employees......the outcome of sufficient or absent employee development...... is that the employees lack the requisite capabilities..."
I. Ehnert et al as quoted by Jane Maley, 2017

However, organisations
"...with performance management systems are 51% more likely to outperform others regarding financial outcomes and 41% more likely to outperform others regarding additional outcomes, including customer satisfaction, employee retention, and other important metrics..."
W. F. Cascio as quoted by Jane Maley, 2017

Increase sustainability focus in performance management
 A new approach is needed
"...to performance management that incorporates the balance of organisational financial goals with positive human and social outcomes, both of  which are necessary to achieve and sustain superior, long-term organisational performance......recognise the influence that people management policies have not only on organisational financial outcomes but also on developing and motivating employees.......go beyond the traditional short-term focus of financial goals where organisations balance finance efficacy and sustainability over a longer period of time..."
Jane Maley, 2017

NB More effectively
"...performance managing people in an organisation in a sustainable way could prove to be strong source of competitive advantage......particularly in a tight labour market..."
Jane Maley, 2017

The human side needs to focus on training, development, compensation, deployment, talent management (including retention of staff, hiring and promoting staff), etc.

Once decided to build upon long-term sustainability as a competitive strategy, it needs to develop a performance management system to effectively signaflect and implement this strategy. This involves employees' contributions, ie participation in the decision-making process to
"...also give them more control. Dynamic participation should encompass employees putting into the design of the performance management scheme; helping set the criteria for an effective performance management; recommending the balance of qualitative or qualitative assessment; endorsing types of training, career development and the nature of the most effective renumeration system (eg the type of rewards and amount of fixed to variable pay); validating the type of appraisal technique used and even the frequency..."
Jane Maley, 2017

Included in the performance management is appraisal; this can vary from self-appraisal to 360° type appraisal, ie gain potential valuable improvement insights from a range of stakeholders that interact with different employees.
"...accordingly a clear performance management purpose, congruent stakeholder expectations and crucially employee participation are imperative in managing employee perceptions......to performance management and, ultimately sustainability..."
Jane Maley, 2017

Feedback
Higher levels of employee participation in the performance management process is associated with greater employee acceptance, satisfaction and motivation so that they attain a degree of ownership, pride and acceptance which reinforces the attributes of a participatory and empowered work culture.
"...when an employee does not fully participate in the performance management process, he/she may not have the opportunity to discuss performance objectives. This could produce an inconsistency with the supervisor's expectation. Moreover, a deficiency in participation in the performance management process could eliminate the employees' chance for discussion about training and development needs. This may further threaten the advance of her/his capabilities..."
Jane Maley, 2017

Best feedback is face-to-face, ie regular meetings to review objectives, outcomes and development of staff.

Employee behaviour

Employees' behaviours in performance measurement can be classified into 2, ie task performance and extra-role helping behaviour.
Task performance is related to activities prescribed in a formal job description or role; while
"... Extra-role helping behaviour is employee discretionary behaviour not normally found in routine performance management objectives..."
Jane Maley, 2017

These extra role helping behaviours are not normally documented but can
"...have many potential benefits by contributing to organisational effectiveness, interpersonal harmony, and job performance and satisfaction..."
K. W. Mossholder et al as quoted by Jane Maley, 2017

It is thought that the focus on profit can have a negative impact on the extra-role behaviours.