Performance Management System as a Predictor of Organizational Effectiveness: Insights from Indian Manufacturing Industries

Abstract

Assessment of performance in a regular and systematic manner is an essential activity on the part of the management, because it not only serves to evaluate and monitor the growth and development of the organization; but also provides necessary career direction for an individual employee. By establishing clear performance expectations which includes results, actions, and behaviors, the process helps the employees in understanding what exactly is expected out of their jobs. Clearly defined goals blended with regular assessments of individual performance is pertinent for defining the corporate competencies and exploring the major skill gaps that serves as a useful input for designing the HRD plans for the employees. However, in many organizations there happens to be a gap between the intention and actual practice of performance appraisal systems. Especially in Indian organizations, earlier research has surfaced the fact that, the existing performance management systems (PMSs) though provides for use of appraisal data for administrative purposes, but in actual practice there is missing link between the appraisal outcomes and subsequent design and execution of developmental program. Keeping in view of the importance of such an emerging area, an attempt has been made by the researchers to assess the perceptions of employees regarding the PMS and its role in achieving organizational effectiveness. A survey has been conducted though a questionnaire along with focused group discussion to examine the efficacy of performance management as a tool of HR interventions with 200 purposive sample professionals employed in Indian manufacturing industries. The analysis confirms the association between PMS and organizational effectiveness. However, there are difference of perception between line managers about PMS and where agreement exists; it is not associated with superior outcomes because of lack of clarity in the existing system. By analyzing the discussions, it was concluded that, there is distinct differentiation of involvement of different levels of management in the performance appraisal mechanism. Moreover, the reciprocal trigonometric relationship between the PMS, competency management system, and training and development is also emphasized.