Performance Management System - Advantages and Disadvantages.

A well defined, process oriented Performance Management System is a structured guide for the stakeholders to follow in order to evaluate the performance / output / productivity / contributions of an employee for a stipulated period of time.

As any system this process too has its own advantages and disadvantages to offer, which are been discussed as below:

1. The foremost and most important advantage of this process is that it engages Managers with their employees. In day to day life and Managers with their own KRAs often forget to interact or talk to their employees on their current performance and how they see their future with the Company. They are happy or unhappy? Their aspirations and many such issues and development related topics are discussed during these sessions, which are very important for any Organization.
2.  Above discussions by the Managers results in identifying the gaps between the expectations of Manager and delivery of an employee, which results in identification of training needs. With the help of this process it becomes easy to identify the training requirements for any particular employee.
3. The system also helps employees identifying clear career roadmap, and they understand what is expected from them and what they need to achieve in order to reach another level or promotion.
4. The process gives opportunity to the Managers to recognize and appreciate the achievements of the employees.
5. This in turn encourages employees as they get appreciated for what they achieved and they clearly understand how they contribute towards Company’s Goals and Vision. It motivates them to strive further and increases Employee Engagement and loyalty towards the Company.
6. The system helps quantify the goals and objectives which are otherwise qualitative and difficult to measure.
7. The outcome of PMS results in appraisals and promotions. It facilitates Managers and HR personals to calculate the raise based on the ratings in effective manner.
8. The system also identifies the under performers and help Managers and HR to take relevant action in order to scale them up with training or change in job role or even eliminate where ever necessary. Indirectly it helps in reducing the unfit hires.
9. The process provides valuable information about the employees which helps in further Succession planning.

Like every system there are also few disadvantages discussed as below:

1. While  Managers’ involvement being the advantage, it also becomes a disadvantage in cases where Managers don’t keep track of an individual’s performance throughout the period and at the time of such discussions, Managers pass on irrelevant information and inconsistent data to their employees, creating confusions and contradictions with respect to goals and its achievements.
2.  The goals set by the Managers for their employees are not relevant in some or more cases and are not in line with Company’s Goals and Objectives. This happens due to lack of training provided to the Managers about the PMS resulting in failure of the whole system and it purpose.
3.  The system as well results in discouragement of employees in cases where discussion becomes more of a highlight of what are their negatives points or where they failed to perform. It becomes a mere formality when Managers rate Employees on their gut feeling and favoritism.
4. Companies which follow Bell Curve appraisal system are forced to give ratings based on Comparative performance to other employees rather than employee’s individual performance. This results in a set of employees getting low ratings. This kind of rating system not only de-motivates Employees for their low ratings, it also results in a high performing team always having few Employees called as low performers or low rated employees.
5. The system passes on incorrect message when the Goal setting for the Employees is done during the start of the period and it sometimes doesn’t consider the Goals that become irrelevant over the course of time/ changes in systems or factors (internal/external) the goal is dependent on.
6.  The goal setting results in lack of innovation because the employees are busy in achieving their predefined goals. They feel less or no need to think further beyond their goals and hence don’t often innovate or create.
7. Where goals are number based, often employees are focused on achieving the numbers and forget the quality of the numbers delivered. The system doesn’t most often evaluate the quality and rates on the fulfillment of the numbers. This is a big setback for any Organization, as the quality is not been delivered.
8. The process also results in productivity loss of Managers in situations where 100s of Employees reporting them and Managers spends considerable amount of time just in Goal setting, reviewing and rating. Not only this, it also demands lot of time from the leaders (Management and HR) to discuss the results and outcomes of the Performance Management Ratings and Appraisals.