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Establishing a company performance management system is a significant undertaking. HR practice leaders have grappled with this issue for decades, and academic and professional journals contain a plethora of ideas and approaches on this subject too numerous to count. Clearly, there is no one-size-fits-all solution for any organization. Each organization is unique and must find its own niche in the marketplace. However, most would agree that whether our organizations are large or small in revenue or in human capital, there are certain fundamental criteria that could apply equally. This article discusses certain "critical success factors" that every organization interested in getting it right from the start may wish to consider when formalizing a performance management system.
Most would agree that establishing a company performance management system is a significant undertaking. But how can you ensure that you get it right from the start? HR practice leaders have grappled with this issue for decades. Academic and professional journals abound with ideas and approaches too numerous to count. Yet making recommendations and choices about program components from among a perplexing number of growing choices and their associated variables remain a dilemma.
What we do know for certain is that a steady shift has occurred overtime in the workplace in relation to human resources. Work now requires more knowledge and skills than ever before, i.e., organizations are more dependent on human capital as an intangible asset (Figure I).1·2 As a result, organizations are, or it would appear they should be, interested in optimizing the way this asset is managed. Establishing an effective performance management system is an organization's way of doing just that. After all,
".. .a great deal of theory concerned with human motivation and human development argues that an effective performance management system should be a key building block of every organization's human capital management system. To tie performance to rewards (the key to motivating performance), organizations need to have accurate measures of individual performance. To develop, individuals need feedback about their strengths and weaknesses. Organizations, meanwhile, need performance information to direct their training and development resources to those individuals who can gain the most by them. Finally, organizations need performance information to correct performance problems and assess the effectiveness of their improvement efforts."3