Components of Performance Management System
February 12, 2025
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Defining the performance objectives can be very useful as it defines the performance expectations. Objectives which are written down and are verifiable can be far more useful if they are SMART in nature which means Specific, Measurable, Achievable, Realistic and Time Bound. Many organizations set goals and objectives through a formal process known as Management by Objectives (MBO) which is an organized and a systematic approach of defining organizational goals and realizing them within the available resources.
The main aim of this approach is to improve organizational performance by aligning the organizational goals with the individual objectives at all levels and attaining those goals within a prescribed time frame. The system involves continuous monitoring and feedback for improving the quality of outcome.
The chief proponent of MBO system was Peter F Drucker in 1954 in his book entitled ‘The Practice of management’. GE was the first organization to adopt the MBO method for defining goals.
The major focus of this approach is on inviting participation from all the managers in the goal setting process and strategic planning and implementing a range of performance systems which help an organization to remain on the right path.
On the whole, it may be regarded that objective setting process is an important part of performance management process as it defines and manages expectations by establishing an understanding on the part of the role holder about what has to be achieved and at the same time acts as a point of reference during the period of performance review.
Objectives can be broadly classified under the following heads:
Effective work objectives clearly define an activity in terms of the results or standards which are to be accomplished. For example, Tata Steel for transforming itself into a growth organization aligns the key result areas with the corporate strategy at all levels in its performance management module.
The organization rewards and provides career growth opportunities to those employees who perform well in their jobs. In this way the organization manages the performance of its employees by focusing on work objectives or the KRA’s.
South West Airlines aims at improving the performance of its employees by providing them appropriate training for handling the requirements of the job challenges, compensating them favorably and keeping them motivated for winning their loyalty.
In GE, training and development is a continuous process for developing the competencies of the employees and invests in both in-house training programmes and development programmes. Besides this, the company also sponsors its employees for MBA course in reputed universities.
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