CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Performance management (PM) is a goal-oriented process directed toward ensuring that organizational processes are in place to maximize the productivity of employees, teams, and ultimately, the organization. It is a major player in accomplishing organizational strategy in that it involves measuring and improving the value of the workforce. PM includes incentive goals and the corresponding incentive values so that the relationship can be clearly understood and communicated. There is a close relationship between incentives and performance.3 Performance management systems are one of the major focuses in business today. Although every HR function contributes to performance management, training and performance appraisal play a more significant role. Whereas performance appraisal occurs at a specific time, performance management is a dynamic, ongoing, continuous process.
Every person in the organization is a part of the PM system. Each part of the system, such as training, appraisal, and rewards, is integrated and linked for the purpose of continuous organizational effectiveness. With PM, the effort of each and every worker should be directed toward achieving strategic goals. If a worker’s skills need to be improved, training is needed. With PM systems, training has a direct tie-in to achieving organizational effectiveness. In addition, pay and performance are directly related to achieving organizational goals. Robert J. Greene, CEO of Reward Systems Inc., said, “Performance management is the single largest contributor to organizational effectiveness. If you ignore performance management, you fail.”4 Organizations must take a more strategic approach to performance appraisal. Instead of using the familiar “check the box, write a comment” ritual, organizations need to integrate the company’s mission, vision, and values into their
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