Performance Management System: Measuring Its Effectiveness

Having successfully completed the annual appraisal cycle, I breathed a sigh of relief. Moreover, I felt a tinge of achievement with the culmination owing to the remarkable efforts having been put in, by the leadership team, to ensure the utmost fairness and transparency to the process.

But as important it is to ensure a fair and transparent performance appraisal, equally important is to measure its effectiveness and impact on our internal customers- the employees.

It is also an opportunity for us to identify the factors which have driven or impacted the performance of the employees. The learning can be extrapolated to drive performance in the subsequent years. Another important factor which comes into the picture here is the potential of our employees. Have we been able to exploit the potential of our employees to the fullest?  Is the performance of the employees not a direct coefficient of the employee potential?

The thought prompted me to analyze the correlation between the performance and the potential of our employees. And it threw some interesting results:

Though the results prove the positive correlation between the performance and the potential of the employees, the correlation is definitely not as high as expected.

Also, it does not mean that the correlation will be 0.62 for all the organizations and all the cycles. This is only an illustrative value, based on a few samples. The value is a variant of the effectiveness of the process for each cycle in each organization.

What does it mean?

The correlation is a measure of the effectiveness of the performance management system vis-a-vis the employee potential. Though employee surveys, gauging the employee satisfaction with the outcomes, may also be used, the survey results are weighed down by the employee expectations.

There are some errors which exist within the system which is not allowing the employees to deliver up to their potential. If we are able to identify the other factors which are causing the gap and make them a constant high/ low, we shall be able to mitigate this error.

These factors may comprise of work processes, resources, employee engagement and the organization culture. With my personal bias towards managerial effectiveness, I strongly believe that the managerial effectiveness plays a strong role here.

What next?

Firstly, it is imperative to find the other factors which impact employee performance and endeavor to make them a constant favorable value.

Secondly, the correlation value helps measure the effectiveness of the performance management system with a target to achieve the highest value of correlation, in the coming year. The trend over the years will help track the improvement in the performance management system in the organization.

“What cannot be measured cannot be improved!”

Please feel free to connect with me for any further insights to the study.