Effective Performance Management

Introduction

Performance management is an important strategy that affects an organization's strategic goals as well employee relations. It is "a formal, structural process used to measure, evaluate, and influence employees' job-related attitudes, behaviors, and performance results" (Werner, Schuler, & Jackson, 2012, p. 286). The concept of performance management focuses on the systematic process aimed at achieving the organization's mission. There are many performance developing activities that enhance the motivation and productivity of employees. Because of the success that these activities have on strategic objectives, companies understand how the overall value of an organization depends on performance management. Management must understand how performance is measured, achieved, and exhibited throughout an organization.

Effective performance management processes ensure that the organization's goals are linked to the performance goals of individual employees. This linkage created a connection that ties the employee to the overall goals of the organization. When work expectations and goals are clearly understood, employees are able to identify and be held accountable for good performance as well as poor. In today's business setting, the paradigm of performance feedback has shifted. When it comes to managing their performance, employees have shifted from being passive recipients to active agents (Vorhauser-Smith, 2012, para. 5). The days of being handed down performance ratings without soliciting employee feedback are over. Employees want to participate in the performance management process and understand what is needed to meet the company's goals as well as their own.

The purpose of implementing such an engaging performance management process is not only to ensure the employee is aligned with the company's objectives but also to take into consideration the employee's needs. Organizations must create a work environment in which people are enabled to perform their job to the best of their abilities. This ensures a fair and just culture where employees are engaged and able to evolve in their career. This evolution in performance management is an ongoing process that should include formal and informal feedback sessions (Aguinis, 2005, Chapter 7). This accountability leads to effective growth and productivity for the organization.

Lincoln Electric

Effective performance management is one of the keys to success at Lincoln Electric. Exception worker performance is standard for the company. There is no idle chatter in a Lincoln factory; each worker busily and thoughtfully completes the task at hand. Many workers take no coffee breaks and hardly need any supervision. This allows supervisors to focus on planning and record keeping instead of micromanaging employees. This level of performance not only benefits the company, but it also benefits the employee. For the company, sales per employee currently exceed $150,000 and at the same time, the average Lincoln employee earns twice as much as workers at comparable factories (Werner et al., 2012).

What does Lincoln do to achieve this level of performance? Lincoln's HR polices are credited with the company's success. Along with their recruitment and selection practices that help select quality employees, managing the performance of employees once hired helps produce a quality product. One basic element of performance management is the performance review. Lincoln conducts these twice a year. Employees are given marks and supervisors discuss the marks with each individual employee. During these reviews, suggestions for improvements are made and these suggestions often lead to recommendations for exceptionally high performance scores. Employees are also provided with coaching and feedback to help with performance improvement and development (Werner et al., 2012). Many companies now encourage employee self-development, but the feedback Lincoln gives helps to encourage this self-development. Research suggests that supervisor performance feedback helps shape the quality of an employee's self-development choices (Orvis, 2001).

Lincoln Electric has above average compensation, but compensation alone does not lead to increased performance in employees. Lincoln realizes that allowing employees to participate in decision making gives them a stake in the company and leads to better performance. Lincoln gives more responsibility to employees, giving high school graduates more responsibility than other companies give their foremen. Lincoln also has an advisory board that is elected by the workers and meets with the chairperson and president every two weeks for discussion on improving operations. This does not mean that all suggestions given by the advisory board will be accepted. If management feels the suggestion is not in the company's best interest, it will be rejected. While the board does not have complete authority, the willingness of management to meet with the board gives employees an extra level of involvement in the decision making process. This shows that management trusts the employees. Management trust in employees reflects a belief on the part of management that lower employees care about the goals of the organization and are competent to make good decisions (Spreitzer & Mishra, 1999).

Lincoln's financial success can be attributed to performance management. By focusing on employee development and allowing employees to engage in decision-making, Lincoln has developed a culture in which employees care about the company. Once employees are more than financially invested in a company, they exhibit better qualities and financial success follows. Lincoln's culture of performance management not only leads to improved financial results for the company but also increased pay for employees.

Southwest Airlines

Southwest's fares were originally set to compete with car and bus transportation. This small upstart began as a no-thrills airline. In order to offer low-cost flying, Southwest did not offer first class, movies, food, or reserved seating. Southwest also avoided the large airports and opted for short-haul, direct flights. Southwest claims that their primary goal is not to make a large profit. However, the airline has been profitable for over thirty years. In fact, Southwest claims that the employees come first and customers come second. By showing their devotion to their employees, the company encourages the employees to take care of the customers (Gittell, 2003). Rather than using the tactic of lowering fares to compete, fares are reduced to establish profitability and loyalty. Because their fares are not always the lowest, their success