Performance Management Risks

The performance management process does improve the work with the human capital, increases the satisfaction of employees, and has an impact on the development of employees. However, the performance management process has many risks and HR has to treat them. Many organizations use inefficient performance management process. The role of HR is in constant development of the process using the feedback, comments, measures and observations. The PM process can become extremely complicated. The process has to be always focused on providing useful feedback to employees and reliable results to Human Resources.

HR is responsible for the process, and it has to set clear priorities for the performance management system in the organization. The PM system without the vision is weak and brings no value added to employees and the organization. The system runs, but the top management does not trust the results. Setting the vision is the main HR responsibility. The weak performance management process is the greatest risk.

Another big risk for the performance management is an unclear alignment with the corporate culture. The organization with the high performance corporate culture can afford a strict performance management process and tough goal setting process. The goals can be extremely challenging, but they have to be achievable. The organization with the friendly corporate culture has to implement the softer performance management process. The fit with the corporate culture is essential as managers can trust the system. The tough goals are not suitable for the every organization.

HR has to be sensitive in setting the performance management process. It has to decide about the right timing for the whole procedure. Managers invest a lot of time to conducting the performance management appraisals and they should be given quite a broad time frame for them. The risk of too quick performance management cycle is high.

Performance management is not just about appraisals; the goal-setting process is extremely valuable for the efficient performance management. HR has to cooperate with the top management on setting the right strategy for the goal-setting process. Managers have to follow the defined matrix for goals across the organization. HR has to make a final consolidation of all goals, and they have to be randomly checked. The weak alignment of goals and the business strategy is a serious performance management risk.

HR has to define the strict process for goal setting in the organization. Each management layer has to follow the defined rules. Many organizations let employees define their goals freely. These goals are weak, easy to reach and not contributing to the business strategy. The goals have to be set as they build the competitive advantage for the organization. Many top managers are not interested in the goal-setting procedure, and they let their subordinates manage the process. Employees feel no value added from the process, and they define weak goals. This is a risk for the performance management in the organization.

The performance management has to differentiate employees. It has to provide the clear output about the performance of individual employees. HR cannot design the process, which has many different performance rating codes. The system has to be kept clear and has to define the definite and a limited number of different groups of employees. The consequences have to be assigned to each performance rating. The groups of employees have to be manageable, and HR has to be able to estimate and manage costs of each group of employees. Managers want the flexible system of performance ratings. HR has to define a strict system of ratings. Many performance ratings are a danger for the performance management.

Finally, HR cannot focus just on the performance appraisal form. The form is a tool for the performance management; the form is not a goal of the appraisal. The form should help managers to make the performance appraisal in a standardized way. It should provide the formal record of the meeting and the discussions. Manager and employee should agree on results. The form should be as easy as possible. It should collect just the basic information. The form should be a growing story; the performance appraisal should not start from a scratch every time.

The performance management is highly valuable HR process, but HR has to treat some basic risks. Many organizations run the system, which does not bring any benefits to the organization. It has not benefits for Human Resources. The top management does not use the performance management results as a basis for tough decisions in the people management area.