With the current dynamic economic world, organizations have adopted strategic management systems to stay competitive. One of such systems is performance management, which ensures the organization’s goals are achieved. Organizations in both the private and public sectors apply this system. The paper discusses the concept of performance management and its application in the private sector. The paper also analyzes how public organizations in the member states of the Gulf Cooperation Council (GCC), such as the United Arab Emirates, and the other countries apply this concept.
The performance management is the process of discovering, assessing and advancing performance in firms by linking individual’s work to the overall mission of the firm (Lin & Lee, 2011). It aims to improve the organization’s overall performance by raising the level of input of employees. Performance management is crucial to the success of an organization for a myriad of reasons. The first reason is that performance management increases employees’ motivation to performance. When an employee receives feedback about his performance and realizes that the organization recognizes his hard work, he becomes motivated to accomplish more in the future (Aguinis, 2005). Performance management also increases a worker’s self-esteem. When an employee feels appreciated at the firm because of his work, it consequently improves his self-esteem. Another importance of performance management is its role in providing insight into the achievements of employees. Through performance appraisals, managers can understand each employee’s contributions to the organization (Esu & Inyang, 2009). Performance management is also essential as it helps to clarify an employee’s job description. Through the appraisal process, workers can better understand the organization’s expectation of them in their positions and how to achieve success in these posts (Aguinis, 2005). Performance management also assists employees to understand their strengths and weaknesses better. Having this knowledge helps to identify future career trails for the workers. Performance management as a concept provides valid information about an organization’s performance. The company then uses the information for adopting different strategies, such as promotion, transfers, and terminations. It ensures fair distribution of rewards in an organization (Aguinis, 2005).
Performance management also goes hand in hand with the setting of an organization’s goals and objectives. Employees can understand what they need to do to achieve the organization’s mission. On the legal aspect, performance management documents an organization’s compliance with laws and regulations. Through performance appraisals, matters such as equal treatment of employees are addressed (Aguinis, 2005). It helps to prevent a situation of subjective performance evaluations that have not been noted down that consequently end up causing legal issues.
As stated in the preceding paragraphs, the administration of an organization’s performance is critical to the private firms as it helps to realize organizations’ missions and goals and to improve the performance of staff. Performance management is at the center of employee management and development in private sector organizations as they operate in a highly competitive and dynamic environment (Rachna & Snigdha, 2015). Performance management in the private sector is achievable through the use of different models. One of the examples is the performance appraisal model. It is a structural official communication between an organization’s supervisor and an employee. It is usually applied in the form of a periodic interview in which the supervisor examines the employee’s work. The system helps to identify the weaknesses and strengths of an employee. It also provides the workers with opportunities for self-improvement (Begum, Sarika & Sumalatha, 2015). However, some performance appraisals are usually not formal. For example, a supervisor or manager can give informal statements regarding an employee’s performance during day to day scheduled work supervision rounds. Appraisals reward an assessment of an employee’s performance and provide feedback and ranking of the worker that is helpful in the improvement of his performance and the achievement of the organization’s goals.
Another model of performance management used by organizations in the private sector is management by objectives. Here, the employees are given the opportunity to set their objectives that they are capable of achieving (Kumari, Kaleramna & Pandey, 2010). The workers then use these objectives to achieve the overall organization’s goals. The performance of the employees is measured based on the workers’ achievements of their set objectives in relation to the organization’s goals. Management by objectives is a useful model of performance management as it motivates employees by encouraging them to foster goal attainment strategies (Abdulaziz, Saad, & Saad, 2011). The balanced scorecard is another standard model of performance management. The model measures the performance of an organization by using a multi-dimensional performance measurement system. It includes four performance indices. They are the fiscal, customers, domestic and processes on learning. Performance managers use the model to invest the organization’s input at improving the customer, internal and learning process outcomes. Consequently, the investment pays off and results in the improvement of the financial sector of the organization (Northcott & Taulapapa, 2012).
Benchmarking is also an effective performance management model used by organizations in the private sector. A company uses the model to compare its performance with that of another similar or competitor organization. The organization then adopts the strategies of the competitor that are responsible for the success of the organization and uses them to improve its performance (Arnaboldi, Lapsley & Steccolini, 2015).
Although performance management was initially meant for use in the private sector, it has gained application in the public organizations (Lin & Lee, 2011). In public organizations, performance management focuses on establishing more valid indices that are useful to measure the operation of employees in a public company. It also aims to improve the effectiveness of public services (Talbot, 2010). Public organizations in the Gulf Cooperation Council nations practice performance management. The application of performance management in these public organizations has led to an improvement in efficiency and revenue growth. For example in Oman, public organizations use the performance appraisal model. Once employees are evaluated, public organizations through the government developed the Technological, Vocation, Education and Training system to assist in developing workers’ skills consequently improving their performance (Abdulaziz, Saad, & Saad, 2011). Also to boost the performance of public workers, the Oman government in 2013 increased the minimum salary of employees by 3 percent. The government of Bahrain has also followed this example. In 2014, it mandated public organizations to increase the minimum wage of employees by 4 percent (Abdulaziz, Saad, & Saad, 2011, p. 22). The GCC nations also use the benchmarking model where they compare the performances of public organizations within the region. It is a preferred system in public organizations because the organizations are not competing and are open to sharing of information (Talbot, 2010). The collaborative learning helps to improve the functioning of the organizations.
Public organizations in the United Arab Emirates have adopted the E-Performance model. It is a competency determined system that measures the performance of employees based on the organization’s standards. The model also measures the corporate performance, tracks and reports performance and conducts external benchmarking with other public organizations in the UAE (Abdulaziz, Saad, & Saad, 2011). By streamlining the process of performance management into a web-based solution, the organization is able to monitor its performance and to reduce unnecessary costs. Public organizations in the UAE also use the Abu Dhabi Accountability Authority performance management model launched by the government. The system coordinates and monitors the performance of the U.A.E ministries and public agencies. It uses over 2500 key performance indicators updated three times a year to measure individual employees’ performances in these organizations (Abdulaziz, Saad, & Saad, 2011, p. 21).
Public organizations around the world prefer to use the balanced scorecard in performance management. It is determined by the fact that as these organizations are responsible for achieving multiple goals during the same period, they are under pressure to improve performance outcomes. The balanced scorecard being a multi-dimensional performance measurement model is the most appropriate in the achievement of several goals at the same time (Northcott &Taulapapa, 2011). In public organizations, the model operates by re-arranging the four indices so that the customer index is given priority at the top of the hierarchy. The model is effective in public organizations as it provides managers with information needed to measure the performance of the organization and to direct improvements where necessary. The City of Charlotte in the USA and the City of Melbourne in Australia are two of organizations in the world that have successfully implemented the balanced scorecard model and are receiving positive results (Northcott & Taulapapa, 2011, p. 176).
For an organization to stay on top in the competitive world, it is necessary to practice performance management. Performance management is applicable through different models, such as the performance appraisal system, the benchmarking system, and the balanced scorecard. Although initially meant for use in the private sector, public organizations have adopted this system to assist in improving efficiency in the workplaces. The GCC countries prefer the benchmarking model. Public organizations in the UAE use advanced technological models that also conduct benchmarking in performance management. Other public organizations in the world such as the City of Charlotte prefer to use the balanced scorecard model in performance management. All these models have helped to increase the performance of organizations.