Performance management is a mean of getting better results by managing performance within an agreed framework of goals, standard and competence requirements. It is a process to establish a shared understanding about what is to be achieved, and an approach to managing and developing people in order to achieve it.
Process of PM
1.	Business plan
2.	Performance agreement
3.	Performance and development plan
4.	Management performance continually throughout the year.
- Reinforce high performance
- update update
- Coach or counsel Work problem
5.	Performance Review and plan for future.

	Appraisal is part of the system of performance management, including goal setting, performance monitoring, feedback and improvement planning.
Performance appraisal
-	goal setting
-	performance monitoring
-	feedback
-	improvement planning

 Process of Appraisal-
1.	Identification of criteria for assessment base on Job analysis  or STD
2.	Appraisal report is prepared
3.	Appraisal interview
4.	Review of the assessment
5.	Action Plan
6.	Follow up

Importance of individual assessment
Reward review, Performance review, and Potential review.
-	For achieving objectives- What to do.
-	The result the individual will be expected to achieved
-	Basis for remuneration
-	Training and development needs
-	For promotion and area for improvement
-	Picture of HR and inventory
-	Assess selection procedures
-	Improving communication 

Assessment of HR performance; Performance management; getting better results, share understanding, manage and develop people

Performance measure
-	Job related 
-	Controllable
-	Objective and observable
-	Data must be available
Prepare
-	coherent complete and objective picture of employee performance
-	improvement ad development
-	Justify in detail
-	Consistency on performance
Benefit
Individual;
-	Goal congerance
-	Establish key result and time scale
-	Comparison on past and future performance against STD
-	Basic for pay schemes
Organisation;
-	Promotion can be identified
-	Improvement area can be identified
-	Improvement communication
-	Short term/ long term HR plan

Appraisal techniques
1.	Overall assessment; Written in narrative form by managers ( opinion on appraisee). However, no guaranteed consistency.
2.	Guided assessment; comment on a number of specified characteristics and performance elements. Example, application, integrity and adapability
3.	Grading; or Rating scales. For example, Job knowledge
- HIGH……… AVERAGE……..LOW
 Graphic scale may be used. 
4.	Behavioural incident method; measured against typical behaviour in each job, as defined by common critical incidents of successful and unsuccessful job behaviour reported by managers.
5.	Result oriented schemes; review performance against specific targets and standards of performance agreed in advance by manager and subordinate together.
a.	It is jointly- agreed targets and so more participate by subordinate.
b.	Manager become coach not critic
c.	Clear and know targets help modify behaviour.  
6.	Self appraisal;
Advantages,
o	Save management time
o	Increase employee responsibility and motivation
o	Goal congruence
o	Flexibility in term of time and relevance
      Disadvantages
o	People are not the best judges of their own performance
o	Over or under estimation of performance
7.	Appraisal interview; encourage joint problem solving and improvement planning.
Process;
o	Prepare; pre interview include timing and environment, taking relevant documents such job description, employee record, and appraisal form. Also include historical review and self and peer appraisal.
o	Interview; select interview style and encourage employee to talk and identified problem and solution. Be fair.
o	Agree
o	Report; Complete appraisal form
o	Follow up; monitor progress and keep informed.
Three approach to interview style, (Maier)
o	Tell and sell style
o	Tell and listen style
o	Problem style
8.	upward appraisal
9.	Customer appraisal
10.	360’ degree feedback

Barrier to effective appraisal and overcome
	Employee may treat appraisal as 
-	confrontation
-	Judgment
-	Chart
-	Bureaucracy
-	Unfinished business
-	Annual event

Overcome to Barriers
1.	Fair 
2.	Commitment from senior
3.	Objectivity and avoid bias
4.	Realistic
5.	Clear objective about appraisal

Appraisal Vs Pay
1.	Fund available
2.	Continuous improvement
3.	Forward looking
Evaluation of appraisal scheme
1.	Relevance
2.	Fairness
3.	Serious intent
4.	Cooperation
5.	Efficiency in term of cost benefit.
Evaluate methods
-	Ask employee felt about appraisal system.
-	Check performance improvement
-	Other indicators such as labour turnover, Disciplinary action and succession etc…..
Rewards and appraisal
by John Ball   02 May 2007	 	
Understanding what motivates people is necessary at all levels of management. It is of particular relevance in the accounting environment because technicians are usually supervisors and relationships are often on a personal, one to one basis. Technicians must understand the relevance of individual motivation; unless individuals are well managed and motivated they are unlikely to work to achieve the organisations objectives. 
Motivation is frequently based on reward. Many writers describe rewards as having basically two dimensions – intrinsic and extrinsic. 
Intrinsic rewards are to a great extent within the control of the individual. They include feelings of personal satisfaction, a sense of achievement, status, recognition, the opportunities for advancement, responsibility and pride in the work. This form of reward forms part of Maslow’s higher order thinking on motivation and is also often seen as akin to Hertzberg’s motivators (or ‘satisfiers’); that is those factors directly concerned with the satisfaction gained from the job itself.
Extrinsic rewards on the other hand are those forms of reward which are outside the control of the individual and at the disposal of others; sometimes the individual’s superior but more often the organisation itself. Extrinsic rewards can be ‘seen’ and are akin to Hertzberg’s hygiene (or maintenance) factors. Because extrinsic rewards are obvious and can be ‘seen,’ not only by the individual concerned but by others, lack of attention can lead to job dissatisfaction and motivation problems. They include such simple matters as salaries and conditions, incentive arrangements (which are discussed later), share schemes, pension schemes, insurance and wider facilities such as creches. Surprisingly, these simple factors are often overlooked by management and can lead to problems in the workplace – even more so if other organisations are seen to be providing better rewards.
Reward systems have to be consistent, transparent and understood. Above all they should be equitable and seen to be fair. But they do not exist for their own sake, they are useful in assisting management in other ways. Prospective employees will wish to know whether a reward system exists and to understand it’s characteristics. For the organisation, a reward system aids recruitment and retention and ensures that employees work to a known and consistent standard. A well thought out reward system will reflect the nature of the post and task and recognise the skills and experience required to fulfil that particular post. A well constructed reward scheme will motivate employees, increasing commitment and effort.
Rewards are of course about performance. This is now an issue across all sectors of business and is not confined to the traditional manufacturing sector. Activities in business once seen as being beyond any kind of reward or bonus are more and more subject to 'appraisal'. But how does this work? Appraisal systems are increasingly becoming an everyday part of business life yet remain misunderstood and badly managed. 
In some industries, especially manufacturing, a reward scheme can be based on relatively simple matters such as the amount of production achieved within a specific timescale. 
Such schemes can not of course apply to services such as accounting. Thus over the years, many service sector concerns (and indeed service departments within manufacturing) where traditional ‘bonuses’ do not readily apply, have adopted performance related pay as a method of reward. Appraisal systems do not of course necessarily occur only for performance related pay schemes. However – and this really is very important for all concerned – performance related pay must be related to some form of formal appraisal. 
Appraisal systems are often misunderstood and mismanaged, especially if they form part of the duties of supervisors and lower level managers. All concerned must understand the background to, and the objectives of, the appraisal system.
The appraisal system should be a well constructed scheme which is fair to both individual and organisation. It must be accepted and understood that appraisals are formal events, and that the manager or supervisor carrying out the appraisal must be the appraisee’s immediate superior. It provides an opportunity to both look back at past achievements (and failings) and to look forward. Overall however, appraisal systems exist to improve organisational efficiency by ensuring that individuals perform to the best of their ability and develop their potential. This leads in turn to improved organisational performance.
For the individual being appraised, the appraisal has distinct advantages. It establishes the individual’s activities in relation to the overall objectives of the organisation. It provides key results which the individual needs to achieve within work within an agreed time scale. It compares the individual’s past performance and future activities against an agreed standard and of course provides the basis for performance related pay schemes.
The appraisal is by its very nature two sided. For the business organisation for which the individual works, suitable promotion candidates can be identified and trained, areas of overall organisational improvement can be seen and – in theory at least – communication is improved. For many organisations, the appraisal provides a basis for medium to long-term human resource planning whilst at the same time, measures selection processes against results.
Dr John Ball is former examiner for Paper 1.3 	
© 2008 Association of Chartered Certified Accountants