Performance Management System

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Organizations derive competitive advantage by outperforming rivals in the execution of activities required to ensure optimum operational effectiveness in providing products and services to customers (Porter, 1996). Operational effectiveness depends largely on the extent to which the organization’s performance management system (PM) is capable of developing the knowledge, skills, and abilities of its people (Allan, 1994). Thus, knowledge of developing and implementing an effective PM system plays an essential role in achieving competitive advantage. Using the table provided in Case Study 1-1 (Aguinis, 2009, pp. 24-25), this paper analyzes the content and efficacy of the PM system being used by Aeternus Life Insurance Corporation (renamed to comply with confidentiality agreements) to develop its people. An effective analysis of a PM system begins by comparing the characteristics of the actual system with those of an ideal system, then assessing the capability of the system for identifying, measuring, developing, and aligning performance with organizational goals (Aguinis, 2009).

The Value of an Effective PM System

In general, an effective PM system contributes to the achievement of organizational strategy, administration of employee transactions, communication of organizational performance expectations, human resource planning, and employee development (Aguinis, 2009). In addition to elements corresponding to the conduct of performance appraisals, the ideal PM system addresses several key characteristics that contribute to the alignment of performance with strategic objectives. Overall, an effective PM system represents a “. . . systematic, data-oriented approach to managing people at work that relies on positive reinforcement a...

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...rmance management (2nd ed.). Upper Saddle River, NJ: Prentiss Hall

Allan, P. (1994). Designing and implementing an effective performance appraisal system. Review Of Business, 16(2), 3.

Daniels, A. (1989). Performance management: Improving quality and productivity through positive reinforcement. Tucker, GA: Performance Management Publications.

Hopkins, S., & Weathington, B. (2006). The relationships between justice perceptions, trust, and employee attitudes in a downsized organization. Journal of Psychology, 140(5), 477-498.

Porter, M. (1996). What is strategy? Harvard Business Review. Retrieved from http://hbr.harvardbusiness.org/1996/11/what-is-strategy/ar/1

Scott, S. G., & Einstein, W. O. (2001). Strategic performance appraisal in team-based organizations: One size does not fit all. Academy Of Management Executive, 15(2), 107-116. doi:10.5465/AME.2001.4614990

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