Why the Performance Management System Fails In Small and Medium Enterprises


Many companies turn to the performance management system when it comes to creating an organization climate of employee efficiency and satisfaction. Performance management is a work system that involves organizing an environment that encourages employees to work to the best of their abilities. Most of the companies use this human resource system to help boost their profits and productivity but it often fails if it is not implemented properly.

There are many reasons why the performance management system often fails with employees. Most of these problems do not have anything to do with the system itself, but rather with the employee’s thoughts and feelings regarding the system.

One of the main issues involved with using the performance management system in Indian companies is a strong lack of faith and respect for the system.

A business model may have all of the necessary elements needed to enhance worker productivity and encourage team work, such as organization, team development, proper communication, and an award and reward system, but it will be ineffective if it is not accepted by employees. This is especially true in most of the Indian companies.

Recent studies have shown that employees in India need to build an emotional bond with their fellow employees and superiors in the work place, and although they understand the need for procedures and processes, their respect is primarily influenced by the amount of personal trust among the other members of the work group. This causes a problem for many companies who are operating in India, as the emotions and trust of the employees are not handled well.

The employees tend to mostly question the performance management system’s ability to recognize excellent employee performance, along with its reward system. Information from a Gallup study shows that more than 70 percent of Indian employees have doubts about whether the performance management system effectively rewards its workers, while another 40 percent of employees have shown decrease in their level of engagement because of a lack of confidence.

Yet another issue involved with the performance management system is flaws in the design of system, such as poor leadership and support, incompetence, problems with communication and feedback, a poor reward system, and a lack of inspiration. Even if the flawed system is fully integrated into the company and among the employees, it still presents a problem in that the procedures and processes used are ineffective and time consuming. For example, a lack of leadership and support on a project can cause employees to become unmotivated and unfocused. It can also prevent employees from coming together as a team on a project.

Finally, there is the bell curve system, or forced ranking. This method of ranking has many disadvantages, and many companies do not integrate it into their performance management system. The bell curve model mainly consists of a bell shaped graph that is high in the middle and is lower along the edges. This graph’s main purpose is to subdivide employees into subgroups based on performance levels, such as high ranking employees, average employees, and so forth. Although some human resource professionals view the bell curve model as a good way to measure employee performance, it is still heavily flawed. For example, the bell curve model is very rigid, which makes it unsuitable for small companies. It also tends to focus purely on the amount of work done by employees, rather the values, such as work ethic. Employees have also shown a loss of morale when the bell curve model is used and many workers question their ability to accomplish difficult tasks in an efficient matter.

How To Foolproof the Performance Management System

Despite the various issues associated with the performance management system within Indian companies, there are still ways to resolve these problems. One of the first ways to foolproof the performance management system is to appeal to the workers’ emotions. Employees want more than just assurance that their work will be rewarded and taken note of; they want an emotional connection between themselves and their fellow employees. In order to make sure that the employees’ needs are met, companies must first take in consideration their employees’ reactions to a performance management system. If the employees are unsatisfied with the system or are simply unclear of how it should work, changes should be made and the company should clearly communicate how each employee’s performance will be rewarded.

Teamwork among employees should also be emphasized. Most employees will need to work together to complete a project, and one employee’s output is another employee’s input. This chain of input and output should not be appraised as one employee’s work, but it should be appraised as the employee’s performance in a team.

Finally, Changes to the reward system should be made; money can be used as a bonus, but companies should encourage a feeling of well-being and accomplishment among employees, especially when teamwork is involved. This will not only keep the team engaged, but will also decrease the feeling of discontentment among workers.