Challenges that confront managers and HR leaders when establishing a performance
management system
Organizations often identify a number of challenges whenever they execute
performance management systems. This paper discusses the challenges of executing a
performance management system as well the possible solutions to the identified challenges.
Furthermore, the implications for employees and the company as a whole are described if
those challenges are not overcome.
Design challenges: a major challenge is that the performance management system
may be poorly designed such that it fails to address the organization’s specific needs (Dahling
& O’Malley 2011). To overcome this challenge, the performance management system has to
be designed to address the company’s particular needs. The process of design must entail an
CHALLENGES IN ESTABLISHING A PERFORMANCE MANAGEMENT SYSTEM 2
extensive consultation with important stakeholders and the system’s future users. Interaction
and consultation are essential in building relationships and trust with pertinent stakeholders
and staff members. Trust is a key necessity for the performance management system’s
success. Before being applied in the company, the new performance management system has
to be thoroughly tested and piloted. The consequence of applying a system which is
incomplete is that it would result in loss of time, loss of human and fiscal resources, and
credibility, over and above increasing opposition to change (Mone et al. 2011). An
incomplete performance management system also results in low acceptance of this new
system. The individuals who are involved in designing should have expertise in performance
management and they should understand the context of the organization.
Lack of integration: performance management in any business organization should
be approached from an integrative standpoint. It is important to create synergy between the
performance management system and organizational structure, culture, human resource
management processes, strategic planning and every other important organizational processes
and systems (Risher 2012). Team, individual and organizational objectives have to be
harmonized. If integration is absent, the performance management system could not succeed
on its own, in spite of how good it may be.
Lack of support from the top management: to overcome this challenge, the execution
of the system should be driven and supported by the organization’s senior leadership. The
senior executives should be committed to executing the performance management system.
The senior executives have to be encouraged to inspire the employees, create a common
vision, and create a performance management system which will drive the whole company
toward a shared purpose (Dahling & O’Malley 2011). An organization that has excellent
performance management outcomes has strong vision-driven and value-driven leaders who
take risks, communicate the vision, inspire employees, and offer support as well as rewards.
CHALLENGES IN ESTABLISHING A PERFORMANCE MANAGEMENT SYSTEM 3
Incompetence: to effectively overcome this challenge, the persons who are involved
in the performance management system should have relevant skills, attitudes, and knowledge
to use this system. Some of the key skills needed are as follows: be able to develop
performance indicators, performance agreements, management competencies, and key results
areas; should be able to measure performance indicators; should be able to communicate the
results and give feedback; and should be able to monitor and evaluate the performance
management system (Armstrong 2014). To ensure that those who utilize this system are
constantly developed, proactive training and development will need to be carried out.
Lack of rewards: to overcome this challenge, a reward system which discourages
mediocre and low performance and rewards high performance has to be established. A
holistic and inclusive reward system that comprises a variety of rewards including study and
learning opportunities, promotions, public acknowledgements, greater work responsibilities,
merit awards, and monetary rewards need to be developed and communicated to all
employees. A lot of importance should be given to rewards that are non-financial. Measures
will have to be established for taking corrective action against staff members who are low
performers (Mone et al. 2011).
Communication challenges: to effectively overcome this challenge, a hands-on
communication strategy and process has to be followed during the performance management
system implementation. Communication is a critical success factor of the whole performance
management system. It is worth mentioning that effectual communication calls for the
provision of pertinent information. Effective communication also reduces anxieties and fears,
ensures buy-in from the system’s users, generates commitment to the system, and decreases
resistance to change (Gruman & Saks 2011).
CHALLENGES IN ESTABLISHING A PERFORMANCE MANAGEMENT SYSTEM 4
Lack of monitoring and evaluation: to effectively overcome this challenge, the
implementation of performance management system has to be monitored constantly.
Problems should be detected early enough so that prompt remedial action could be taken. It is
important to develop monitoring systems that would gather information methodically,
analyze that information and interpret it, and utilize it for decision-making. The process of
evaluation has to be carried out regularly so that any problems could be detected early
enough (Dahling & O’Malley 2011). The identified problems have to be fed back to the
design stage so that prompt remedial action could be taken aimed at addressing the problems
identified. For the performance management system to be successful, it should be evaluated
and improved continually.
The identified challenges are not insurmountable hindrances, but are aspects that call
for much attention and work. If these challenges are not addressed, they could actually cause
the organization’s performance management system to fail. The challenges can undermine
the performance management system’s execution. In essence, to prevent the challenges from
undermining the execution of the performance management system, it would be important to
meet those challenges head-on.
CHALLENGES IN ESTABLISHING A PERFORMANCE MANAGEMENT SYSTEM 5
References
Armstrong, A 2014, Armstrong’s handbook of performance management: An evidence-based
guide to delivering high performance (5 th ed.). London: Kogan Page
Dahling, JJ., & O’Malley, AL 2011, Supportive feedback environments can mend broken
performance management systems. Industrial and Organizational Psychology,
4:201-203
Gruman, JA & Saks, AM 2011, Performance management and employee engagement.
Human Resource Management Review, 21(2): 123-136
CHALLENGES IN ESTABLISHING A PERFORMANCE MANAGEMENT SYSTEM 6
Mone, E., Eisinger, C., Guggenheim, K., Price, B., & Stine, C 2011, Performance
management at the wheel: Driving employee engagement in organizations. J Bus
Psychol, 26: 205-212
Risher, H 2012, Employers need to focus on improving performance management.
Compensation & Benefits Review, 44(4): 188-190
