Examining the Performance Management System as a Predictor of Organizational Effectiveness: Perspectives from the Indian Manufacturing Sector

Abstract

Regular and systematic assessment of performance is a crucial responsibility for management. It not only evaluates and monitors organizational growth but also provides career direction for individual employees. Establishing clear performance expectations, encompassing results, actions, and behaviors, helps employees understand their job requirements. Well-defined goals, coupled with regular performance assessments, are vital for defining corporate competencies and identifying skill gaps. This information serves as a valuable input for designing Human Resource Development (HRD) plans. Despite the importance of performance appraisal systems, there is often a gap between intention and actual practice in many organizations. Previous research in Indian organizations revealed that existing performance management systems (PMSs) may allow for the use of appraisal data for administrative purposes, but there is a missing link between appraisal outcomes and the subsequent design and execution of developmental programs. In light of this, researchers aimed to assess employees' perceptions of PMS and its role in achieving organizational effectiveness. A survey, including a questionnaire and focused group discussions, was conducted with a purposive sample of 200 professionals in Indian manufacturing industries. The analysis confirmed the association between PMS and organizational effectiveness. However, there were differing perceptions among line managers about PMS, and even when there was agreement, it did not lead to superior outcomes due to a lack of clarity in the existing system. The discussions highlighted a distinct differentiation in the involvement of different levels of management in the performance appraisal mechanism. Additionally, the reciprocal trigonometric relationship between PMS, competency management systems, and training and development was emphasized.