Performance Management System

Blog 3: Performance Management System

            Performance management (PM) system is an internal organization system which the organization used to manage its employees’ work performance. The system usually will link to the rewards, compensation, payroll, staffing, training and development, and career development processes. In order to get deeper understanding on how the system impacts the company, I have decided to use McDonalds as my example.

            According to McDonalds, PM is the process the managers ensure that their employees’ activities and outputs are consistent with the organization’s goals. It is a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization.

            In order to drive high performance culture, McDonalds has designed the Performance Development System (PDS). This system helps to align individual performance goals with the business. Performance evaluations are based on ‘what gets done’ and ‘how it gets done’. The distribution of rewards is based on the employees’ individual performance. The process of performance management in McDonalds starts from developing Individual Performance Plan (IPP). During this stage, the managers will work with the employees to create a IPP to line up their objectives with the business objective for the coming year. The objective should be ‘SMART’ and the employees are responsible for meeting their objectives and documenting their achievements. Next is Individual Development Plan (IDP). IDP focuses on the employee’s job scopes and leadership competencies so that they can success in their current position and future positions. The IDP also recognizes the employees’ career aspirations. After IDP, a midyear review will take place at the end of July each year for the employees and managers to review their year to date performance. Besides, the employees and managers will revise their annual goals based on shifting business priorities.

            The next stage is Year-End Review. The employees submit their accomplishments to their managers during a face-to-face discussion around what the employee has done (75% weighting) and how the employee has done it (25% weighting). Then, the manager will present the employee’s accomplishments at the calibration roundtable and rewards are distributed. Based on the employee’s overall performance, the manager will assess the employee’s readiness for promotion.

            With PDS, in 2007, McDonalds is delivering its strongest business results in the last 30 years. PDS has enabled this success by ensuring individual performance goals are congruent with the business strategy. In 2007, McDonalds’s sales have increased by 40%, and they also experienced an increase of $6 billion in revenues.

(Total 411 words)

References:

1.      Levensaler, L. (October 2007). Driving a High-Performance Culture. McDonald’s Leverages Its Global Performance Management Practices. Bersin and Associates.

2.      Aguinis, K. (2007). Performance Management. Performance Management and Reward Systems in Context, Pearson Prentice Hall.

3.      Kramar, Bartam, et al. (2010). Performance Management. Human Resource Management in Australia, Ed 4, McGraw Hill.

4.      Charles H.F and Renato E.N. (2012). Performance Management, Compensation, Benefits , Payroll, and the Human Resource Information System. Human Resource Information Systems, Second edition, Chapter 14, pp 447.

5.      McDonalds corporate website 2011, http://mcdonalds.com.au/about-us/responsibility