Behavioural Aspects of Performance Evaluation

Behavioural Aspects of Performance Evaluation

Some organizational goals are too remote from individual managers, and therefore, have little significance for them, for example, goals relating to the return on capital employed or overall growth targets envisaged in the long-range plan. Management by objectives seeks to establish personal targets at all levels as a means of overcoming this problem. By relating personal goals to departmental and divisional goals and thence to organizational goals, an integration is achieved between them which may be depicted as follows:

Personal goals-.Divisional goals-Organizational goals

We examined the meaning of control in an administrative context. Management by objectives gives rather a different slant to the meaning of control, which is discussed by Drucker in the following terms:

Control' is an ambiguous word. It means the ability to direct oneself and one's work. It can also mean domination of one person by another. (Management) objectives are the basis of 'control' in the first sense; but they must never become the basis of 'control' in the second, for this would defeat their purpose. Indeed, one of the major contributions of management by objectives is that it enables us to substitute management by self-control for management by objectives.' (Drucker, 2004).

It would seem that most of the problems which researchers have discovered in relation to the budgeting process have arisen where a Theory X view of man has been reflected in management by domination as a method of control. Man has always rebelled against coercion and domination. By contrast, his most significant achievements have been attained when he has acted as a free agent, exercising self-control in his ability to direct himself and his work.

Management by objectives involves the following processes:

(1) The review of long-term and short-term organizational objectives and goals.

(2) The revision, if necessary, of the organizational structure. An organizational chart is required to illustrate the titles, duties and the relationships between managers.

(3) Standards of performance necessary to fulfil key tasks are set by the job-holder himself in agreement with his immediate supervisor. Unless the job-holder participates in setting performance standards, he will not feel committed to them. The standards of performance which result from systems of management by objectives are not 'ideal', nor are they minimum acceptable levels of performance. They indicate what are agreed to be 'satisfactory' levels of performance. As far as possible, they should be expressed in quantitative terms.

Management controls are operated so that supervisors do not act as watchdogs but rather as sources of help and guidance to their subordinates. A divisional profit goal in this sense is not only a target for the divisional manager, for it may also act as a means whereby top management may help to solve divisional problems should they become apparent through the failure to reach a stipulated figure.

(4) Results are measured against goals. An important aspect of this stage is the use of periodic performance appraisal interviews, in which supervisor and subordinate jointly discuss results and consider their implications for the future. The performance appraisal interview is essentially a discussion between manager and subordinate about objectives and their achievement. Performance appraisal should evaluate the manager not merely in terms of current performance as expressed in tangible results; it should also enable his performance as a manager, his personal qualifications and character and his potential for advancement to be assessed. It is an integral part of the process of managing by results by which both parties to the interview assess their efficiency as managers. The manager himself assesses his role as tutor to the subordinate; the subordinate considers his role in supporting the manager.

(5) Long- and short-term organizational goals are reviewed in the light of current performance.

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Read on: Management By Objectives

From the foregoing discussion of the problem of controlling the activities of an organization and evaluating managerial performance, it follows that several conditions must be satisfied if the accounting function is to play a useful role.

(a) Divisional and departmental goals must be clearly identified and defined, and appropriate measurements selected by which to express them and evaluate managerial performance. Where objectives are too vague or too ambiguous to be susceptible to clear definition in conventional terms, surrogates should be sought which will enable them to be defined and... see: Management By Objectives