Disadvantages of PMS are as follows:
1. Risk of Internal Competition: Under this system, employees compete with each other for job status, position, and pay.
This could amount to backstabbing, failure among team members to communicate efficiently, and strong employee rivalry; It could lead to dysfunction of the department and/or team, resulting in failure to achieve performance standards.
2. Favouritism: Managers and supervisors tend to trust and depend on one employee more than the others. This employee could be the foreman or the team leader.
This employee is entrusted with the responsibility of explaining new job roles and duties to other employees. It leads to dissension and distrust among the group members.
It causes team fraction and adversely affects employee morale and satisfaction.
3. Expensive and Time-Consuming: Performance management systems are costly, requiring a lot of administrative work, patience, and time.
Usually, the areas impacted negatively include the human resources department, finance, and organizational development. Performance management demands equipping employees with the “right” skills and knowledge.
This means conducting extensive training, retraining, and career development workshops for every division and employee level. This tums-out a costly process.
Further, projects are lost as employees are getting trained with newly improved skills. This means a negative organizational performance as the time when employees could have been working was spent in a workshop.
4. Manager’s Dilemma: The manager is unable to perform his tasks efficiently because he spends too much time supervising employees about their job functions.
He is faced with value-based appraisal systems. It becomes challenging and tough to decide value and performance indicators for measurement.
It is not possible to have common indicators as each job has different job requirements. Managers are faced with information overload.
5. Convoluted and Bureaucratic: The company ends-up hiring and training new personnel. Performance management creates new organizational layers.
The employee population increases. Now, instead of one team to do a project, two teams are doing it. This actually affects the financial structure of the organization.