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Summary Performance Management
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Summary of all articles of Performance Management. The summary was made in 2018 and is therefore still very recent.
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Samenvatting Performance Management:1. Performance management: introduction + management control theory
Article 1:
DeNisi & Smith (2014). Performance Appraisal, Performance Management and
Firm-Level Performance: A review, a proposed model and new directions for
future research.
The goal of appraisal and performance management is to develop techniques that will help
employees meet their personal goals (growth, development), but which will also help the
organization to function more effectively. However, we have done well in finding ways to
improve individual performance, but we have not done well in either demonstrating or
explaining how these HR techniques can also result in improved firm-level performance.
The degree and type of aggregation from the individual to the team (or firm) level depends
upon certain aspects of the work environment according to Bell and Kozlowski (2002):
1. Temporal pacing: the timing of when employees perform their individual tasks. They
can perform them independently or they can require synchronization in order to be
completed.
2. Dynamism of the task environment: the extent to which tasks are stable versus
changing.
3. Strength of member linkages: the extent to which members must interact with each
other and know what each other are doing.
4. Workflow structure: refers to whether the structure of tasks is pooled, sequential,
reciprocal or intensive, which in turn require different levels of member linkages and
temporal pacing.
The goal of the paper is to address the important question of whether we have shown a
relationship between individual-level performance appraisal and performance management
techniques and improvements in firm-level performance.
Individual Performance Appraisal and Management: How We Got Here
Performance Management is the process by which we evaluate the individual performance
of an employee over some period of time. Formal appraisals are infrequent events; some
type of score is assigned; and there may or may not be any formal developmental feedback.
Performance management goes beyond appraisal and is typically defined as encompassing
all the activities a firm undertakes to improve an employee’s performance, beginning with the
evaluation of performance and subsequent feedback to the employee, and continuing
through training and administration of rewards. Thus, performance management “is a
continuing process of identifying, measuring and developing the performance of individuals
and teams and aligning performance with the strategic goals of the organization”.
First, Performance Appraisal:
Traditionally, much of the research on performance appraisal has focused on ways to
eliminate rating errors and/or to improve accuracy. Much of the research in the early 60’s
was devoted to finding better ways to construct or administer rating scales. Around the 80’s
research took a different direction. They proposed that future research should focus on
cognitive processes, and so led to a series of papers examining how such processes might
,influence rating accuracy (rather than rating errors). Soon the focus of research began to
shift away from trying to improve rating accuracy.
Next, Individual Performance Management:
Once the focus shifted to performance improvement, more attention had to be paid to the
process through which an individual employee might be motivated to improve their
performance. This has been the major focus of performance management: the improvement
in the performance of the individual employee. In this context, rating accuracy is only
important as it might affect employee motivation, mainly through employees’ perceptions of
fairness of the process. Note that even if raters intended to be fair and accurate, these
ratings would not have the desired effect unless they were perceived as being fair by the
employees. There are also some ratee biases, such as ratees’ perceiving more favorable
ratings to be more accurate.
The new interest in performance management led to the publication of new models of how to
manage and improve performance. All of these models emphasized the importance of
employee reactions in the appraisal process, and all cast performance management
interventions in a central role in attempts to improve performance. All of these models focus
upon changing individual or team performance to better align it with corporate goals, with the
assumption that, once these are aligned, corporate performance will be improved.
Also, all organizational-level decision making and planning relies on accurate measurement
of performance at the individual, team and organizational level. Thus, performance
management is complicated by expressly trying to create links between or trace the effects
of performance across different levels.
Changing levels: Team Performance Appraisal and Management:
One possible way to move up to firm-level performance is to work through improving team-
level performance. Teams are groups of employees working together, typically defined by
interdependence of action, shared responsibility and meaningful goals. The nature of the
task and type of interdependence may impact what types of performance management will
be beneficial for the team. Managing team performance often involves not just focusing on
the team task and outcomes, but on team processes, including detrimental conflict and other
dysfunctional behavior that may affect task outcomes. The goal of team performance
management is to “make all team members accountable and to motivate them to have a
stake in team performance”. But, performance appraisal in team settings can be challenging,
depending upon the nature of the task, because it may be difficult to assess individual
contributions to the team outcome. This can lead to social loafing, which occurs when some
team members do not put forth as much effort in the group as they would if they were
working alone, resulting in team performance being lower than it should be.
Even when both team- and individual-level performance can be assessed, it may be difficult
to establish effective goals and to compensate team members. Evidence shows that group
goals help team performance, but individual goals are only beneficial for group performance
when they are specifically directed at maximizing individual contribution to the team’s
performance. In terms of compensation, mixed individual and group incentives may produce
faster, but less accurate, performance and undermine backing-up behavior, when compared
to group-based incentives only.
Furthermore, training may be more complicated for employees embedded in teams, as they
may require more interpersonal skills training and may benefit from self-correction training,
which encourages team members to correct each other and provide performance feedback
,to each other on an ongoing basis. There probably needs to be a high level of psychological
safety and low relational conflict for this to work.
Yet, despite these issues and difficulties, there has been progress in understanding how to
leverage individual performance up to the level of the team. A great deal depends upon the
nature of the work environment, but there have been efforts to explain and predict
relationships between individual and team-level performance.
Where We Are Today:
The field has moved from a concern primarily with performance appraisal and improving
rating accuracy, to a greater concern with performance management. After decades of
research on performance appraisal and performance management, we have learned a lot
about appraising and even improving individual performance at work, and we even have
some knowledge of how to improve team performance. But, we almost know nothing about
how to leverage changes in individual performance up to the level of the firm.
HR Practices and Firm Performance
Initially, the major interest had been in demonstrating how using valid selection techniques
could improve the performance of members of a work group. In the 1950’s they began with
answering the question of what the criterion should measure stating that “the criterions
should measure the contribution of the individual to the overall efficiency of the organization”.
In the early 90’s, a number of papers appeared where the authors argued that HR practices
should form a basis for competitive advantage, as long as those practices were aligned with
firm strategy. Specifically, Huselid (1995) demonstrated a significant relationship between
the application of a series of HR “best practices” and several measures of firm performance,
such as turnover, productivity and several measures of corporate financial performance.
Eventually two views emerged from this line of research. The first is the HPWS approach,
which argues that there are “best practices” which, when implemented, will improve firm
performance. There was disagreement, however, about exactly which practices make up a
HPWS. Eventually, they came to nine categories of HPWS: compensation and benefits, job
and work design, training and development, recruiting and selection, employee relations,
communication, performance appraisal and management, promotions, turnover, retentions,
and exit management.
The second approach is concerned with the “fit” between HR practices and strategy. That is,
a firm must align its HR practices with each other AND with its strategic goals in order for
there to be an effect on firm performance.
In related vein, some researchers attempted to decompose firm profitability into factors due
to economic forces and those due to organizational forces. Economic factors focused on
things such as characteristics of the industry in which a firm competes, its relative position in
that industry, and firm size. Organizational factors focused on organizational climate.
Finally, two recent papers have taken a slightly different approach to studying HR systems.
They reported that the implementation of a HPWS was linked to “organizational
ambidexterity” defined as the ability of the organization to align its resources with present
demands in order to create value, and yet be flexible enough to adapt to changing
conditions. The authors reported that ambidexterity partially mediated the relationship
between HPWS and firm growth. Another article discussed the implementation of what they
termed as a “flexibility-oriented HRM system”, which they defined as using practices similar
to those usually associated with HPWS, but also emphasizing coordination and resource
flexibility.
, There are also some other studies that have related some HR practices to firm performance
outside of this line of research. For example organizational citizenship behavior (OCB),
which has been defined as “individual behavior that is discretionary, not directly or explicitly
recognized by the formal reward system, and that in the aggregate, promotes the effective
functioning of the organization”. Another example is contextual performance, which is
defined as the behavior that enhances or sustains the social, psychological or organizational
context of the system. Both of these behaviors being discussed go above and beyond the
job requirements and have the goal of enhancing effectiveness at some level.
There is however another model of performance management that has been able to produce
improvements at higher levels of analysis than the individual, but which relies less upon
traditional models of performance appraisal. The productivity measurement and
enhancement system (ProMES) which can improve organizational effectiveness, but is not
concerned with performance appraisal. Instead, ProMES is about motivation and how to
focus the efforts of work group members to exert effort on tasks that will increase
effectiveness. It focuses directly upon the workgroup.
It would seem that there is considerable evidence that HR practices are related to form
performance, but only when they are bundled. The evidence directly linking performance
appraisal or even performance management practices, to firm performance, on the other
hand, is quite limited. Thus what is required is an expanded view of PMSs which include
other HR practices beyond those typically associated with such systems.
Moving From “What” to “How”:
In order to effectively build upon the research on HPWS, it’s not enough to show that certain
bundles of HR practices impact firm performance – we must also understand how these
practices affect firm performance. Some papers have attempted to explain the underlying
processes. One paper found that HPWS were related to empowerment climate and
employee psychological empowerment, which related to performance. Another paper divided
HR practices into skill-enhancing, motivation-enhancing and opportunity-enhancing
practices. Most of the motivation-enhancing practices (compensation, incentives, benefits,
promotion and career development, and job security) could be considered aspects of PMS.
They found that the motivation-enhancing practices had direct effects on human capital,
employee motivation and financial performance, as well as indirect positive effects on
financial performance and operational outcomes (quality, innovation, productivity and
service). Thus, the results of this study would seem to suggest that HR practices may affect
firm performance primarily by improving various aspects of employee motivation. These
results seem consistent with the suggestions of some other study who suggested that the
specific HR practices employed should be related to the organizational context and strategy.
These practices, when bundled and implemented, should then affect organizational climate
as well as individual psychological climate – creating a “climate for performance” or
“performance climate”. Organizational climate can be defined as employees’ shared
perceptions of and the meaning attached to practices, policies and procedures in the
workplace and the behaviors they observe being supported, expected, and rewarded.
Performance climate is defined as that employees share the perception that firm-level
performance is important and that the organization’s policies are devoted to achieving that
goal.
But while climate refers to shared perceptions of practices and policies, corporate culture
refers to actual shared values, traditions, philosophy and policies of a corporation that
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