Performance Management
Summary articles
Introduction & management control theory
Schraeder & Jordan (2011). Managing performance: A practical perspective on
managing employee performance.
Employees should be viewed as an investment, not an expense; employees' individual and collective
performances play a vital role in helping organizations achieve their overall institutional objectives.
Communication is becoming an increasingly important function of managers. Its importance is
reinforced further by its role related to managing employees' performance through channels such as
performance appraisals, informal feedback, coaching, training, setting goals, and facilitating employee
involvement / participation in key change initiatives. Communication can share the performance
expectations from both the manager and the employee. To manage employee performances, firms can
use different tools:
Performance appraisal: measuring and documenting employees’ performance. It is important
to evaluate its potential quality and effectiveness. The overall effectiveness can be improved by
defining key performance expectations in the job description.
Rewards (pay/benefits) and recognition: bonuses or other types of remuneration to influence
behaviour and performance. Non-monetary recognitions (e.g. compliments) can also be a
valuable tool to change behaviour. The most important thing is to select rewards that employees
will perceive as valuable.
Training: initiative to improve employees’ skills and abilities, and thus directly influence their
performance. Training can also indirectly influence performance, because employees may feel
that the organization values their contributions.
Access to resources: employees must have access to certain resources in order to be more
effective completing their tasks (e.g. software, financial resources).
Goal setting: they have an impact in motivation, driving to accomplish them. Employees should
take part in developing goals that are short, offer a challenge but are achievable, and have a
required timeframe.
Participation and empowerment: employees want to have a voice in factors directly related to
their work-lives (e.g. involved in setting goals, making decision). This gives employees the
feeling their values, opinions, and ideas are worthwhile.
Coaching and feedback: feedback is often provided in performance appraisals. To be effective,
feedback should be specific and related to the job task or job expectations.
The following approaches are used less frequently, but have advantages too:
Mentoring: process similar to coaching, but often not executed properly. While coaching focuses
more on improving skills and abilities, in mentoring a more experienced employee helps the
protégé to understand the organizational culture and how to develop her/himself within the
organization.
, Positive Organizational Behavior (POB): helping employees achieve maximum potential by
building on their strengths and positive attributes. Responding positively to employees can
improve employees’ morale and motivation. Communicating and behaving in a more positive
manner actually may improve performance
Innovative work design (flexibility and i-deals): allowing employees higher degrees of
flexibility and i-deals (unique working conditions tailored to the needs of individuals) to match
expectations better with the needs of employees.
Individual factors can influence performance as well, but it would be difficult, impractical, or
impossible to manage (e.g. personal traits). However, the following facets can be managed
Task/role specific performance: Feedback should be related to the specific task performed.
Define expectations clearly related to tasks in the job description and measure them on a regular
basis.
Extra role performance (Organizational Citizenship Behavior [OCB]): Well-developed job
descriptions should provide employees with a comprehensive framework outlining salient
performance and behavioural expectations. Extra role behavior however falls outside this
description, but do have a positive effect on organizations.
Willingness to adapt to change: The ability to successfully adapt to the dynamic environment
often depends on the efforts of employees. Allowing employees to participate in planning and
implementing a change, however, is a widely acclaimed approach for reducing resistance and
increasing support for changes. Moreover, their involvement reduces the need for training because
they are already aware of the changes
Innovation/Creativity: important to adapt to changing competitive circumstances. Remaining
competitive requires new products, improvement of services or modification of structures. Firms
should accept a certain amount of uncertainty and risk, allowing employees to make mistakes.
Ethical conduct: To become more legitimate, firms should include improve employees’ ethical
conducts (e.g. training in CSR).
Aguinis (2009). An Expanded View of Performance Management
Weakly implemented PM systems can do more harm than good, because they waste time, money and
resources. According to Aguinis, performance management 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”. There are six purpose why to implement a performance
management system:
1. Strategic purpose: PM system links the organization’s goals with individual goals, thereby
reinforcing behavior consistent with the attainment of organizational goals. Even if the
individual goals are not achieved, linking them to organizational goals still communicates
what are the most crucial business strategy initiatives.
2. Administrative purpose: PM system is a source of valid and useful information for making
administrative decisions about employees such as remunerations or salary increase. Without a
good PM system in place, administrative decisions are more likely to be based on biased
decisions, such as personal preferences or politics. For instance, a PRP system has an
administrative purpose.
, 3. Communication purpose: PM system informs employees how well they are doing, they
receive information how well they are doing, learn the supervisor’s expectations.
4. Developmental purpose: Feedback allows managers to coach employees and help them
improve performance on an on-going basis. This feedback allows for the identification of
strengths and weaknesses as well as the causes for performance deficiencies. However,
feedback is only useful when action is taken to remedy the deficiencies.
5. Organizational maintenance purpose: PM system yields information about the talent
inventory (skills, promotional potential), assessing future training needs, evaluating
performance achievements at the organizational level, and evaluating the effectiveness of
HRM interventions.
6. Documentation purpose: PM system yields data that can be used to assess the predictive
accuracy of newly proposed selection instruments, but also allows for documentation of
important administrative decisions, especially in case of litigation.
Most PM systems are under-utilized and do not serve all these six purposes. The two purposes that are
most common are administrative and developmental. Organizations with formal PM systems are 51
percent more likely to perform better than other and are 41 percent more likely to perform better than
regarding customer satisfaction and employee retention. The PM process
Stage 1 - Pre-requisites
Before a PM system is implemented, there has to be (1) knowledge of the organization’s mission and
strategic goals and (2) knowledge of the job in question. The organizational goals have to be clear,
otherwise each employee do not know what to do to help the organization get there. Furthermore, the
key components of a particular job (tasks, products, services, processes) should be analyzed;
otherwise we do not know what needs to be evaluated.
Stage 2 - Performance planning
Beforehand, the manager and employee meet to discuss what needs and should be done, regarding (1)
results: the outcomes an employee must produce but also the performance standard (quality, quantity,
cost, time), (2) behaviors (e.g. customer service, written or oral communication): applied when it is
difficult to establish precise result standards, and (3) development: areas that need to be improved,
including both results and behavior. Implications for improvement can come from the appraisal form.
The line manager plays an important role in the planning phase: what is required to achieve the
desired performance, determine development activities that help reach the goals, set achievable
development goals and finally motivates the employee to achieve the goals. 360-degree systems can
help managers in appraising the employees. This system gathers information anonymously from
different groups in order to get a better development plan.
Stage 3 - Performance execution
Producing results and displaying behaviors agreed on earlier and developing are the primary
responsibility of the employee. However, the supervisor have responsibilities: (1) observation and
documentation of performance, (2) update employees about changes in the initial goals, (3) give
feedback about the progression, (4) provide employees with resources to perform well, and (5)
reinforce outstanding performance and progress towards goals. Whether or not employees perform
depends on three factors: (1) declarative knowledge: information about facts (principles, goals); (2)
procedural knowledge: knowing what to do and how to do it and, (3) motivation: the choice to expend
