CHAPTER 11

EMPLOYEE PERFORMANCE
MANAGEMENT
THE OBJECTIVES OF THIS CHAPTER ARE TO:

1 Clarify the nature and purpose of performance management and

performance appraisal
2 Outline the characteristics of performance management systems
3 Explain the stages of a typical performance management system
4 Evaluate the impact of varying national contexts on performance
management
5 Evaluate the effectiveness of performance management systems in
improving individual and organisational performance
 Chapter 11  Employee performance management

Managing individual performance in organisations traditionally centred on assessing per-

formance and allocating reward, with effective performance seen as the result of the interac-
tion between individual ability and motivation. Nowadays, it is recognised that planning and
enabling performance have a critical effect on individual performance, with performance
goals and standards, appropriate resources, guidance and support from the individual’s
manager all being central. The words ‘performance management’ are sometimes used to
imply organisational targets, frameworks like the balanced scorecard, measurements and
metrics, with individual measures derived from these. Franco-Santos and Doherty (2017)
describe these as ‘directive’ systems and compare them to more ‘enabling’ systems focused
on softer developmental and motivational approaches to aligning the individual and the
organisation that equate to good management practice. We focus on these enabling systems
in this chapter, not least because Franco-Santos and Doherty (2017) demonstrate that these
have more positive outcomes for employees and then organisations. We begin by comparing
and contrasting performance appraisal and performance management systems, before out-
lining the characteristics of a typical performance management system. We then consider in
detail the component parts of performance management, drawing out their likely effective-
ness in a range of national contexts. Finally, we evaluate the effectiveness of performance
management systems in improving individual and thus organisational performance.

Performance management or performance

appraisal?

Performance appraisal systems have operated in many organisations since the 1950s and
are distinct from performance management systems, which have changed (and broadened)
the nature of performance appraisal. Here we compare and contrast performance manage-
ment and performance appraisal. Detailed definitions of each can be found in Aguinis
(2013) and Decramer et al. (2012).

Performance appraisal
Traditionally performance appraisal systems have provided a formalised process to review
employee performance. They are centrally designed, usually by the HR function, and
require each line manager to appraise the performance of staff, often in just one perfor-
mance review meeting a year. Elaborate forms are completed as a record of the process,
but these are not living documents. They are generally stored in the archives of the HR
department, and the issue of performance is often then neglected until the next round of
performance review meetings. But while performance appraisal has gradually been applied
to wider groups of employees, beyond managers and professionals, there are concerns
that appraisal systems are treated as an administrative exercise, are ineffective and do little
to improve the future performance of employees. Aguinis et al. (2011) present a detailed
discussion of the problems of performance appraisal.

Performance management systems

While many appraisal systems are still in existence and continue to be updated, perfor-
mance management systems are recommended as a better way to manage employee per-
formance. An appraisal/review process is incorporated into this but is distinct from a
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traditional appraisal system. We consider the performance appraisal interview later in the
context of either an appraisal or a performance management system (see Chapter 16).
Aguinis and Pierce (2008: 139) provide a useful definition of performance management,
stating that its essence is:
a continuous process of identifying, measuring, and developing the performance of indi-
viduals and teams and aligning performance with the strategic goals of the organisation.

A strategic approach is thus adopted in which there is an attempt to ensure that employee
efforts are directed to the achievement of organisational goals. Attention is paid to both
task and contextual performance. Contextual performance is often addressed via the
use of competencies (Hutchinson 2013) so that how something is achieved is as impor-
tant as the results themselves. In this way, organisations seek to ensure long-term sustain-
able performance rather than quick wins which may damage ongoing business
relationships. As we noted in the recruitment and selection chapters, values play an
increasingly prominent role in organisational processes and some organisations are
including them in their performance management systems (see this blog for an interest-
ing discussion https://7geese.com/how-to-integrate-core-values-into-your-performance-
management-process/). Employee development also becomes recognised as a key element
of performance management and the emphasis is on an ongoing cycle of performance
development. The system is line manager driven although, as Biron et al. (2011) note,
senior management have an important role is setting strategic direction.
Many organisations now claim to operate performance management systems and Biron
et al. (2011) present a detailed review of their uptake and application. Originally a private-
sector phenomenon, performance management has now spread to the public sector in
many countries in support of neo-liberal agendas which seek to operate sectors such as
health and education using business principles (e.g. Franco-Santos and Doherty 2017, Yu
et al. 2018). It is also a global phenomenon. Aguinis and Pierce (2008), for example, sug-
gest that over 90% of the multinational companies surveyed across 15 countries imple-
mented a performance management system and that this figure also reflects practice in
Australian companies. Emerging economies, such as Saudi Arabia (Al. Harbi et al. 2017),
are also recognising its importance. The majority of research into performance manage-
ment emanates, however, from a western context and understanding of how effective these
systems might be in other national contexts, while developing, is at an early stage (Wang
et al. 2017). We consider the implications of this throughout the chapter.
It is important to distinguish, as we have done here, between performance appraisal
and performance management systems. There has been much hype in recent years about
many large firms ‘abandoning’ performance management. We present discussion of this
in the following Window on Practice and suggest that it is in fact performance appraisal
that is being abandoned and that most firms will continue to operate systems of perfor-
mance management. Recent CIPD (2016a) research supports this point of view.

WINDOW ON PRACTICE
The death of performance management?
Many organisations have made prominent claims that they intend to abandon perfor-
mance management. Among these are Accenture, Google, GE, Netflix and Microsoft. This
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does not mean that these firms are not interested in managing employee performance.
Quite the opposite; many of them are moving towards more frequent and less formal
systems of discussing performance on the basis that these are likely to be more effective
in improving performance. The emphasis is on coaching and developing a feedback cul-
ture. As we discuss throughout this chapter, it is these dynamic processes that are funda-
mental to effective performance management rather than a static performance appraisal.
The death of performance management appears to be somewhat exaggerated.

Source: Adapted from https://hr-gazette.com/?s=abandoning+performance.

A view is emerging of performance management that centres on ‘dialogue’, ‘shared

understanding’, ‘agreement’ and ‘mutual commitment’, rather than rating for pay pur-
poses. To this end organisations are increasingly suggesting that employees take more
ownership of performance management and become involved in collecting self-assess-
ment evidence throughout the year (Trosten-Bloom et al. 2014). Many organisations do,
however, try to achieve both development and reward outcomes, which may undermine
the motivational outcomes of development-focused approaches that encourage time
spent with the line manager and two-way communication. Alternatively, where there is
a measurement focus, performance management is seen as judgemental, a chance to
assess and get rid of employees, emphasises control and getting more out of staff, raises
false expectations and is a way to manage the salaries bill. Franco-Santos and Doherty
(2017) have found that employees are generally more supportive of performance manage-
ment systems when they are used for developmental rather than judgmental purposes.
We summarise the characteristics of performance management systems discussed in
this section in Table 11.1.
In summary, performance management, as opposed to performance appraisal, provides
strategic links to organisational objectives, provides ongoing feedback to improve perfor-
mance and is a continuous process driven by management, rather than an annual event
owned by HR. In this chapter, we discuss performance management systems. We use the
term ‘performance appraisal’ to denote the review of performance comprised within these
systems, not to describe traditional performance appraisal systems.

Table 11.1 Characteristics of performance management systems

• Top-down link between business objectives and individual objectives (compared with performance
appraisal where there may be no objectives, or objectives not explicitly linked to business objectives)

• Line manager driven and owned (rather than being owned by the HR function, as typically with
performance appraisal)

• A living document where performance and development plans, support and ongoing review are
documented as work progresses, and prior to annual review (rather than an archived document
retrieved at appraisal time to compare achievement with intentions)

• Performance is rewarded and reinforced

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ACTIVITY 11.1
Think of the performance appraisal or performance management system at
your place of work or an organisation that you are familiar with.

1 To what extent does it focus on development and to what extent does it focus
on reward?
2 How, and how well, are each of these purposes achieved? Explain why this is.
3 What would you do to improve the system, and what impacts would these
actions have?

Theoretical bases of performance management

The conceptual foundation of performance management relies on a view that perfor-

mance is more than ability and motivation. It is argued that clarity of goals is key in
enabling the employee to understand what is expected and the order of priorities. In addi-
tion, goals themselves are seen to provide motivation. This is based on goal-setting theory
(Locke and Latham 2006) that suggests that for goals to be motivating they must be suf-
ficiently specific, challenging but not impossible, and participatively set. Also, the person
appraised needs feedback on future progress.
Expectancy theory provides a second theoretical base for performance management as
individuals will be motivated to act provided they expect to be able to achieve the goals
set, believe that achieving the goals will lead to other rewards and believe that the rewards
on offer are valued (Vroom 1964). Some performance management systems are develop-
ment driven and some are reward driven, although Hendry et al. (2000) use expectancy
theory to demonstrate the difficulties of reward-based systems. Linking performance
management to reward was at one stage very common, but has decreased in popularity
in recent years (CIPD 2016a).
A final theoretical perspective that is emerging strongly in relation to performance manage-
ment and appraisal is that of organisational justice. In recent years there has been a stream
of papers that reinforce this (see e.g. Sharma et al. 2016, Rubin and Edwards 2018). The three
facets of organisational justice can be clearly linked to performance management:

• Procedural justice: this relates to the extent to which procedures are perceived to be fair and
requires performance management procedures to be transparent and robust.
• Distributive justice: this relates to the perceived fairness of the allocation of outcomes.
This is particularly important where performance management is linked to pay but is
also relevant in relation to training, promotion and other similar outcomes of a per-
formance management system.
• Interactional justice: this relates to the perceived quality of interpersonal treatment
received and relates to performance appraisal but also to other interactions such as
coaching and feedback.
The growing weight of evidence indicates that these forms of justice need to be demon-
strated in order for performance management systems to achieve their potential in improv-
ing performance at both individual and organisational levels. For example, Sharma et al.
(2016) demonstrate that a system must be fair for employees to believe that it is effective
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and Rubin and Edward’s (2018) evidence suggests that delivery of interactional justice is
particularly important. This supports a theme that we develop throughout the chapter, that
is, the importance of relationships within an effective performance management system.

Performance management across national

contexts

As we noted above, almost all research into performance management has been conducted
in a western context and the implications for its effectiveness in other national contexts are
not well understood. Hofstede’s work on the dimensions of national culture informed early
attempts to explore these issues (see e.g. Fletcher and Perry 2001, Milliman et al. 2002) and
there is a growing body of research that both builds on this (Wang et al. 2017) and explores
other cultural influences such as Wasta in Arab countries (Al. Harbi et al. 2017) and guanxi
in China (Gu and Nolan 2017). It is now widely accepted that national context will influ-
ence the operation of all aspects of these systems from the content or aim of the appraisal
through objective setting to the review/appraisal stage, as well as influencing who provides
the feedback and the process or style used. We consider this in more detail in each of the
stages of the performance management process outlined below, providing an example of
contextual implications for performance review in the next Window on Practice.

WINDOW ON PRACTICE
Performance management in Saudi Arabia
Western approaches to performance management are premised on delivering formal,
objective processes. This is likely to conflict with aspects of other cultures. In Saudi Arabia,
for example, the influence of Wasta, which loosely translates as reliance upon social net-
works to achieve objectives, is at odds with an objective approach. Personal relations,
rather than individual performance, can influence performance evaluation, promotions
and reward. As globalisation proceeds, however, and aspects of practice across the world
become more similar, there is evidence that employees in Saudi Arabia are beginning to
turn away from Wasta and to seek processes that recognise their individual performance
and deliver fair outcomes rooted in organisational justice. It is early days, but it may be
that we are seeing a convergence of practice across different national contexts.

Source: adapted from Al. Harbi et al. (2017).

Stages in a performance management system

Figure 11.1 shows a typical performance management system. The system is cyclical: it

starts by defining the organisation/work group objectives and then moves to translate
these into individual-level objectives and to specify the development required to achieve

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Definition of business role

Job description
Objectives of dept/group

Formal assessment and reward Planning performance

Annual assessment Individual objectives
Link to pay Development plans

Figure 11.1
Stages of a typical
Delivering and monitoring
performance Ongoing manager support
management Ongoing review
system

these. Performance is then delivered by the individual and monitored by the manager: this
is the most important stage of the continuous cycle of performance management in which
coaching may take place and ongoing feedback is provided. Indeed, a growing body of
research demonstrates the critical role of the line manager in the performance manage-
ment process (e.g. Van Waeyenberg and Decramer 2018) and its likely failure where line
managers lack the necessary skills or commitment to the process. Finally there is an assess-
ment of performance and (where appropriate) a link to reward before the cycle begins
again. The main stages of the cycle are discussed in more detail below.

Business mission, values, objectives and competencies

There is an assumption that before planning and managing individual performance, the
organisation will have made significant steps in identifying the performance required of
the organisation as a whole. In most cases, this will involve a mission statement so that
performance is seen within the context of an overriding theme. In addition, many organ-
isations will identify the strategic business objectives that are required within the current
business context to be competitive and that align with the organisation’s mission state-
ment. The efforts of senior management here are crucial to an effective performance
management system that underpins organisational strategy (Biron et al. 2011).
Many organisations will also identify core values of the business and the key competen-
cies required. Each of these has a potential role in managing individual performance.
Organisational objectives are particularly important, as it is common for such objectives
to be cascaded down the organisation in order to ensure that individual objectives con-
tribute to their achievement (for an example of an objective-setting cascade, see
Figure 11.2). The cascade of strategic objectives is often, however, weak (Decramer et al.
2012), which may relate in part to the emergent, rather than rational, nature of organisa-
tional strategy.

Planning performance: a shared view of expected performance

Individual objectives derived from team objectives and an agreed job description can be
jointly devised by manager and employee. These are important in ensuring that employees
understand the required performance standards and can work effectively and build favour-
ably on the feedback they receive (Pichler et al. 2018).
Objectives should be outcome/results orientated rather than task orientated, tightly
defined and include measures to be assessed. The objectives are designed to stretch the

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Board level

Functional level

Department level

Team level

Individual level

Key

Direction of objectives cascading down

Figure 11.2 the organisation.
An objective- Direction of feedback going up the organisation
setting cascade in the process of agreeing objectives.

individual, and offer potential development as well as meeting business needs. It is helpful
to both the organisation and the individual if objectives are prioritised. Many organisa-
tions use the ‘SMART’ acronym for describing individual objectives or targets:

• Specific
• Measurable
• Appropriate
• Relevant
• Timebound.
It is clearly easier for some parts of the organisation than others to set targets. There is
often a tendency for those in technical jobs, such as computer systems development, to
identify purely technical targets, reflecting the heavy task emphasis they see in their jobs.
Moving staff to a different view of how their personal objectives contribute to team and
organisational objectives is an important part of the performance management process.
An objective for a team leader in systems development could be:
To complete development interviews with all team members by end of July 2020 (written
March 2020).

Clearly, the timescale for each objective will need to reflect the content of the objective
and not timescales set into the performance management system. As objectives are met,
managers and their staff need to have a brief review meeting to look at progress in all
objectives and decide what other objectives should be added, changed or deleted. Five or
six ongoing objectives are generally sufficient for one individual to work on at any time.
A mix of objectives about new developments and changes as well as routine aspects of the
job is generally considered to be appropriate. Ongoing research continues to demonstrate
the importance of setting effective objectives to good performance (Zhang et al. 2018)
Difficulties have, however, been experienced with purely results-focused objectives (the
‘what’) as there may be both appropriate and inappropriate ways of achieving an objec-
tive. For example, a manager with an objective to ensure that another department agrees

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to a plan of action could achieve this in different ways. The manager may pressure the
other department and force agreement through. This may alienate that department and
damage future good relations. For this reason, it is recommended that organisations also
set behavioural objectives, usually in the form of competencies, as to ‘how’ results are to
be achieved (Hutchinson 2013). The requirement to display teamwork in achieving results
might, for example, prevent the inappropriate behaviour described in the previous exam-
ple. The use of competencies also supports a softer, developmental approach to perfor-
mance management as opposed to a harder, target-driven approach. Further, it allows
employees to achieve goals, even where they have relatively little influence over results and
emphasising these developmental aspects has been shown to be effective in improving
employee performance (Tuytens and Devos 2012). However, CIPD (2016b) research dem-
onstrates that many performance management systems are not as developmentally focused
as claimed. Dewettinck and van Dijk (2012) also argue that results are typically empha-
sised over development.
Objectives may also be set at the team rather than individual level (Aguinis and Pierce
2008). However, despite the claimed importance of teamworking, very few organisations
operate a team system. Supporting team and individual performance is a critical balancing
act as there can be conflicts built into performance management activity causing employ-
ees’ pursuit of individual objectives to damage the performance of the team they are in,
and vice versa. Team objectives, however, might experience difficulties in the form of peer
pressure and social loafing (see e.g. Clark 2005). Peer pressure can be experienced by an
individual, such as, for example, the pressure not to take time off work when feeling ill,
as this may damage the achievement of objectives; or pressure to work faster, make fewer
mistakes and so on. Social loafing occurs in a situation where one or more team members
rely on the others to put in extra effort to achieve objectives, to cover for their own lack
of effort. It works when some members are known to be conscientious or competitive or
to care deeply about the rewards available, and there are others who are likely to be less
concerned and who know the conscientious team members will make sure by their own
efforts that the objectives are achieved. Van Vijfeijken et al. (2006) provide a helpful discus-
sion of managing the performance of teams. Typically, research into objective setting even
for teams presumes a traditional line manager/employee relationship. Increasingly, how-
ever, organisations operate via project management teams and the implications of this for
performance management are outlined in the following Window on Practice.

WINDOW ON PRACTICE
Managing performance for project-based workers
Project-based working introduces a high degree of complexity into performance manage-
ment processes. An employee will be assigned to one-line manager, but may then report
to several project managers across the course of a performance review cycle. This raises
questions as to who sets objectives, who reviews them and how tensions across these
objectives are addressed. Often, the responsibility for managing processes falls to the
employee themselves, as opposed to the line manager in more traditional structures. The
line manager may be too distant to set objectives and comment on their execution, but
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input from project managers is often variable and inconsistent. Further, the employee may
not ask for their input and, despite having relevant insight, this may not be included, which
can skew the assessment of performance. HR may need to adapt processes to work more
with the employee, rather than the line manager, in how to manage performance pro-
cesses in these circumstances. Training for project managers is also likely to be needed. It
will be important to continually review how effective performance management processes
designed for a traditional organisational structure are in developing organisational forms.

Source: adapted from Keegan and Den Hartog (2018).

Whether at team or individual level, establishing a shared view of performance is

essential: handing out a job description or list of objectives/competencies to the employee
is not adequate. Performance expectations need to be understood and, where possible,
to involve a contribution from the employee. For example, although key accountabilities
may be fixed by the manager, they will need to be discussed and the competencies
required to achieve them identified. Planning the support, development (usually in the
form of a personal development plan) and resources necessary for employees to achieve
their objectives is imperative. A key benefit of performance management is that it directs
training and development resources efficiently (Aguinis and Pierce 2008). Without this
support it is unlikely that even the most determined employees will achieve the perfor-
mance required.
Objective setting is not, however, a straightforward process. SMART targets can be
problematic if they are not constantly reviewed and updated, although this is a time-
consuming process. Kuvaas et al. (2016) also demonstrate the need for flexibility and
autonomy, as where employees feel that goals cannot be changed, performance is reduced.
Pre-set objectives can be a constraining factor in such a rapidly changing business context,
and they remind us of the trap of setting measurable targets, precisely because they are
measurable and satisfy the system, rather than because they are most important to the
organisation. A further concern with SMART targets is that they inevitably have a short-
term focus, yet what is most important to the organisation is developments that are com-
plex and longer term, which are very difficult to pin down to short-term targets. In this
context, systems which also focus on the development of competencies will add greater
value in the longer term. There is, however, a long way to go to describe performance
adequately and define what is really required for organisational success.
National context may also create challenges for the use of objectives and competencies.
For example, we have argued that objective setting should be a joint activity between
supervisor and employee. This notion of participation is, however, a western concept that
does not translate well into countries where supervisors are expected to direct employees
what to do and to assign them goals. This respect for hierarchy is typically found in China
where goals have to be both assigned and easily attainable, to avoid loss of face if not
achieved (Wang et al. 2017). Chinese firms have also been shown to evaluate moral and
ideological behaviour, rather than task achievement, and in Indian workplaces

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personalised relationships are often privileged over the accomplishment of job objectives
(Gupta and Kumar 2013). Much fuller understanding of the implications of these contexts
for performance management is required, particularly as recent research in both Saudi
Arabia (Al. Harbi et al. 2017) and China (Gu and Nolan 2017) has demonstrated that once
well-recognised cultural values are changing as globalisation develops.

Delivering and monitoring performance

While the employee is working to achieve the performance agreed, the manager retains a
key enabling role. Organising the resources and off-job training is clearly essential. So too
is being accessible. There may well be unforeseen barriers to the agreed performance that
the manager needs to deal with, and sometimes the situation will demand that the
expected performance needs to be revised. The employee may want to sound out possible
courses of action with the manager before proceeding, or may require further informa-
tion. Sharing ‘inside’ information that will affect the employee’s performance is often a
key need, although it is also something that managers find difficult, especially with sensi-
tive information. Managers can identify information sources and other people who may
be helpful.
Ongoing coaching during the task is especially important as managers guide employees
through discussion and by constructive feedback. Managers can refer to practical job
experiences to develop the critical skills and competencies that the employee needs, and
can provide job-related opportunities for practice. Managers can identify potential role
models to employees, help to explain how high achievers perform so well, and oil the
organisational wheels. Coaching is an opportunity to both seek and deliver feedback –
essential as feedback has been demonstrated to improve job performance, increase job
satisfaction and discretionary behaviour and reduce intention to quit (Krasman 2013).
Russo et al. (2017) also found that those who coached were seen as more trustworthy,
particularly by older employees. This raises an interesting point about how performance
management processes may need to be sufficiently flexible to cope with an age-diverse
workforce.

ACTIVITY 11.2
Think of any organisation in which you have had some involvement:

1 How has individual performance been supported?

2 How effective was/is this?
3 How would you improve the way in which performance was/is supported?

Employees carry out ongoing reviews to plan their work and priorities and also to
advise the manager well in advance if the agreed performance will not be delivered by the
agreed dates. Joint employee/manager review ensures that information is shared. For
example, a manager needs to be kept up to date on employee progress, while the employee
needs to be kept up to date on organisation changes that have an impact on the agreed
objectives. Both need to share perceptions of how the other is doing in their role, and what
they could do that would be more helpful.

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These reviews are normally informal, although a few notes may be taken of progress
made and actions agreed. They need not be part of any formal system and therefore can
take place when the job or the individuals involved demand, and not according to a pre-set
schedule. The review is to facilitate future employee performance, providing an opportu-
nity for the manager to confirm that the employee is ‘on the right track’, redirecting him
or her if necessary. The review thus provides a forum for employee reward in terms of
recognition of progress. A ‘well done’ or an objective signed off as completed can enhance
the motivation to perform well in the future. During this period evidence collection is also
important to support ongoing assessment. Employees are expected to build up a portfolio
of evidence of their performance over the period to increase the objectivity of reviews and
to provide an audit trail to back up any assessment ratings. A developmental approach to
performance may, however, be problematic in some national contexts. In countries such
as China and Russia, for example, development through feedback may not be successful
as managers are more likely to be reluctant to engage in two-way communication and the
offer of direct feedback is not culturally acceptable (Fletcher and Perry 2001).

Formal performance review/appraisal

Regular formal reviews (perhaps once or twice each year) are required. A well-designed
system will measure the extent to which set (ideally agreed) objectives have been met. When
a competency profile has been identified for a particular job, it is also possible to use this
in the appraisal of performance. Many systems combine competency assessment with
assessment against objectives or job accountabilities. In many organisations, employees
are invited to assess their own performance and prepare an initial draft of their achieve-
ments. Performance measures may be either quantitative or qualitative. Qualitative
appraisal is often an unstructured narrative on the general performance of the appraisee,
although some guidance might be given about the areas on which the appraiser should
comment. The problem with qualitative appraisals is that they may leave important areas
unappraised, and that they are not suitable for comparison purposes. When using quantita-
tive measures, it is common to use a Likert scale to rate performance with either numbers
or letters. These ratings can be contentious as, despite being seemingly objective they can
be subject to bias and are often resented by employees. Bizzi (2018), for example, showed
that better networked employees tend to get higher ratings and Bernandin et al. (2016) that
less competent managers give higher ratings. Low levels of system formalisation can also
lead to increased bias (Bonet et al. 2019). Further, some organisations have overall assess-
ment ratings which have to conform to a forced distribution, requiring each team/depart-
ment to have, say, 10% of employees on the top point 20% on the next point, and so on,
so that each individual is assessed relative to others rather than being given an absolute
rating. These systems are not popular: Chattopadhayay and Ghosh (2012) present a
detailed review of their problems, suggesting that they create employee dissatisfaction and
lead to high labour turnover. These authors propose using an employee’s relative position
within his or her work group to improve the effectiveness of forced distribution systems.
Other approaches include behaviourally anchored rating scales (BARS) and behavioural
observation scales (BOS), which are specific methods of linking ratings with behaviour at
work, although evidence suggests that these are not widely used. An increasing trend in
the UK is to what is known as ‘rank and yank’, where the bottom (say) 10% of performers
in any year are exited from the organisation. This creates many difficulties for the employ-
ment relationship, not least with employee perceptions of the fairness of the performance
management system. We consider an example of this in the Window on Practice.
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WINDOW ON PRACTICE
Tax officials to strike over HMRC ‘must improve’ employee appraisals
HMRC staff have taken industrial action over proposals for a new performance manage-
ment system which forces managers to identify 10% of staff as underperforming. Manag-
ers who fail to do this will themselves be marked as underperforming.
Initially, this group will be supported to improve performance but there are con-
cerns that these ratings could affect pay rises and ultimately lead to job losses. There will
be no appeals process, leading to concerns over the fairness of the system and lack of
recourse to support if an employee feels wrongly rated.

Source: Summarised from http://www.theguardian.com/politics/2014/feb/04/

senior-tax-officials-strike-hmrc-employee-appraisals.

Performance may also be appraised by collecting primary data via various forms of
electronic surveillance system. There are increasing examples of how activity rates of
computer operators can be tracked and analysed, and how the calls made by telephone
sales staff can be recorded and analysed. On another level, some companies test the per-
formance of their sales staff by sending in assessors acting in the role of customer, often
termed ‘mystery shoppers’. Other organisations encourage employees to give upwards
feedback to their managers at this point in the cycle. Further details of this stage in the
process will be presented later (see Chapter 12).
One particular form of review/appraisal is 360-degree feedback, which is a very specific
term used to refer to multi-rater feedback. It is increasingly being used within perfor-
mance management systems and as a separate development activity. This approach to
feedback refers to the use of the whole range of sources from which feedback can be
collected about any individual. Feedback is collected from every angle on the way that
the individual carries out his or her job: from immediate line manager, peers, subordi-
nates, more senior managers, internal customers, external customers and from individuals
themselves. It is argued that this breadth provides better feedback than relying on the line
manager alone, who will only be able to observe the individual in a limited range of situ-
ations. It also provides a better way to capture the complexities of performance and
individuals will find feedback from peers and subordinates compelling and more valid.
Space here precludes a detailed discussion of 360-degree feedback and you can find this
in Torrington et al. (2008).
Performance review/appraisal attracts perhaps most criticism of any aspect of a per-
formance management system. Its effectiveness hinges on a range of different factors and
there is an increasing body of evidence that strong working relationships are needed for
its success (Cappelli and Conyon 2018, Meinecke et al. 2017). Common problems include
unclear objectives, inconsistent ratings, lack of feedback, poor preparation for the meeting
and lack of development opportunities. Aguinis and Pierce (2008) have also found that
many employees are dissatisfied with the level of feedback and frequency of performance
review. Informal reviews that are more frequent may thus be more effective (Dewettinck
and van Dijk 2012). Fairness and trust in supervisors are thus essential to an effective

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appraisal (Byrne et al. 2012) and to fostering employee participation (Dewettinck and van
Dijk 2012). Subjectivity is, however, hard to avoid and may explain managers’ reluctance
to undertake appraisals (Neu Moren 2013).
National context also has substantial implications for performance review. The empha-
sis on relationships in India, for example, leads managers to rate all employees at a similar
standard (Gupta and Kumar 2013) and direct criticism is unacceptable in cultures such as
China where importance is attached to saving face (Wang et al. 2017). Milliman et al.’s
(2002) study of performance appraisal in ten countries across the Pacific Rim found that
cultural difference impacted on its purpose. Some used it primarily for development while
others emphasised its judgmental/reward functions. Shen (2004) supports this, arguing
that Chinese firms use performance review to drive pay, whereas Western firms tend to
focus on its developmental aspects.

ACTIVITY 11.3
Think of any organisation in which you have had some involvement:

1 How has individual performance been measured and rated?

2 What impact has this had?
3 Would you recommend qualitative or quantitative descriptions of
performance?

Reward
Performance management systems, and performance review/appraisal in particular, can
be used to allocate reward. This can be both financial and non-financial reward, although
much of the debate centres around financial reward. It is not difficult to understand why.
Performance management systems are effective and relatively uncontentious in supporting
non-financial rewards such as training and development, quality of working life and strong
supervisor/employee relationships. The allocation of financial reward is much more con-
tentious (Aguinis and Pierce 2008). Many performance management systems still include
a link with pay, although this is reducing in popularity and staff almost universally dislike
the link. Many authors, for example Trosten-Bloom et al. (2014), recommend linking per-
formance to team or organisation reward to avoid many of the difficulties of linking it to
individual reward. Recently, however, Kampkötter (2017) has argued that performance
review linked to monetary outcomes increase job satisfaction and this is a field where
debate continues.

Performance management: does it improve

performance?

Although the practitioner literature somewhat uncritically accepts that effective perfor-
mance management systems improve individual and organisational performance, the
findings of academic research have been more mixed (e.g. Thursfield and Grayley 2016).

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This might, in part, derive from the failure of many organisations to evaluate their
performance management systems. Houldsworth and Jirasinghe (2006) report that the
majority of organisations rated their performance management effectiveness as excel-
lent, yet it is not clear how effectiveness was measured. Similarly, research on the HR/
performance link has included performance management in the bundle of HR practices
that are associated with improved organisational performance. Some studies on perfor-
mance management itself have been similarly promising. For example, it has been dem-
onstrated that over half of organisations with formal performance management systems
have better financial outcomes than those without and over 40% have better outcomes
in respect of customer satisfaction and employee retention (Yu et al. 2008). Decramer
et al. (2012) have also reported positive outcomes within higher education systems and
(Yu et al. 2018) evidence positive relationships between performance management and
individual/organisational performance. Yet other research has been much more pessi-
mistic. Haines and St-Onge (2012) found no improvement in performance in 80–90%
of cases and Pulakos et al. (2008) found similar results for around a third of organisa-
tions in their study. CIPD (2016a) also notes the mixed success of performance manage-
ment systems. Further research is clearly needed but to achieve potential
benefits, robust systems that are well implemented are essential. We consider below
some of the key requirements, together with some of the criticisms of performance
management systems.
Performance management must have credibility with employees, particularly in terms
of fairness and accuracy, to be effective (Sharma et al. 2016). It must also be line rather
than HR driven. The incorporation of line managers alongside HR managers in a work-
ing party to develop the system is important as it not only takes account of the needs of
the line in the system design, but also demonstrates that the system is line led. Recent
evidence is unequivocal that line manager buy in and delivery is fundamental to an effec-
tive system (Dewettinck and Vroonen 2017, Van Waeyenberg and Decramer 2018). Train-
ing in the introduction and use of the system should also be line led. Unsurprisingly,
some researchers have found that line managers are the weak link in the system (Tuytens
and Devos 2012) and training is rarely provided (Biron et al. 2011). Difficulties can arise
in many forms. Redman et al. (2000) found incomplete take-up of performance manage-
ment, with some aspects being adopted and not others. They noted that there was a
general lack of integration. This is rather unfortunate as one of the key advantages of
performance management is the capacity for integration of activities concerned with
the management of individual performance. Performance management also seems to
suffer from the same problems as traditional appraisal systems. Armstrong and Baron
(2005) report, for example, that employees feel that managers give their best ratings to
people that they like. A further problem with performance management systems is the
lack of clarity of purpose and they may be expected to deliver in too many areas. Systems
may focus on development, identifying future potential, reward, identifying poor per-
formers, or motivation. Many systems try to encompass both developmental and judge-
mental approaches. Although it is recommended that a primarily developmental
approach is adopted, many managers still predominantly perceive the primary purpose
of the performance management process to be performance evaluation and control
(Dewettinck and van Dijk 2012). Blackman et al. (2018) also argue that too many sys-
tems are passing fads and that, to be effective, they have to be operated as part of the
organisation’s core business.

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More fundamentally, some argue that the problems are not simply related to poor
design or implementation of performance management systems, but rooted deeply in the
basic reaction of organisational members to performance management. In the critical
literature, debates on the role and theory of appraisal centre on the underlying reasons
for appraisal (see e.g. Townley 1993, Newton and Findlay 1996). These are radical cri-
tiques which posit that performance management systems are an abuse of power and
create exploitation and work intensification. These are powerful criticisms which have
been recently built upon by Neu Moren (2013) in her challenge to the basis of performance
appraisal and the need to view it as a social practice.

SUMMARY PROPOSITIONS

11.1. Employee performance management systems incorporate appraisal activity, but

include other aspects such as a link to organisational objectives and competency
frameworks, an emphasis on ongoing review, motivation, coaching and support,
and reinforcement/reward for performance achieved.
11.2. There is a conflict in many appraisal and performance management systems as
managers frequently have a dual role as assessor and developer.
11.3. Current trends in sophisticated performance management activity include greater
employee ownership, emphasis on the ‘how’ as well as the ‘what’, emphasis on
evidence collection from both manager and employee, and upwards feedback to
the line manager as well as downwards feedback to the employee.
11.4. Most employee performance management systems focus on the individual, but
there is a need to ensure that team contributions are not neglected and more
importantly that team and individual goals do not conflict.
11.5. Performance management systems are generally believed to improve performance
but research evidence is mixed.
11.6. The impact of national context on performance management processes is poorly
understood and further research is required.

GENERAL DISCUSSION TOPICS

1. In what ways is the concept of performance management different from the way in
which appraisal has been traditionally practised? What are the advantages and dis-
advantages for employees and employers?
2. Critics argue that, rather than being focused on development and improvement,
performance management systems are a form of employee control that create work
intensification. How would you respond to this criticism?

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THEORY INTO PRACTICE

Contextualising performance management in Chinese public sector

organisations
Wang et al. (2017) explore the use of performance management, a western-based HRM practice,
to manage employee performance in a Chinese public sector organisation (PSO). Their analysis
is interesting as it includes cultural, political and institutional influences. It demonstrates organ-
isational and managerial impacts on performance management but goes much wider to evi-
dence how institutional factors, such as employment legislation, enable discrimination in relation
to both age and gender. Culturally, it demonstrates that Confucianism (religion), national politics
and ancient systems of deference all impact on the operation of performance management
systems. For example, the respect afforded to senior people makes the giving and receiving of
feedback difficult, as do cultural norms, which frown on discussing others. Similarly, guanxi, a
reliance on personal social networks, means that favouritism can dominate in performance man-
agement and this is problematic for organisational justice, which has been identified as central
to an effective performance management system. The research also demonstrates that vague
performance criteria are applied and appraisals place greater reliance on moral and/or political
character. Further, reliance on guanxi and social connections means that many with poor perfor-
mance are able to avoid penalty. Subjective rather than objective approaches clearly dominate.

Questions
1 What are the key contextual factors outlined here?
2 How do these factors make performance management processes more subjective than
objective?
3 To what extent do you think that this is likely to be problematic for the effectiveness of a
performance management system?

FURTHER READING
Hutchinson, S. (2013) Performance Management: Theory and Practice. London: CIPD.
This is a well-balanced textbook that effectively combines discussion of theory and practice across
the whole performance management process.

Denisi, A. and Murphy, K. (2017) ‘Performance appraisal and performance management: 100 years
of progress?’ Journal of Applied Psychology, Vol. 102, pp. 421–33.
This is a wide-ranging and comprenhensive review of performance management (and appraisal)
research over the past 100 years. It outlines a number of topics including: use of rating scales; criteria
for evaluating performance; training in using performance management systems; reactions to
appraisal and a number factors related to ratings including purpose, sources and demographic
differences.

CIPD (2016a) Could do better? Assessing what works in performance management. London: CIPD.
This report evaluates goal setting and performance appraisals, two core aspects of performance
management. It provides an in-depth and comprehensive review of the existing body of research to
identify the current body of knowledge in respect of these two issues and what is working effectively
and where development of practice is still needed.
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