PRAISE FOR ARMSTRONG’S HANDBOOK OF
PERFORMANCE MANAGEMENT
I am an avid fan of Michael Armstrong’s handbooks and have used
them successfully with my CIPD classes for several years. This book
includes current debates on whether traditional performance
management systems add value to an organization and discusses in
depth the movement towards ‘performance leadership’. Armstrong has
included distinct sections on hot topics such as managing the
performance of home and international workers that my students at all
levels will find useful, particularly for the latest CIPD suite of courses. I
will be recommending this text to my students and predict that I will see
many references to it in their future assessments.
Dianne Johnson, CIPD Course Adviser, Watson Martin Ltd
The 7th edition confirms Michael Armstrong’s standing as the preeminent author in the performance management field for both HR
practitioners and business students. He relates evidence-based
analysis of performance management principles and processes to their
utilization by managers who wish to become ‘performance leaders’ in
today’s organizations. Armstrong identifies significant challenges to
traditional approaches to performance management, together with
ways of addressing these and evaluating performance management’s
enhanced contribution. The new chapter on managing the performance
of homeworkers is particularly welcome given the increased emphasis
on homeworking following the COVID-19 pandemic.
Dr John Simmons, Lecturer, Management School, University of
Liverpool
Armstrong's Handbook of Performance Management is both a
professional practitioner and academic toolkit, resourced with a
complete suite of comprehensive tools and techniques that managers
and leaders need in today’s business landscape. I am confident that any
student pursuing to acquire the competencies of a ‘performance leader’
will certainly experience the promises that the book seeks to achieve. It
is definitely a valuable book that will have a long tenure in the collection
of the successful leader.
Dr Stephen Tan, College of Arts, Business, Law and Social Sciences,
Murdoch Business School
Armstrong’s Handbook of
Performance Management
An Evidence-Based Guide to Performance
Leadership
Michael Armstrong
Seventh Edition
CONTENTS
Introduction
PART ONE
Performance management fundamentals
01 The meaning and nature of performance management
Introduction
Performance management defined
Performance management and performance
appraisal
The nature of performance management
The purpose and aims of performance
management
The impact of performance management
Performance management: the ethical dimension
The approach to managing performance
References
02 The conceptual framework of performance management
Introduction
The meaning of performance
The distribution of performance
Factors affecting individual performance
Underpinning theories
Performance management and the psychological
contract
References
03 Performance management systems
Introduction
Features of a performance management system
The reality of performance management
References
04 Performance management issues
Introduction
How well is performance management working?
What’s wrong with performance management?
The role of line managers
References
05 Performance management developments
Introduction
Performance management systems
Advantages and disadvantages of developments
References
PART TWO Performance management processes
06 Performance leadership
Introduction
What engaging managers do
The concept of performance leadership
Conclusion
References
07 Performance and development planning
Introduction
Performance and development planning – the
traditional approach
Defining roles
Defining objectives
Development planning
References
08 Assessing performance
Introduction
Performance analysis
Rating
Forced distribution and forced ranking
Narrative assessment
Visual methods of assessment
Conclusions
References
09 Conducting performance reviews
Introduction
The traditional performance review
Performance conversations
Strength-based assessment
References
10 Multi-source feedback
Introduction
360-degree feedback defined
The rationale for 360-degree feedback
Methodology
Advantages and disadvantages
Introducing 360-degree feedback
Crowdsourced feedback
References
PART THREE Performance management skills
11 Defining objectives
Introduction
The meaning of objectives
The conceptual background
Characteristics of an effective objective
The process of defining objectives
Strategic alignment
References
12 Providing feedback
Introduction
Feedback defined
The nature of feedback
Use of feedback
How effective is feedback?
Continuous feedback
Providing constructive feedback
An alternative approach – the ‘feedforward’
interview
Guidelines on providing feedback
References
13 Coaching
Introduction
Coaching defined
The process of coaching
Coaching skills
Developing a coaching culture
References
14 Managing underperformance
Introduction
The problem of underperformance
Approaches to managing underperformance
The five basic steps
Handling challenging conversations about
performance
Use of a capability procedure
References
PART FOUR
Applications of performance management
15 Managing organizational performance
Introduction
The process of managing organizational
performance
The strategic approach to managing organizational
performance
Business performance management systems
ProMES
Organizational capability
Performance management and human capital
management
Measuring performance
References
16 Managing team performance
Introduction
Agreeing performance objectives
Agreeing process objectives
Conducting team performance reviews
References
17 International performance management
Introduction
Performance management in the subsidiaries of
multinationals
Approaches to international performance
management
What happens in practice
International performance management in action
Performance management for expatriates
References
18 Managing the performance of homeworkers
Introduction
Policy
Clarifying expectations
Performance management processes
Guiding principles
References
19 Performance management and learning
Introduction
How learning is facilitated by performance
management
References
20 Performance management and talent management
Introduction
The process of talent management
Identifying talent
Identifying ability
Identifying potential
Developing talent
References
21 Performance management and reward
Introduction
Performance management and non-financial
rewards
Performance management and performance pay
Reconciling performance management and pay
References
22 Performance management and employee engagement
Introduction
What is employee engagement?
Why is engagement important?
What are the enablers of engagement?
What part is played by performance management?
How can an organization ensure that performance
management plays its part?
References
PART FIVE Managing performance management
23 Developing performance management
Introduction
Developing performance leadership
Developing performance management systems –
the choices
The development process
How to approach development
Advice on introducing performance management
The development programme
References
24 Learning about performance management
Introduction
Performance leadership development
Performance leadership development
programmes
References
25 Evaluating performance management
Introduction
Criteria for evaluation
Performance management audit
Improving the performance of performance
management – an eight-point plan
References
PART SIX Conclusions
26 Where is performance management today?
Introduction
References
Author index
Subject index
LIST OF FIGURES
FIGURE 1.1 Model of the HRM and performance relationship
from a performance management perspective
FIGURE 2.1 A normal curve of distribution
FIGURE 2.2 The power-law distribution
FIGURE 2.3 Expectancy-based motivational model for
performance
FIGURE 3.1 The performance management cycle
FIGURE 3.2 Model of the performance management system in
AstraZeneca
FIGURE 3.3 Model of the performance management system in
Halifax Bank
FIGURE 3.4 Model of the performance management system in
Pfizer Inc.
FIGURE 7.1 Example of a role profile
FIGURE 8.1 A three-level rating scheme
FIGURE 8.2 Forced distribution of ratings
FIGURE 8.3 Analytical narrative assessment framework
FIGURE 8.4 A performance matrix
FIGURE 8.5 Performance matrix in financial services company
FIGURE 8.6 Assessment and action matrix – Unilever
FIGURE 9.1 Performance management form (part 1)
FIGURE 9.2 Performance management form (part 2)
FIGURE 9.3 Features of effective performance and development
conversations
FIGURE 10.1 360-degree feedback
FIGURE 10.2 Example of 360-degree profile
FIGURE 11.1 Strategic alignment of goals
FIGURE 11.2 The balanced scorecard
FIGURE 15.1 A strategy map
FIGURE 15.2 The business performance planning cycle
FIGURE 15.3 Example of a dashboard
FIGURE 15.4 Example of dashboard with (1) dials, (2) traffic
lights, (3 and 4) graphs
FIGURE 15.5 Human capital reporting dashboard
FIGURE 17.1 International performance management system –
Standard Chartered Bank
FIGURE 20.1 Performance management as the foundation of
talent management at Cemex
FIGURE 20.2 Potential assessment
FIGURE 23.1 The performance management continuum
FIGURE 23.2 The performance management development
programme
FIGURE 23.3 General performance management questionnaire
FIGURE 23.4 Current performance management arrangements
questionnaire
FIGURE 25.1 Areas for performance management evaluation
FIGURE 25.2 A performance management questionnaire.
LIST OF TABLES
TABLE 1.1 What management and individuals can gain from
performance management
TABLE 5.1 Comparison of developments
TABLE 6.1 Example of competency profile for a performance
leader with positive and negative indicators
TABLE 10.1 360-degree feedback advantages and disadvantages
TABLE 23.1 Performance management system choices (part 1)
TABLE 23.2 Performance management system choices (part 2)
TABLE 23.3 Advice from practitioners on developing
performance management
Introduction
Performance management provides people with the support
and encouragement they need to enable them to carry out their
work effectively and to develop their skills and their career. Its
primary purpose is developmental. This means ensuring that
employees have the ability, motivation and opportunity to do
well in the present and even better in the future. Performance
management is forward-looking and is very much about
fostering the skills required to succeed. It is about managers
acting as performance leaders, not just as the operators of an
imposed system.
Focus on performance leadership
Throughout this handbook the emphasis is on performance
leadership – the role of the line manager as a performance
leader rather than someone who is expected to manage
performance in accordance with the requirements of a highly
formalized performance management system (a bureaucratic
approach to fixing ‘SMART’ objectives, conducting retrospective
performance reviews and rating performance using a laiddown set of dimensions imposed on managers and employees
by the organization). This sort of performance management is
characterized by Griffin and Ebert’s (2004: 216) definition of it
as: ‘The formal evaluation of an employee’s job performance in
order to determine the degree to which the employee is
performing effectively.’
Kevin Murphy in his seminal Human Resource Management
Journal article ‘Performance management will not die but it
should’ (2020: 26) ended it with the exhortation: ‘Stop
evaluating and start leading!’
Plan of the book
Part One: Performance management fundamentals
The first part of the book deals with the fundamental
characteristics of performance management: what it is, what it
aims to do and how it is supposed to work. Performance
management, whether formalized or not, operates within a
conceptual framework and this is covered in Chapter 2. The
features of a traditional performance management system in
the shape of a cycle of activities starting with a performance
agreement and concluding with a performance review is
described in Chapter 3. Performance management as applied
through performance appraisal or performance management
has been heavily criticized by commentators ever since
Douglas McGregor’s celebrated 1957 article in the Harvard
Business Review, ‘An uneasy look at performance appraisal’. In
2019 performance management was called by Ledford and
Benson ‘the human resources process most hated by
employees and managers alike’. The issues causing these
comments are analysed in Chapter 4 and recent developments
in response to them are discussed in Chapter 5.
Part Two: Performance management processes
The conclusion reached at the end of Part One is that the future
lies with the concept of performance leadership rather than
tinkering with the traditional features of a performance
management system. The initial chapter in Part Two therefore
describes this concept, which, as argued in a number of later
chapters, is the way ahead for performance management. The
next three chapters in this part cover the basic performance
management processes of planning, assessing and reviewing
performance. These all feature in traditional performance
management systems, but they also characterize the approach
adopted by performance leaders. The final chapter in this part
deals with multi-source feedback, often known as 360-degree
feedback as an adjunct to the usual one-to-one arrangement,
although not a particularly popular one.
Part Three: Performance management skills
This part deals with the skills used by managers when acting as
performance leaders or when administering a traditional
performance management system, namely defining objectives,
providing feedback, coaching, and managing underperformers.
Part Four: Applications of performance management
This part covers the many ways in which performance
leadership and performance management are applied – at
organizational and team level, managing homeworkers (a
particular requirement since the Covid-19 pandemic), at
international level and in various aspects of people
management, namely learning and development, talent
management, managing engagement and reward
management.
Part Five: Managing performance management
The key chapter in the handbook is the first one in this part. It
describes how all the ideas expressed earlier – especially new
ones such as performance leadership – can be put into practice.
The second and third chapters deal respectively with how
people can learn about performance leadership, and how the
whole process can be evaluated.
Part Six: Conclusions
The conclusion reached in the final chapter is that the future of
performance management lies in the cultivation of
performance leadership as advocated and justified throughout
the book.
References
Griffin, R and Ebert, R J (2004) Business Essentials Prentice Hall, London
Ledford, G E and Benson, C (2019) Ratingless Reviews, CEO Publications, Los Angeles
McGregor, D (1957) An uneasy look at performance appraisal, Harvard Business
Review, May–June, pp 89–94
Murphy, K R (2020) Performance management will not die but it should, Human
Resource Management Journal, 30 (1), pp 13–31
PART ONE
Performance management
fundamentals
01
The meaning and nature of
performance management
Introduction
Performance management has been described as ‘a broad set of
activities aimed at improving employee performance’ (DeNisi
and Pritchard, 2006: 255). This definition of the meaning of
performance management is expanded in the first section of
this chapter, which is followed by an explanation of the
difference between performance management and
performance appraisal. The next section explores the nature of
performance management as an informal process (what
managers do by acting as ‘performance leaders’), or as a formal
process (performance management systems). The chapter
continues with sections dealing with the purpose and aims of
performance management, its impact and the ethical
dimension. The chapter concludes with a brief review of the
performance management approaches that can be adopted.
The conceptual framework that influences the practice of
performance management is examined in the next chapter.
Performance management defined
Performance management is the process of improving
performance by setting individual and team goals that are
aligned to the strategic goals of the organization; planning
performance to achieve the goals; reviewing and assessing
progress; and developing the knowledge, skills and abilities of
people.
Here are some other definitions:
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. (Aguinis, 2005: 2)
Performance management is the system through which
organizations set work goals, determine performance
standards, assign and evaluate work, provide performance
feedback, determine training and development needs and
distribute rewards. (Briscoe and Claus, 2008: 17)
Performance management is the key process through
which work gets done. It’s how organizations
communicate expectations and drive behaviour to
achieve important goals; it’s also about how organizations
identify ineffective performers for development
programmes or other personnel actions. (Pulakos, 2009: 3)
Performance management is regarded as a continuous,
future-orientated and participative system; as an ongoing
cycle of criteria setting, monitoring, informal feedback
from supervisors and peers, formal multi-source
assessment, diagnosis and review, action planning and
developmental resourcing. (Shields, 2007: 22)
Performance management is a process consisting of
managerial behaviours aimed at defining, measuring,
motivating and developing the desired performance of
employees. (Kinicki et al, 2013: 1)
Performance management involves the setting of
corporate, departmental, team, and individual objectives;
the use of performance appraisal systems; appropriate
reward strategies and schemes; training and development
strategies and plans; feedback, communication and
coaching; individual career planning; mechanisms for
monitoring the effectiveness of the performance
management system and interventions and even culture
management. (Roberts, 2001: 506)
Performance management and performance
appraisal
Performance management should be distinguished from
performance appraisal. The two topics are clearly related, but
are not identical. The term ‘performance management’ arose
when scholars and practitioners began talking about
transforming performance appraisal from an event to a
process. DeNisi and Pritchard (2006: 254) describe performance
appraisal as:
a discrete, formal, organizationally sanctioned event, usually not
occurring more frequently than once or twice a year, which has clearly
stated performance dimensions and/or criteria that are used in the
evaluation process. Furthermore, it is an evaluation process, in that
quantitative scores are often assigned based on the judged level of the
employee’s job performance on the dimensions or criteria used, and the
scores are shared with the employee being evaluated. Measurement
issues are important for the performance appraisal process, as are
issues of rater motivation, so that effective appraisal systems are those
where the raters have the ability to measure employee performance
and the motivation to assign the most accurate ratings.
They point out that, in contrast, performance management is a
broad set of activities aimed at improving employee
performance and that the aim of performance appraisal should
be to provide information that will enable managers to do that.
In short, performance appraisal attempts to measure
performance while performance management aims to improve
performance. Performance appraisal functions as a subset of
performance management.
The nature of performance management
Performance management is about leadership and managing
the business. Managing performance is what line managers do
in their capacity as leaders. Performance management happens
informally as a natural process of leadership. It can also operate
formally as a performance management system – a set of
practices or activities that fit together and interact to guide
managers on how they should manage performance. A fully
developed system will include formal arrangements for
concluding performance agreements, setting objectives using
the ‘SMART’ formula (S = specific or stretching, M = measurable,
A = agreed, R = realistic and T = time-related), annual
performance reviews, evaluating performance through a rating
system and documenting the outcomes on a performance
management form.
Line managers as performance leaders clarify what their
team members are expected to do and achieve (set the
direction), ensure that their people have the skills and
resources required to get results, motivate them, secure their
engagement, monitor their progress, keep them informed of
how they are doing (feedback), develop their skills through
coaching, and see that corrective action is taken when
necessary. Performance leadership involves the use of
performance management skills and techniques such as
defining objectives, providing feedback and coaching. Managers
may exercise these skills when operating a formal performance
management system. Many organizations believe that a formal
system is essential, but it isn’t. A contextualized approach to
developing managers as performance leaders is a valid
alternative.
The purpose and aims of performance
management
As John Shields (2007: 24) put it: ‘A well-designed and wellaccepted performance management system can be said to have
a four-fold purpose: (1) strategic communication, (2)
relationship building, (3) employee development and (4)
employee evaluation.’
From the viewpoint of the organization, the fundamental
purpose of performance management is to further the
achievement of the organization’s strategic goals. But it also has
three specific purposes:
managerial – to provide a framework within which
managers can effectively manage performance;
developmental – to provide the basis for identifying and
meeting learning and development needs;
administrative – to provide the information required to
administer performance pay and talent management
systems.
Thus performance management can make a contribution to
strategic human resource management by helping to achieve
strategic alignment (the vertical integration of HR and business
strategies). DeNisi and Smith (2014: 144) emphasized that: ‘it is
important that every aspect of this broader performance
management system be directly aligned with the firm’s
strategic goals – this is related to defining what performance
means to the firm’. This is the process of ‘cascading’ goals, an
important aim of performance management, which involves
passing down and interpreting the fundamental strategic goals
of the organization through successive layers of management
to individual employees, and ensuring that everyone involved
understands the contribution they are expected to make to
their achievement.
But performance management also functions as part of a
process of horizontal integration when it is linked to other HR
practices (a process known as ‘bundling’), such as human
capital management, talent management, learning and
development and reward management, so that they are
interrelated and therefore complement and reinforce each
other.
A basic aim of performance management is to provide gains
for both management and individual employees, as shown in
Table 1.1.
Table 1.1 What management and individuals can
gain from performance management
Skip table
What management can gain
What individuals can gain
The opportunity to:
They will:
integrate individual, team and
corporate objectives;
guide individual and team effort
to meeting overall business
needs;
motivate and engage
employees;
recognise individual
contribution;
plan individual careers (talent
management);
introduce relevant and effective
learning and development
programmes to meet identified
needs.
know what is expected of them;
know where they stand;
know what they need to do to
achieve their objectives;
be given the opportunity to develop
their skills and careers;
be able to discuss with their
manager their present job, their
development and training needs and
their future.
Respondents to the 2014 e-reward survey of performance
management reported that their most important performance
management objective was to:
improve organizational performance – 33 per cent
align individual and organizational objectives – 22 per cent
develop a performance culture – 17 per cent
improve individual performance – 14 per cent
align individual behaviour to organizational values – 6 per
cent
provide the basis for personal development – 3 per cent
inform performance pay decisions – 3 per cent.
Note the low priority given to informing performance pay
decisions.
Here is a typical statement of objectives from one respondent
to the e-reward survey:
To support culture change by creating a performance culture and
reinforcing the values of the organization with an emphasis on the
importance of these in getting a balance between ‘what’ is delivered and
‘how’ it is delivered.
The Lloyds Banking Group produced this definition of the
purpose of its performance management system:
The purpose of performance management: Lloyds
Banking Group
The aim is to improve performance. Rather than just saying that somebody’s been very
effective and ticking a box, the process is actually to sit down and have a discussion
around the requirements of the role, dealing with what aspects are being done well and
what aspects are not so good. Overall the purpose is to make it clear to people how
their performance links in with the performance of the business.
Managing performance is about coaching, guiding, appraising, motivating and
rewarding colleagues to help unleash potential and improve organizational
performance. Where it works well it is built on excellent leadership and high quality
coaching relationships between managers and teams. Through all this our colleagues
should be able to answer three straightforward questions:
1.
What is expected of me? How will I be clear about what is expected of me in
terms of both results and behaviour?
2.
How am I doing? What ongoing coaching and feedback will I receive to tell me
how I am doing and how I can improve?
3.
What does it mean for me? How will my individual contribution, potential and
aspirations be recognized and rewarded?’
The following description of the purpose of performance
management was produced by Hitachi Europe:
The process is as much about building relationships with employees in
order to agree what is reasonably attainable in the year as it is about
setting objectives. It is effective because it focuses people’s intentions
and produces new thinking on the way they work rather than simply
continuing to perform at the same level day-in-day-out.
The impact of performance management
At organizational level performance management is expected
to improve performance by creating a performance culture in
which the achievement of high performance is a way of life. At
individual level it is supposed to improve performance by
indicating what good performance looks like; agreeing
performance goals; providing the basis for developing
knowledge, skills and abilities; identifying where performance
needs to improve and deciding on the steps required to achieve
that improvement through performance improvement plans,
personal development plans and coaching.
But establishing the impact of performance management on
organizational performance is problematic because of causality
issues. Determining the link between independent and
dependent variables (cause and effect) is a major problem.
Correlation does not imply causation. It may be relatively easy
to establish correlations in the shape of a demonstration that X
is associated with Y; it is much more difficult and sometimes
impossible to prove that X causes Y.
A major problem in establishing the extent to which
performance management affects organizational performance
is causal ambiguity. This refers to the numerous subtle and
often hidden interconnections between the factors influencing
cause and effect. Boselie et al (2005: 75) referred to the causal
distance between an HRM input and an output such as financial
performance: ‘Put simply, so many variables and events, both
internal and external, affect organizations that this direct
linkage strains credibility.’ A basic reason for ambiguity is
multiple causation, which exists when there is more than one
possible cause for an effect. Performance management may
have caused an improvement in performance but there may be
many other economic or business factors that contributed to
the improvement, and it could be difficult to unravel them.
Another factor is the possibility of reversed causality (a
situation where A might have caused B, but B might well have
caused A). As Purcell et al (2003: 2) express it: ‘Although it is
nice to believe that more HR practices leads to higher economic
return, it is just as possible that it is successful firms that can
afford more extensive (and expensive) HRM practices.’
This, plus contextual factors, increases the complexity of the
relationship between performance management and
organizational performance, as shown by the conceptual model
produced by den Hartog et al (2004: 562) shown in Figure 1.1.
Figure 1.1 Model of the HRM and performance
relationship from a performance management
perspective
SOURCE den Hartog et al (2004)
Figure 1.1 details
As Taylor et al (1995: 495) observed, performance management
systems constitute ‘a human resource management paradox
and their effectiveness an elusive goal’. Aguinis (2013: 2)
suggested that: ‘The lack of clear and compelling evidence for
the effectiveness of performance management… has given rise
to recent debates about whether or not formal performance
management is even necessary.’ Pulakos and O’Leary (2011:
146) stated that: ‘The formula for effective performance
management remains elusive.’ Haines and St-Onge (2012: 1171)
claimed that: ‘few studies support the many claims about the
actual contributions of various practices to the overall
effectiveness of project management systems’. And DeNisi and
Murphy (2017: 429) thought that: ‘It is not clear that
performance management will lead to more effective
organizations.’
Evidence from research into a direct link between
performance management and organizational performance is
meagre. One of the few instances is the research conducted by
McDonald and Smith (1991), which showed that companies that
had introduced performance management had made
significant gains over three years in financial performance and
productivity. But this looks like a classic case of reversed
causality. Performance management systems may have helped
to generate successful companies, but it is just as likely that the
successful companies were the ones with the inclination and
money to introduce sophisticated practices such as
performance management. Other projects (Rodgers and
Hunter, 1991; West et al, 2002; Kochanski, 2007) have
established correlation but not causation.
DeNisi and Smith (2014: 134) observed that: ‘most models of
performance management 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’. They commented (page 137):
‘The evidence directly linking performance appraisal, or even
performance management practices, to firm performance… is
quite limited (at best). Thus, it seems likely that, despite the
logic of moving from individual- to firm-level performance,
such a direct link simply does not exist.’ They also pointed out
(page 142): ‘It is clear that we know almost nothing about how
to leverage changes in individual performance up to the level of
the firm. Although there have been suggestions about how to
go about this… there is almost no empirical evidence that it can
be done successfully. It would seem, therefore, that there is
considerable evidence that HR practices are related to firm
performance, but only when they are bundled.’
Performance management: the ethical
dimension
There is an important ethical dimension to performance
management. The design of a performance management
system and how it is operated should be based on values
related to the ethical principles of respect for the individual,
mutual respect, justice, procedural fairness and transparency,
as defined by Winstanley and Stuart-Smith (1996). These
principles refer to beliefs that:
the management of the organization has the overriding
responsibility for creating the conditions in which high
performance is achievable;
everyone is concerned with the improvement of
performance; it is the joint responsibility of managers and
their teams, and they are mutually dependent on one
another to attain this purpose;
people should be valued for what they are as well as what
they achieve;
the needs of individuals as well as those of the
organization must be recognized and respected;
individuals should be given the opportunity to express
their views about the objectives they are expected to
achieve;
individuals should understand and agree to the measures
used to monitor their performance and should be able to
track their own performance against those measures;
individuals have the right to obtain feedback on their
performance and to comment on that feedback;
individuals should know how and why decisions affecting
them that emerge from performance reviews have been
made, and should have the right to appeal against those
decisions;
the focus should be on developing performance rather
than merely managing it – priority should therefore be
given to the developmental aspects of performance
management.
These values are underpinned by the need to pay attention to
due process. In law, there are three essential features of due
process: (1) adequate notice – that individuals be held
responsible for obeying laws only when they have been
published or otherwise communicated and for satisfying only
those charges explicitly presented; (2) a fair hearing – that all
relevant evidence to a proposed violation be presented and
considered and that charged parties be given the opportunity to
provide commentary; and (3) judgement based on evidence to
ensure that procedural, distributive and interactional justice are
achieved. The latter refers to the quality of the interpersonal
treatment people receive and is particularly important. Folger
et al (1992) proposed that these principles should be applied to
performance management as follows: (1) adequate notice of the
performance standards to be met, (2) fair hearing based on
evidence, and (3) judgements based on evidence to apply
consistently across employees.
Organizational researchers such as Taylor et al (1995) have
gathered a strong body of evidence showing that employees
care a great deal about the justice of performance management
practices. This work has generally found that the more just or
fair employees consider such systems to be, the more satisfied
and accepting they are of the resultant outcomes, even when
those outcomes are less than desirable. They found that
procedurally just performance systems may also increase
managers’ own positive outcomes. The strength of these
findings led researchers Folger and Cropanzano (1998) to
propose that the provision of fair procedures is a more
powerful foundation for the management of employees than is
the provision of financial rewards.
The approach to managing performance
The context of the organization will have a considerable
influence on how performance is managed. It has been said
that: ‘Rather than manage performance, manage the context in
which performance occurs’ (Jones, 1995: 426). He went on to
explain (page 431) that:
In this equation, the role of management focuses on clear, coherent
support for employees by providing information about organization
goals, resources, technology, structure, and policy, thus creating a
context that has multiplicative impact on the employees, their
individual attributes (competency to perform), and their work effort
(willingness to perform). In short, managing context is entirely about
helping people understand; it is about turning on the lights.
The context includes the organizational culture, the people
involved at all levels, including top management, line managers
and employees generally, the employee relations climate, and
the internal environment in terms of the organization’s
structure, size and technology, and working practices.
Commentators such as Deming (1986) and Coens and Jenkins
(2002) stress that system factors are instrumental in governing
the level of organizational performance. The latter (page 41)
referred to the need to replace the mechanistic model of
managing individual performance, that is, a performance
management system, with a more dynamic, organic model.
Note the reference to leadership in the description of such a
model. According to Coens and Jenkins (2002):
[It] attributes organizational outcomes to the interaction of
organizational systems and structures (sometimes called systems theory)
rather than individual performance. This model capitalizes on freedom
rather than maintaining control. We see more and more managers who
are willing to experiment with leadership attuned to this new paradigm.
It is based on trust and a greater belief in people. It assumes that, with
less control and greater autonomy, commitment and innate motivation
will flourish. It rests on the premise that with less structure, people can
effectively work in concert, within naturally emerging systems that
foster optimal work patterns. [italics in original]
A high-performance culture
A systems approach at organizational level will involve
developing a high-performance culture; one in which the
achievement of high levels of performance is a way of life. It
has the following features:
Management defines what it requires in the shape of
performance standards and improvements, sets goals for
success and monitors performance to ensure that the
goals are achieved.
People know what is expected of them – they understand
their goals and accountabilities.
People feel that their job is worth doing and there is a
strong fit between the job and their capabilities.
There is a focus on promoting positive attitudes that result
in an engaged, committed and motivated workforce.
Senior management should take the lead in creating and
maintaining a high-performance culture, but the support of line
managers and employees is essential. The development of a
high-performance culture can be achieved with the help of a
high-performance work system (HPWS), a bundle of HR
practices such as talent management, leadership development,
and learning and development that facilitate skill
enhancement, motivation and employee engagement (see also
Chapter 15).
Choice of approach to managing performance
The basic choice is between having a formal performance
management system or relying on the effectiveness of line
managers as performance leaders. In the former case, there is a
choice of the type of system to be adopted and the degree of
formality required. (The choices available and the factors to be
considered in making them are reviewed in Chapter 23.) In the
latter case, talent management and leadership development
programmes will be required to ensure that there are managers
available who have the skills required to exercise performance
leadership (see Chapter 6) and the desire to do it.
The views set out below of two managers interviewed by
Dilys Robinson (2013) are interesting. They were obtained when
she carried out research for the Institute for Employment
Studies, in which she initially identified a number of managers
in large organizations who were in charge of departments
where surveys revealed that levels of employee engagement
were high, and then investigated how they contributed to the
achievement of those levels through the ways in which they
managed performance.
Performance management is seen as something you do to keep HR
quiet. It’s seen as owned by HR not about how you manage people
properly.
This organisation has a very structured performance management
framework, as you would imagine from a big company. I try and avoid
using it unless I have to, I would rather try and develop the personal
relationship with someone, to understand their issues and try and
improve their performance by working with them, rather than going
through procedural ways of managing performance.
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02
The conceptual framework of
performance management
Introduction
Performance management is carried out more effectively if the
relevant concepts relating to performance – the meaning of
performance, the distribution of performance, the factors
affecting individual performance, the underpinning theories,
and the significance of the psychological contract – are
understood and applied. The purpose of this chapter is to
describe these concepts and examine their practical
significance.
The meaning of performance
If you can’t define performance, you can’t manage it. Bates and
Holton (1995: 279) pointed out that: ‘Performance is a multidimensional construct, the measurement of which varies
depending on a variety of factors.’ They also stated that it is
important to determine whether the measurement objective is
to assess performance outcomes or behaviour.
Latham et al (2007) emphasized that an appropriate definition
of performance is a prerequisite for feedback and goal-setting
processes. They stated that a performance theory is needed that
stipulates:
the relevant performance dimensions;
the performance standards or expectations associated
with different performance levels;
how situational constraints should be weighed (if at all)
when evaluating performance;
the number of performance levels or gradients;
the extent to which performance should be based on
absolute or comparative standards.
There are different views on what performance is. It could just
mean outcomes – the results obtained, or it could mean
behaviour – how the results were obtained, or it could be both
results and behaviour.
Performance as outcomes
Bernadin et al (1995) suggested that performance should be
defined as the outcomes of work because they provide the
strongest links to the strategic goals of the organization,
customer satisfaction and the economic contribution to
performance. Kane (1996: 124) argued that performance ‘is
something that the person leaves behind and that exists apart
from the purpose. More specifically, it is the record of the
person’s accomplishments.’
Performance as behaviour
Campbell (1990) made the point that performance is behaviour
and should be distinguished from the outcomes because they
can be contaminated by systems factors. Campbell et al (1993)
focused on the measurement of performance, which they
defined as behaviour or action relevant to the attainment of the
organization’s goals that can be scaled, that is, measured. They
suggested that performance is multidimensional and that each
dimension is characterized by a category of similar behaviour
or actions. The components consist of: (1) job-specific task
proficiency, (2) non-job-specific proficiency (such as
organizational citizenship behaviour), (3) written and oral
communication proficiency, (4) demonstration of effort, (5)
maintenance of personal discipline, (6) facilitation of peer and
team performance, (7) supervision/leadership and (8)
management/administration.
Borman and Motowidlo (1993) put forward the notion of
contextual performance that covers non-job-specific
behaviours such as cooperation, dedication, enthusiasm and
persistence and is differentiated from task performance
covering job-specific behaviours. As Fletcher (2001) mentioned,
contextual performance deals with attributes that go beyond
task competence and foster behaviours that enhance the
climate and effectiveness of the organization.
Performance as both outcomes and behaviour
It can be argued that a more comprehensive view of
performance is achieved if it is defined as embracing both
behaviour and outcomes. When people are said to be
performing well it does not solely cover the results they deliver,
it also refers to their behaviour in achieving those results. The
Oxford English Dictionary defines performance as: ‘The
accomplishment, execution, carrying out, working out of
anything ordered or undertaken.’ This refers to
outputs/outcomes (accomplishment) as well as behaviours
(carrying out the work). Brumbach (1988: 388) noted that:
Performance means both behaviours and results. Behaviours emanate
from the performer and transform performance from abstraction to
action. Not just the instruments for results, behaviours are also
outcomes in their own right – the product of mental and physical effort
applied to tasks – and can be judged apart from results.
Defining performance like this leads to the conclusion that,
when managing the performance of individuals and teams,
both inputs (behaviour) and outputs (results) need to be
considered. This was supported by Aguinis (2005: 11) who
suggested that performance management: ‘focuses on
achieving important results that lead to organizational
effectiveness and also on driving effective employee behaviour.
The focus on both results and behaviour is important because
the most impressive results fade in the presence of bad
behaviour.’
This is the mixed model of performance management that
covers competency levels and achievements as well as
objective setting and review. It is concerned not only with what
people do but also how they do it and has become the generally
accepted basis for performance management.
The distribution of performance
It has long been assumed that levels of performance in a
population are distributed in accordance with the normal curve
of distribution (the Gaussian curve), as illustrated in Figure 2.1.
Figure 2.1 A normal curve of distribution
Figure 2.1 details
This type of distribution may be correct for IQs (intelligence
quotients) but there has been no evidence that it applies to
levels of performance or productivity. In spite of this lack of
evidence, the practice of forced distribution or ranking has
been based on it.
Aguinis and Bradley (2015: 161), in their analysis of what they
called ‘star performers’, defined them as those who
‘consistently generate exorbitant output levels that influence
the success or failure of their organizations and even society as
a whole.’ They referred to them as ‘the secret sauce for
organizational success’. Their initial research challenged the
concept of a normal distribution of performance levels and
they suggested that: ‘It is time we change management theories
and practices so that we conceptualize the distribution of
performance as being non-normal instead of changing the data
to fit our existing, and often incorrect, conceptualization’ (page
162).
The results of their extensive research to establish the facts
were published by Aguinis and his colleagues in 2016. They
hypothesized that, rather than following a normal distribution,
performance would be distributed in accordance with the
characteristics of what is known as a ‘power law’ distribution.
This has a long tail on the right, as illustrated in Figure 2.2. It is
associated with the Pareto Principle, which states that for many
phenomena 80 per cent of the result comes from 20 per cent of
the effort. The research involved the use of 229 datasets
including 633,876 productivity observations collected from
approximately 625,000 individuals. To understand this principle
as it applies to performance or productivity the researchers
adopted as their framework the principle of cumulative
advantage – the process by which small initial differences
compound to yield large differences. One form of cumulative
advantage is the ‘Matthew effect’, as formulated by Merton
(1988), where initial small advantages in wealth, education and
opportunity over time lead to very large gaps between the
‘haves’and ‘have-nots’.
Figure 2.2 The power-law distribution
Figure 2.2 details
Aguinis et al (2016: 9) stated that the principle of cumulative
advantage is: ‘a generating mechanism that shifts the source of
production from being primarily vested in a large group of
average workers to a small group of productivity stars, thereby
leading to a heavy-tailed rather than a normal distribution’. The
principle also means that those who find themselves with an
initial advantage over others will be offered more opportunities
to produce more and better outcomes in the future: ‘such
differences, albeit small, quickly result in the presence of
heavy-tailed productivity distributions and a greater proportion
of productivity stars than would be realistically possible, from a
probability standpoint, by a normal distribution.’
As Murphy (2020) points out, this distribution does not mean
that most people are poor performers. It simply explains that
there is a relatively small number of people who are highly
effective and a much larger number of people who are less
effective. The implication, according to Murphy, is that the
differences will be so obvious that they will be easy to detect,
and elaborate evaluation schemes are therefore unnecessary.
Factors affecting individual performance
Four major influences on performance were identified by
Harrison (1997):
the learner, who needs the right level of competence,
motivation, support and incentives in order to perform
effectively;
the learner’s work group, whose members will exercise a
strong positive or negative influence on the attitudes,
behaviour and performance of the learner;
the learner’s manager, who needs to provide continuing
support and act as a role model, coach and stimulator
related to performance;
the organization, which may produce barriers to effective
performance if there is no powerful, cohering vision;
ineffective structure, culture or work systems;
unsupportive employee relations policy and systems, or
inappropriate leadership and management style.
These can be classified as individual, systems and contextual
factors.
Individual factors
Vroom (1964) suggested that performance is a function of
ability and motivation as shown in the formula: Performance =
ƒ (Ability × Motivation). The effects of ability and motivation on
performance are multiplicative not additive. People need both
ability and motivation to perform well and if either ability or
motivation is zero there will be no effective performance.
A development of this formula was produced by Boxall and
Purcell (2003). It states that performance depends on the
individual’s ability, motivation and opportunity. Employees
must have the ability to perform well and the motivation to do
so, while organizations must ensure that they are given the
opportunity to perform. Boxall and Purcell (2016: 155)
formulated the AMO framework as P = ƒ(A,M,O). They noted
that someone’s ability, motivation and opportunity to perform
would depend on two groups of factors: (1) the individual’s
experience, intelligence, health personality and so on, and (2)
the situational factors of HR policies and practices orientated to
creating ‘AMO’, and related variables in the production system
and the organizational context.
Systems factors
Individual performance is influenced by systems factors as well
as person factors (Cardy and Dobbins, 1994). As formulated by
Miller and Rice (1967), systems theory states that organizations
should be treated as open systems that transform inputs into
outputs within the environments (external and internal) upon
which they are dependent. Systems theory is the basis of the
input-process-output-outcome model of managing
performance, which assesses the entire contribution that an
individual makes within the system in carrying out his or her
allotted tasks. Inputs are the skills and knowledge that an
individual brings to a job. Process is how people actually
perform their jobs. Outputs are the results of performance
expressed in quantified terms such as sales volume, income
generated or units of production. Outcomes are a visible effect
that is the result of effort but cannot necessarily be measured in
quantified terms. The input-process-output-outcome model of
managing performance is important, first because it provides
the basis for measuring performance and second, because all
the factors that influence performance, including the system
and the context, can be taken into account when assessing it.
Bowen and Ostroff (2004) advocated a ‘strong’ HR system to
ensure the more effective implementation of HRM practices,
including performance management. They developed a model
of HRM in which HR practices can be viewed as
communications from the employer to employee, and
suggested that: ‘when the HRM system is perceived as high in
distinctiveness, consistency, and consensus, it will create a
strong situation’ (page 208). They argued that a strong HRM
system can significantly affect firm performance by creating
powerful, focused organizational cultures that help to structure
and direct employee behaviour and effort towards desired
organizational goals. Performance management needs to
function like this.
Contextual factors
Systems operate within the context of the organization. Nadler
and Tushman (1980) stated that:
The manager needs to understand the patterns of behaviour that are
observed to predict in what direction behaviour will move (particularly
in the light of management action) and to use this knowledge to control
behaviour over the course of time. Effective managerial action requires
that the manager be able to diagnose the situation he or she is working
in.
This point should be extended to include the people managers
manage – they equally want to know and are entitled to know
the situation they are working in.
The situation or context in which people work and the way
performance can be measured can be described in terms of
systems theory as described earlier. More specifically, the
context includes the organizational culture, the employee
relations climate, the people involved and the internal
environment in terms of the organization’s structure, size,
technology and working practices.
Organizational culture
Organizational culture is the pattern of shared beliefs, norms
and values in an organization that shapes the way people act
and interact and strongly influences the ways in which things
get done. From the performance management viewpoint one of
the most important manifestations of organizational culture is
management style. This refers to the ways in which managers
behave in managing people and how they exercise authority
and use their power. If the prevailing management style in a
command-and-control type structure is autocratic, directive,
task-orientated, distant and tough, a ‘caring and sharing’
philosophy of performance management is not likely to work,
even if it were felt to be desirable, which is unlikely.
Alternatively, a non-directive, participative and considerate
style is more likely to support a ‘partnership’ approach to
performance management, with an emphasis on involvement,
empowerment and ownership.
It is vital to take account of cultural considerations when
developing and implementing performance management. The
aim must be to achieve a high degree of fit between the
performance management processes and the corporate culture
when the latter is embedded and appropriate. Moreover,
performance management is one of the instruments that can
be used in a cultural change programme where the focus is on
high performance, engagement and involvement.
Employee relations climate
The employee relations climate of an organization represents
the perceptions of employees and their representatives about
how relationships between management and employees are
maintained. It refers to the ways in which formal or informal
employee relations are conducted and how the various parties
(managers, employees and trade unions or staff associations)
behave when interacting with one another. The climate can be
good, bad or indifferent, according to perceptions about the
extent to which:
the parties trust one another;
management treats employees fairly and with
consideration;
management is open and honest about its actions and
intentions;
harmonious relationships exist – management treats
employees as stakeholders;
employees are committed to the interests of the
organization;
what management does is consistent with what it says it
will do.
Clearly, a good climate will be conducive to the effective
operation of performance management processes as long as
these are developed jointly by those involved and take account
of their interests. An improved employee relations climate may
also result from pursuing the development and
implementation of performance management in accordance
with the ethical principles set out in Chapter 1.
People
Performance management processes will vary in accordance
with the composition of the workforce. For example, the
approach by a firm employing mainly knowledge workers is
likely to be different from one in a manufacturing firm. Within
the organization, approaches may vary between different
groups of employees.
Organization structure
A hierarchical or functional structure with well-defined layers
of authority is likely to support a directive, top-down approach
to setting objectives and reviewing performance. A flatter,
process-based structure will encourage more flexible
participative approaches with an emphasis on teamwork and
the management of performance by self-directed teams.
A structure in which responsibility and authority are
devolved close to the scenes of action is more likely to foster a
flexible approach to performance management. A highly
centralized organization may attempt to impose a monolithic
performance management system, and fail.
Technology and working practices
There is no conclusive evidence that advanced technology and
working practices are associated with sophisticated approaches
to performance management. But it is reasonable to assume
that high-technology firms or sophisticated organizations are
more likely to innovate in this field. Another aspect of work
practices is the extent to which the work is computer or
machine controlled, or routine. Computerized performance
monitoring (CPM) provides an entirely different method of
measuring performance, which is related directly to outputs
and/or errors. As Bates and Holton (1995) noted as a result of
their research, this can have detrimental effects by
transforming a helpful supervisory style into one that is more
coercive.
Research conducted by Earley (1986), however, found that
employees trusted feedback from a computer more than
feedback from a supervisor. Earley claimed that CPM could
have a greater impact on performance because of higher selfefficacy (the individual’s self-belief that they will be able to
accomplish certain tasks).
Bureaucratic methods of working may also affect the design
and operation of performance management. Organizations that
function as bureaucracies, appropriately or inappropriately, are
more likely to have a formalized performance management
system. The system may be centrally controlled by human
resources and the emphasis will be on the annual appraisal
carried out in accordance with strictly defined rules. The
appraisal may be a top-down judgemental affair referring to
personality traits. Performance and potential will be rated.
Organizations that work flexibly with an emphasis on
horizontal processes and teamwork – what Burns and Stalker
(1961) called ‘organic organizations’ – are more likely to have a
less formal process of performance management, leaving more
scope for managers and teams to act as performance leaders
and manage their own processes in accordance with agreed
principles.
Size of organizations
Research carried out by Beaver and Harris (1995) into
performance management in small firms came to the
conclusion that:
The performance management systems of large firms simply cannot be
scaled down to fit the smaller enterprise which often exhibits a
radically different management process and operation.
They described the management process in small firms as
likely to be characterized by the highly personalized
preferences, prejudices and attitudes of the firm’s entrepreneur
or owner, who will probably work close to the operating
process.
The external environment
If the external competitive, business, economic and political
environment is turbulent – which it usually is – organizations
have to learn to respond and adapt rapidly. This will influence
the ways in which business strategies and plans are developed
and the sort of objectives people are expected to achieve.
Performance management has to function flexibly in tune with
the constant changes in demands and expectations to which the
organization is subject. A business which operates in a fairly
steady state as far as its external environment is concerned
(rare, but they do exist) can adopt more structured and orderly
performance management systems. The way in which
performance is managed will be different when a large
proportion of the workforce is working from home, as is
happening following the Covid pandemic (see Chapter 18).
Underpinning theories
Performance management practice is underpinned and
explained by the theories summarized below. Goal theory has
perhaps been the most influential because setting goals and
assessing performance against those goals is such a significant
part of a performance management system. But other theories
are relevant, such as those relating to control and
reinforcement, which explain the fundamental mechanism of
feedback, and expectancy theory, which indicates how
performance management can help to motivate people. Social
learning theory links reinforcement and expectancy theory,
and self-efficacy theory highlights the importance of helping
people to believe in themselves and their ability to improve.
Goal theory
Goal theory as developed by Latham and Locke (1979)
highlights four mechanisms that connect goals to performance
outcomes: (1) they direct attention to priorities; (2) they
stimulate effort; (3) they challenge people to bring their
knowledge and skills to bear to increase their chances of
success and (4) the more challenging the goal, the more people
will draw on their full repertoire of skills. Motivation and
performance are higher when individuals are set specific goals,
when goals are demanding but accepted, and when there is
feedback on performance. Goals must be clearly defined.
Participation in goal setting is important as a means of getting
agreement to the setting of demanding goals. Feedback is vital
in maintaining motivation, particularly towards the
achievement of even higher goals. Robertson et al (1992: 41)
suggested that:
Goals inform individuals to achieve particular levels of performance, in
order for them to direct and evaluate their actions; while performance
feedback allows the individual to track how well he or she has been
doing in relation to the goal so that, if necessary, adjustments in effort,
direction or possibly task strategies can be made.
Goal theory supports the emphasis in performance
management on setting and agreeing goals or objectives against
which performance can be measured and managed.
However, the universality of goal theory has been
questioned. Pintrich (2000) noted that people have different
goals in different circumstances and that it is difficult to justify
the assumption that goals are always accessible and conscious.
And Harackiewicz et al (2002) warned that goals are only
effective when they are consistent with and match the general
context in which they are pursued. But support for goal theory
was provided by Bandura and Cervone (1983), who emphasized
the importance of self-efficacy (a belief in one’s ability to
accomplish goals).
Expectancy theory
Expectancy theory as originally formulated by Vroom (1964)
states that effort (motivation) depends on the extent to which
people expect that rewards will follow effort and that the
reward is worthwhile.
Performance management is concerned with influencing
behaviour to achieve better results. It operates in line with
expectancy theory by defining the relationship between effort,
achievement and reward, thus motivating people and providing
them with a sense of direction. Positive feedback produces a
reward in the shape of the recognition of work well done. This
is intrinsic motivation offered by the work itself, which arises
when work satisfies needs for accomplishment, provides
opportunities for growth and the scope to use and develop
abilities, and fosters self-belief.
An expectancy-based motivational model for individual
performance improvement was devised by DeNisi and
Pritchard (2006). It is based on the belief that people allocate
energy to actions in a way that will maximize their anticipated
need satisfaction. The sequence is illustrated in Figure 2.3.
Figure 2.3 Expectancy-based motivational model
for performance
Figure 2.3 details
The key to effective performance management is to ensure that
evaluations and outcomes are structured so that employees will
focus their actions in the ways desired by the organization,
resulting in the kind of performance that is needed and in
appropriate rewards. The stronger the links between each
element in the motivation process, the greater will be the
motivation of employees to improve their performance. The
process should aim to strengthen the perceived connection
between actions and outcomes.
Control theory
Control theory focuses attention on feedback as a means of
shaping behaviour. As people receive feedback they appreciate
the discrepancy between what they are doing and what they
are expected to do and take corrective action to overcome the
discrepancy. Feedback is recognized as a crucial part of
performance management.
Reinforcement theory
Reinforcement theory (Hull, 1951) states that successes in
achieving goals and rewards act as positive incentives and
reinforce the successful behaviour, which is repeated the next
time a similar need arises. Positive feedback therefore provides
for positive reinforcement. Constructive feedback can also
reinforce behaviours that seek alternative means of achieving
goals.
Social learning theory
Social learning theory as formulated by Bandura (1977)
combines aspects of reinforcement and expectancy theory. It
recognizes the significance of the basic concept of
reinforcement as a determinant of future behaviour, but also
refers to the importance of internal psychological factors,
especially expectations about the values of goals and the ability
of individuals to reach them. The theory emphasizes the
significance of learning from other people, which suggests that
performance management for teams (see Chapter 16) is
important as well as individual performance management.
Self-efficacy theory
Self-efficacy theory, also developed by Bandura (1982), indicates
that self-motivation will be directly linked to the self-belief of
individuals that they will be able to accomplish certain tasks,
achieve certain goals or learn certain things. An important aim
of performance management is to increase self-efficacy by
giving individuals the opportunity to consider and discuss with
their managers how they can do more. Managers should
encourage self-belief in the minds of those with whom they
discuss performance and development.
Performance management and the psychological
contract
The psychological contract is the set of reciprocal but unwritten
expectations that exist between individual employees and their
employers. A psychological contract is implied and inferred
rather than stated and agreed. It cannot necessarily be spelt out
in detail because it evolves over time. But performance
management processes can be used to ensure that performance
expectations are agreed and reviewed regularly. And this
should contribute to the clarification of the psychological
contract and the employment relationship.
References
Aguinis, H (2005) Performance Management, Pearson Education, Upper Saddle River
NJ
Aguinis, H and Bradley, K G (2015) The secret sauce for organizational success:
managing and producing star performers, Organizational Dynamics, 44 (3), pp
161–68
Aguinis, H, O’Boyle, E, Gonzalez, E and Joo, H (2016) Cumulative advantage:
conductors and insulators of heavy-tailed productivity distributions and
productivity stars, Personnel Psychology, 69 (1), pp 3–66
Bandura, A (1977) Social Learning Theory, Prentice-Hall, Englewood Cliffs NJ
Bandura, A (1982) Self-efficacy mechanism in human agency, American
Psychologist, 37, pp 122–47
Bandura, A and Cervone, D (1983) Self-evaluation and self-efficacy mechanisms
governing the motivational effects of goal systems, Journal of Personality and
Social Psychology, 45 (5), pp 1017–28
Bates, R A and Holton, E F (1995) Computerized performance monitoring: a review
of human resource issues, Human Resource Management Review, Winter, pp 267–
88
Beaver, G and Harris, L (1995) Performance management and the small firm:
dilemmas, tensions and paradoxes, Journal of Strategic Change, 4, pp 109–19
Bernadin, H K, Kane, J S, Ross, S, Spina, J D and Johnson, D L (1995) Performance
appraisal design, development and implementation, in Handbook of Human
Resource Management, eds G R Ferris, S D Rosen and D J Barnum, Blackwell,
Cambridge MA
Borman, W C and Motowidlo, S J (1993) Expanding the criterion domain to include
elements of contextual performance, in Personnel Selection in Organizations, eds N
Schmitt and W C Borman, Jossey-Bass, San Francisco
Bowen, D E and Ostroff, C (2004) Understanding HRM-firm performance linkages:
the role of the ‘strength’ of the HRM system, Academy of Management Review, 29
(2), pp 202–21
Boxall, P F and Purcell, J (2003) Strategy and Human Resource Management,
Palgrave Macmillan, Basingstoke
Boxall, P F and Purcell, J (2016) Strategy and Human Resource Management, 4th edn,
Palgrave Macmillan, Basingstoke
Brumbach, G B (1988) Some ideas, issues and predictions about performance
management, Public Personnel Management, 17 (4), pp 387–402
Burns, T and Stalker, G (1961) The Management of Innovation, Tavistock, London
Campbell, J P (1990) Modeling the performance prediction problem in industrial
and organizational psychology, in Handbook of Industrial and Organizational
Psychology, eds M P Dunnette and L M Hugh, Blackwell, Cambridge MA
Campbell, J P, McCloy, R A, Oppler, S H and Sager, C E (1993) A theory of
performance, in Personnel Selection in Organizations, eds N Schmitt and W
Borman, Jossey-Bass, San Francisco
Cardy, R L and Dobbins, G H (1994) Performance Appraisal: Alternative Perspectives,
South-Western Publishing, Cincinnati OH
DeNisi, A S and Pritchard, R D (2006) Performance appraisal, performance
management and improving individual performance: a motivational
framework, Management and Organization Review, 2 (2), pp 253–77
Earley, D C (1986) Computer-generated performance feedback in the magazine
industry, Organisation Behaviour and Human Decision Processes, 41, pp 50–64
Fletcher, C (2001) Performance appraisal and management: the developing
research agenda, Journal of Occupational and Organizational Psychology, 74 (4), pp
473–87
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Psychology, 94 (3), pp 638–45
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effectiveness, Human Resource Management Review, Summer, pp 123–45
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works, Organizational Dynamics, Autumn, pp 442–47
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Oxford Handbook of Human Resource Management, eds P Boxall, J Purcell and P
Wright, Oxford University Press, Oxford
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symbolism of intellectual property, Isis, 79, pp 606–23
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Resource Management Journal, 30 (1), pp 13–31
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104
Robertson, I T, Smith, M and Cooper, C L (1992) Motivation, Institute of Personnel
and Development, London
Vroom, V (1964) Work and Motivation, Wiley, New York
03
Performance management
systems
Introduction
Formalized performance management systems attempt to
represent the normal processes of management – planning,
executing, reviewing, taking corrective action – as a procedure
for managing performance that managers and employees are
obliged to follow. Each of these processes is covered in the usual
version of the performance management cycle in which
managers agree objectives with the people who report to them,
provide feedback, review and evaluate performance, agree any
actions required to develop capabilities and manage
performance, and complete a report on the outcomes of these
activities. It can therefore be argued that a performance
management system is no more than a formal description of a
natural process. As such, it has its uses as a framework for
managing performance, but it does not mean that it has to be
blown up into a bureaucratic process that purports to provide
all the answers to managing performance. As a framework it
may help, but it should not be regarded as the ultimate answer.
The effective management of performance is much more about
exercising effective performance leadership than conforming
to the requirements of a system.
The first section of this chapter describes the overall features
of a formal performance management system. The next three
sections summarize the main constituents of such a system,
namely: performance and development planning, monitoring
and reviewing.
Features of a performance management system
A performance management system is a defined set of
procedures for planning, monitoring, reviewing, evaluating and
reporting on performance that are interconnected and, in
sequence, constitute an organization’s formal approach to
managing performance.
Ideally, the system flows from the organization’s objectives
and then operates as a continuous and self-renewing cycle, as
shown in Figure 3.1.
Figure 3.1 The performance management cycle
Figure 3.1 details
Three examples of performance management models are
shown in Figures 3.2, 3.3 and 3.4. They exhibit similar features.
It is notable that coaching plays a central role in two of them.
Figure 3.2 Model of the performance management
system in AstraZeneca
Figure 3.2 details
Figure 3.3 Model of the performance management
system in Halifax Bank
Figure 3.3 details
Figure 3.4 Model of the performance management
system in Pfizer Inc.
These models depict an apparently logical sequence of
activities, each of which contributes cumulatively to the
achievement of the objective of improved performance. There
is nothing wrong with the logic. But the success of the process
depends on each stage being conducted properly. And this
makes demands on the participants – managers and their team
members – that can be hard to meet. The nature of these
demands under each of the three headings of the cycle is
summarized below.
Performance and development planning
A performance and development plan or agreement is the
outcome of the decisions made jointly by the manager and the
individual during the planning part of the performance
management sequence. Its purpose is to provide a foundation
for managing performance throughout the year and for guiding
development and improvement activities. It can be used as a
reference point when planning and reviewing performance and
is therefore a key component of an ideal performance
management system. It contains agreements on expectations
in the form of the results, competencies and actions required –
defined as performance and learning objectives – and on action
plans to develop performance and abilities. Individual
objectives are agreed, which flow from departmental and
organizational goals and support their achievement, a process
known as ‘cascading’. The alignment of individual objectives
with the organization’s strategic goals is generally regarded as a
key feature of a performance management cycle. The basis for
these agreements is a role profile that is jointly developed by
the two parties. Performance and development planning is
described fully in Chapter 7 and defining objectives in Chapter
11.
Monitoring
Perhaps one of the most important features of an ideal
performance management system is that it is a continuous
process which can be described as ongoing performance
management or ‘managing performance throughout the year’.
This means regularly monitoring outcomes against plans,
providing or obtaining feedback and ensuring that corrective
action is taken when necessary. The feedback and recognition
of good work by the manager is provided as and when
appropriate, which means at the time or immediately after an
event has occurred rather than being saved up for a later
formal performance review session. Managing performance
throughout the year also means updating objectives and
providing continuous learning on the job or through coaching.
Another requirement is to deal with underperformers in good
time so that improvements can take place.
The ongoing management of performance is important and
ought to take place whether or not there is a formal
performance management system. It will not always happen
even if there is a system, but it will be carried out by effective
managers when such a system does not exist.
Reviewing
A defining feature of a traditional performance management
system is a formal performance review, sometimes called a
performance appraisal, which typically takes place annually.
Formal performance reviews are traditionally annual events
in which a joint analysis of performance over the past year
takes place to establish the extent to which objectives have
been achieved and the development plan has been
implemented. They often provide for some form of
performance evaluation through rating or ranking. And this
may inform performance pay decisions. Following the review, a
revised performance and development plan is agreed for the
next year. The outcome is recorded on a performance
management form (online or paper) illustrated in Chapter 9
(Figures 9.1 and 9.2) and submitted to HR or some other
authority.
The use of formal annual reviews has been the subject of
much criticism, as set out in Chapter 4. A number of
organizations have abandoned them in favour of less formal
and more frequent performance and development
conversations or ‘check-ins’ throughout the year.
The reality of performance management
The model of a performance management system shown in
Figure 3.1 is straightforward and persuasive. The performance
management cycle closely resembles the cycle for continuous
improvement defined by William Deming (1986): ‘plan-docheck-act’. This is not a coincidence. Performance management
is also concerned with continuous improvement. However, in
practice, the system often probably does not work according to
plan. There are four problems with the model.
1. It indicates a steady progression through the stages of
performance management, each of them linked together.
This is desirable but in reality may be difficult to achieve.
The natural tendency of managers is to compartmentalize
these activities, if they carry them out at all. They do not
always appreciate how they are connected and what they
should do to ensure that the cycle does work smoothly.
2. It can encourage an over-elaborate approach. Systems
designers may be tempted to cover every aspect of the
model in detail and turn what should be a natural and
straightforward management process into a bureaucratic
nightmare with complex procedures and intricate paperor computer-based forms. When developing a
performance management system the watchwords are
‘keep it simple’. Remember that line managers may be
even more reluctant to do it well if they have to follow
over-elaborate procedures and understand obscure
jargon. The important thing is to ensure that the basic
processes are explained and illustrated in
communications about the system and in training
programmes.
3. Cascading the organization’s strategic goals to individual
objectives is more difficult than it sounds. Strategic goals
at organizational level may not always translate easily into
individual goals because organizational goals are not
defined well enough or are too remote from the work of
individual employees. Many commentators have extolled
the virtue of alignment; few have made practical
suggestions about how to achieve it. Strategic goals will
probably be determined by top management without
consulting employees, and simply ‘cascading’ goals
downwards contradicts the performance management
principle that people should be involved in agreeing their
own goals. The answer to this objection is that, although at
individual level account should be taken of overarching
goals, individuals can usefully take part in discussions on
how they can further the achievement of those goals.
4. The successful application of the model will largely
depend on the context in which it operates. Fletcher (1993)
noted the evolution in many organizations of a number of
separate but linked processes applied in different ways
according to the needs of local circumstances and staff
levels. Some organizations reject the concept of a
bureaucratic, centrally controlled and uniform system of
performance management that is implied by the model,
and instead accept that, within an overall policy
framework, different approaches may be appropriate in
different parts of the organization and for different people.
Performance management is applied in many ways
according to the context in which it is used. These ways
will not necessarily conform to those prescribed by the
model. The contextual factors include the type of
operation and the organization’s structure. Importantly
they also include the organization’s culture as expressed
in its philosophy or norms (explicit or implicit) on how
people should be managed and the prevailing
management style, for example the degree to which it is
controlling or participative. As Stoskopf (2002: 30) put it: ‘A
[performance management] system with the most
academically correct competencies or performance
measures may fail if it does not fit with the company’s
culture or workforce.’
Because of these problems, many organizations have a
performance management system that broadly follows this
model and looks good but doesn’t work. Others, however, if
they do anything at all, still use old-style, tick-box, top-down
performance appraisal systems that provide an easy way out
(managers need do little more than fill the forms or answer the
standardized questions in a web-based system) and act as a
means of exercising control.
References
Deming, W E (1986) Out of the Crisis, Massachusetts Institute of Technology Center
for Advanced Engineering Studies, Cambridge MA
Fletcher, C (1993) Appraisal: an idea whose time has gone?, Personnel Management,
Sept, pp 34–37
Stoskopf, G A (2002) Taking performance management to the next level, Workspan,
45 (2), pp 28–30
04
Performance management
issues
Introduction
Performance management has been by far the most reviled
HRM activity over many years. Duncan Brown, when Head of
HR Consultancy at the Institute for Employment Studies (2010),
observed that:
The problems [of performance management] are… not of ambition or
intent, but rather practice and delivery. Low rates of coverage and even
more frequently low-quality conversations and non-existent follow-up
are commonplace in the wake of uncommitted directors, incompetent
line managers, uncomprehending employees and hectoring HR with
their still complex and bureaucratic HR processes.
Professor Samuel Colbert of the UCLA Anderson School of
Management (2010) claimed that:
This corporate sham [performance management] is one of the most
insidious, most damaging, and yet most ubiquitous of corporate
activities. Everybody does it and almost everyone who has been
evaluated hates it. It’s a pretentious, bogus practice that produces
absolutely nothing that any thinking executive should call a corporate
plus.
The conclusion that performance management is broken was
reached by Pulakos and O’Leary (2011). The case for
reinventing performance management was made by
Buckingham and Goodall (2015: 43) who wrote that:
Not just employees but their managers and even HR departments are by
now questioning the conventional wisdom of performance
management, including its common reliance on cascading objectives,
backward-looking assessments, once-a-year rankings and reviews, and
360-degree-feedback tools.
These words have been echoed by many other commentators.
For example, Cappelli and Tavis (2016: 67) wrote that:
‘Performance appraisals wouldn’t be the least popular practice
in business, as they’re widely believed to be, if something
weren’t fundamentally wrong with them.’ It is difficult to find
anyone who has anything good to say about performance
management.
The aim of this chapter is to explore the reasons for this
chorus of disapproval. The chapter starts with a summary of
the extensive research that has investigated how performance
management is working, or not working, and goes on to
analyse the issues that have created this situation.
Developments in performance management that attempt to
deal with these issues are considered in the next chapter.
How well is performance management working?
A considerable amount of research has been carried out on
performance management, most of it with negative results.
Summaries of a number of studies are set out below.
Chartered Institute of Personnel and Development
(2009)
A total of 507 individuals responded to a web-based survey. In
reply to the question of what performance management could
achieve, the highest level of agreement (30 per cent) was to the
assertion that performance management enables individuals to
understand what they ought to be doing. But 13 per cent
disagreed and 57 per cent neither agreed nor disagreed.
Twenty-three per cent agreed that performance management
helped line managers to manage people better, but 25 per cent
disagreed. Only 20 per cent agreed that performance
management had a positive impact on individual performance
and 21 per cent disagreed.
WorldatWork and Sibson (2010)
A survey established that the top three performance
management challenges reported by respondents were: (1)
managers lack courage to have difficult performance
discussions (63 per cent); (2) performance management is
viewed as an ‘HR process’ instead of as a ‘business critical
process’ (47 per cent); and (3) that they experienced poor goal
setting (36 per cent). They also noted that: ‘Too much attention
has been placed on the design of a [performance management]
system and not enough on how it works when implemented.’
Institute for Employment Studies (2011)
The conclusion reached by the IES research was that:
Managers and employees in the IES study not only found the
performance management process complex and bureaucratic. They felt
this completely masked its fundamental purpose. The commonest
criticism by both managers and employees was that it was a box ticking
or form filling exercise… The loudest message from HR and senior
managers is of the need to get the forms filled in on time – a message
about administrative compliance. So again in a real sense HR is asking
for form-filling, so should not be surprised when managers say it feels
like form-filling!
Here are some of the comments made by managers and
employees who took part in this study:
Performance management is seen as something you do to
keep HR quiet. It’s seen as owned by HR not about how
you manage people properly.
Managers don’t give honest feedback and employees don’t
tell managers what they are thinking. There is no real
conversation. 360 degree feedback is sought only from
those who will say positive things.
There is no action resulting from the performance review.
Duncan Brown (2011) observed on the basis of this research
that:
The main areas of concern [about performance management] were the
skills and attitudes of reviewing managers, the consistency and quality
of approach across large organizations, the complexity of the
paperwork and the value of outputs… Performance management, it
appears, isn’t working.
Society for Human Resource Management (2012)
The conclusions reached by an SHRM study in the United States
were that:
Traditional performance management processes are often perceived as
burdensome, demotivating and without value…. Despite years of
research and practice, dissatisfaction with performance management
(PM) is at an all-time high. More than 75 per cent of managers,
employees and heads of HR feel that PM results are ineffective and/or
inaccurate. Additionally, study after study has shown that the
performance review is dreaded – it is not only perceived to be of little
value but it is highly demotivating to employees, even the highest
performers. Between formal goal-setting processes, mid-year and yearend reviews, and often extensive rating and calibration processes, a
great deal of time and effort is expended on PM activities, costing
organizations millions annually with questionable returns.
Towers Watson (2012)
The three conclusions from this survey across Europe with 384
participants were that:
Only just over a third (36 per cent) of employers say that
performance management programmes are effective.
Forty-seven per cent of organizations have already
introduced or plan to introduce new technology to enable
better processes.
Over half of the companies say that managers lack
necessary skills and time to manage performance really
well.
Chartered Institute of Personnel and Development
(2014)
A survey of employees’ views in 2014 on the fairness of
performance management processes found that less than half
(46%) believed that they are very or somewhat fair, while a fifth
believed that they are somewhat or very unfair.
Chartered Institute of Personnel and Development
(2016)
A small sample of senior HR leaders was surveyed by the CIPD
to obtain their opinions about performance management. Their
views were compared with those of a number of business
leaders working outside the area of HR. It was found that while
nearly half (49 per cent) of the HR leaders’ organizations used
annual appraisals, most of them (55 per cent) did not consider
them effective. Six-monthly appraisals seemed to work slightly
better, but were still seen as ineffective in a third (37 per cent)
of cases. Senior leaders from outside HR were even more
critical; three in four (73 per cent) considering annual
appraisals ineffective and nearly half (46 per cent) considering
six-monthly appraisals ineffective.
Conclusions
These studies have produced largely negative results. They
have recorded doubts about the effectiveness of performance
management and found faults in design (too complex, for
example), and in execution (mainly with performance
appraisal or review problems and the role of HR and line
managers). Positive endorsements of performance based on
research are hard to find.
What’s wrong with performance management?
The problems with performance management arise through:
the nature of typical performance management systems;
the annual performance review or appraisal;
the practice of rating;
objective setting;
the link to performance pay;
line managers who lack the required skills or are not
interested.
Performance reviews
Performance reviews or appraisals are often expected to fulfil
numerous functions, including performance improvement,
feedback, coaching, goal setting, skill development, the
assessment of potential, pay determination and the
identification of underperformers. No performance appraisal
system can meet all these ends. It is no wonder that line
managers do not live up to the expectations of HR or that the
perfunctory training in performance management provided by
most organizations fails to produce the multi-skilled, multitasking paragon the system demands.
Sullivan (2011) identified 50 problems with performance
management, including these referring to performance
appraisal:
Appraisal doesn’t assess actual performance – most of the
assessment that managers complete focuses on ‘the
person’, including characterizations of their personal
traits, knowledge or behaviours. While these factors may
contribute to performance, they are not measures of
actual output. If you want to assess the person, call it
‘person appraisal’. Performance is output quality, volume,
dollar value and responsiveness.
Infrequent feedback – if the primary goal of the process is
to identify and resolve performance issues, executing the
process annually is silly. A quality assessment/control
programme anywhere else in the business would operate
in real time. At the very minimum, formal feedback needs
to be given quarterly.
High anxiety – because the process is so subjective and no
benchmark performance numbers are set in advance,
uncertainty can cause many employees high levels of
anxiety weeks before the process. Managers may also be
anxious because of the uncertainty related to the
employee’s reaction. Employees should have an accurate
idea of their assessment before any meeting is scheduled.
Appraisal is historical – the process is focused on
capturing feedback about last year rather than on
discussing changes to job and skill requirements that are
necessitated by the business strategy.
This might explain why the 2014 e-reward survey of
performance management established that one of the main
concerns respondents had about their performance
management processes was line managers who are reluctant to
conduct performance management reviews.
Problems with the traditional annual performance
review
A fundamental problem with the traditional performance
review – inadequate feedback – was highlighted by research
conducted for the Institute for Employment Studies by Strebler
et al (2001) in which (page 28) they quoted the following
comment by a manager:
The performance review is good. However, it falls over because there is
no feedback during the year, so if one’s performance is below par, there
would be no feedback until the end of the year thus not giving the
individual a chance to improve.
Research by Mani (2002) showed that even when employee
experiences are positive, appraisal interviews still resulted in
negative attitudes and lower organizational performance – over
40 per cent of the staff in a public-sector organization were
dissatisfied with their appraisal including those who received a
‘good’ or ‘outstanding’ rating. Research by Brown et al (2010)
found that employees who had a poor experience with their
appraisal interview were more likely to be dissatisfied with
their job and to have low organizational commitment. A fouryear longitudinal study with a sample of more than 6,000
public-sector employees conducted by Linna et al (2012)
established that a poor performance appraisal experience had a
negative effect on employees’ perceptions and attitudes.
The following summary of the typical criticisms of traditional
approaches to performance reviews was made by the CIPD
(2020):
They aren’t frequent enough.
They focus on past performance with little attention paid
to future performance improvement, learning and
development.
Assessments are too subjective and not a reliable
reflection of actual performance, especially if they use
‘forced ranking’ or ‘guided distribution’ ratings (that is, a
fixed proportion of employees must be rated as high or
low performers).
Feedback often comes from a single source (the line
manager), which can give too narrow a view.
The process is excessively bureaucratic, time-consuming
and demotivating.
The fundamental problem is that getting managers to conduct a
performance review once or twice a year creates the
impression that the management of someone’s performance
can be accomplished in the hour or so that it takes to complete
the review. What happens during the rest of the year does not
seem to matter. A yearly meeting (the most common
arrangement), or even one every six months, means that
insufficient attention may be given to what happened some
time ago and assessments will be subjected to the ‘recency’
effect, that is, focusing on recent events rather than looking at
the whole picture. Furthermore, waiting for 12 months before
setting new objectives is unrealistic in today’s fast-moving
conditions.
Taking part in a traditional formal performance review can
be a daunting and therefore dreaded occasion for both parties.
Conducting satisfactory reviews requires considerable skill. The
requirements for a successful meeting are demanding. And
then there is the multiplicity of purposes – performance
improvement, feedback, coaching, objective setting, skill
development, the assessment of potential, pay determination
and the identification of underperformers. How can all of them
be satisfied in one brief meeting?
Peter Reilly (2015) of the Institute for Employment Studies
commented that:
All singing, all dancing performance appraisal… requires managers to
review a wide range of content (reward, training needs, business
alignment, etc) and use of multiple processes (eg personal development
planning, performance ranking, potential assessment etc), but also to
apply different modes of management – appreciation, evaluation and
coaching – which can be very tough on them to deliver.
That many managers have difficulties with formal performance
reviews is not surprising. Managers cannot be blamed for
paying lip service to something they do not comprehend and
find daunting and just about impossible to do well. And they
often fail to see the point of a formal meeting – they believe,
possibly unrealistically, that they are managing performance all
the time so cannot see the point of what they feel is an artificial,
time-wasting and stressful performance review meeting. As a
result, meetings can be superficial or inconclusive and can even
demotivate the individual concerned. They can only work if the
purposes are simplified, people believe that those purposes are
worthwhile and there is mutual trust and understanding
between the perceptions of both parties. Otherwise, hostility
and resistance are likely to emerge.
Performance ratings
The problem with performance ratings is that, because the
notion of ‘performance’ is often unclear, subjectivity can
increase. It is difficult to achieve consistency between the
ratings given by different managers. Performance ratings are
an unsatisfactory (because superficial) basis for providing
feedback. A meta-analytic study of the reliability of
performance ratings by Viswesveran et al (1996) found that, on
average, two supervisors rating the same employee correlate at
around 0.5, implying that only a quarter of their evaluations
would be the same.
Fletcher (1993) reported that many studies demonstrated that
performance ratings become more positive over time, as was
confirmed by Silverman et al (2005). Rather than indicating
performance improvement, this could simply arise because
raters become complacent or careless or both.
Strebler et al (2001) commented that: ‘The psychometric
properties of the rating process – ie whether achieved ratings
are valid and a true measure of actual performance – is the
most researched aspect of performance assessment.’ Their
study of a care organization established that people became
focused around the review headings (a little like wasps around
jam) for the sole purpose of getting points (and points mean
prizes) rather than improving the quality of care they delivered.
Saffie-Robertson and Brutus (2014) found through their
research that evaluators who are uncomfortable about the
appraisal process tend to inflate their performance ratings.
A powerful attack on rating was produced by Lee (2005). He
made the following points:
The rating process is actually a by-product of the attempt
to measure performance outcomes. An excessive
emphasis on measurement can be misguided. The desired
end that is lost in measuring performance is not
measurement at all, but rather description.
Poor ratings can stigmatize performance and cause
unnecessary resistance to the acceptance of feedback.
The goal is to have the employee assist us in describing,
interpreting and redirecting performance feedback, not
reacting to the ratings. Feedback can accomplish the same
positive goal as a rating without the negative side effects.
If the goal is performance improvement, then feedback –
not labelling past efforts – is the preferred tool.
Although ratings can be positive they can also be punitive
and focus attention on the negative rather than the
possible. The only message the employee gets from a poor
rating is: ‘Stop doing what you have been punished for
doing.’ This kind of rating may not even be an adequate
description, since many ratings are a summary of a
number of activities collected over time. It does not focus
attention on what to do to get better.
Ratings are feedback but feedback of the worst kind.
Pulakos et al (2008) noted that if a system is strictly
developmental, there is less need for ratings and in fact they
may detract from development. This is because employees tend
to be more concerned about their ‘score’ than understanding
their development needs. From a development perspective,
narratives may provide more useful information than
numerical ratings. Even when performance is rated against
defined standards, the ratings do not convey what the
employee did or did not do in sufficient detail. Jawahar and
Williams (1997) reported that performance evaluations such as
ratings obtained for administrative purposes (such as pay or
promotions) are more lenient than those for research, feedback
or employee development purposes.
Research by Rock (2009) found that giving ratings
undermines engagement and self- confidence. And
neuroscience research reported by Rock et al (2014) has shown
why numbers-based performance management is obsolete.
They noted that labelling people with any form of numerical
rating or ranking automatically generates an overwhelming
‘fight or flight’ response that impairs good judgement. This
neural response is the same type of ‘brain hijack’ that occurs
when there is an imminent physical threat like a confrontation
with a wild animal. It primes people for rapid reaction and
aggressive movement. But it is ill-suited for the kind of
thoughtful, reflective conversation that allows people to learn
from a performance review.
Finally and comprehensively, it was argued by Murphy (2020:
14) that: ‘there is a common feature in virtually all performance
appraisal and performance management systems that
contributes substantially to their failure – that is, they are built
round subjective evaluations of job performance.’
Forced ranking
In a forced ranking or ‘stack ranking’ system the rank order is
divided into the top 20 per cent, the middle 70 per cent and the
bottom 10 per cent, and all employees have to be slotted into
one of these categories. Forced ranking first achieved notoriety
when it was used by Jack Welch at General Electric (GE) to
identify high-flyers and poor performers. He argued that 20 per
cent of any group of managers were top performers, 70 per cent
were average and 10 per cent were not worth keeping. The
latter were ‘let go’, hence the terms ‘rank and yank’ or ‘dead
man’s curve’ for this procedure. Before imploding, thanks to the
actions of its own top performers, Enron used a complicated
system to rank and yank its employees.
Supporters of forced ranking say it is a good way of weeding
out unsatisfactory employees as well as identifying and
rewarding the top players, but it was strongly criticized by
Pfeffer and Sutton (2006: 28):
We couldn’t find a shred of evidence that it is better to have just a few
alpha dogs at the top and treat everyone else as inferior. Rather, the best
performance comes in organizations where as many people as possible
are treated as top dogs. If you want people to keep working together and
keep earning together, it is better to grant prestige to many rather than
few, and to avoid big gaps between who gets the most rewards and
kudos.
A forced ranking approach will not work unless employees
understand what is expected of them, there are fair procedures
for reviewing and classifying levels of performance and
employees trust their managers to use these procedures to
assess their performance correctly. These are exacting
requirements.
Performance pay
Focusing on performance management as a means of deciding
on performance pay awards may conflict with the
developmental purposes of performance management. This is
more likely to be the case if ratings are used – the performance
review meeting will concentrate on the ratings that emerge
from it and how much money will be forthcoming. The nonfinancial reward elements of performance management
associated with feedback and recognition will be subordinated
to this preoccupation with pay. Many organizations attempt to
get over this problem by holding development and pay review
meetings on separate dates, often several months apart
(decoupling). Some do without formulaic approaches (ratings)
altogether, although it is impossible to dissociate performance
pay completely from some form of assessment, even if this is
limited to making decisions on which employees should have
above average, average or below average increases or no
increase at all.
Objective setting
An attack on objective (goal) setting was made by Ordonez et al
(2009) who claimed that it might backfire by narrowing focus to
neglect non-goal areas, distort risk preferences, lead to
unethical behaviour, inhibit learning, corrode organizational
culture and reduce intrinsic motivation. But the methodology
they used was strongly criticized by Locke and Latham (2009),
the initiators of goal theory, who maintained that its
inadequacy destroyed the validity of any conclusions reached.
However, Locke and Latham did refer to their earlier article
(Latham and Locke, 2006) in which they listed potential pitfalls
of goal setting, including using performance goals when one
should use learning goals, competition versus collaboration,
goals perceived as threatening, goals enhancing/reducing risk
taking, repeated goal attainment resulting in reliance on an
outmoded strategy, inappropriate goal-reward linkages, tying
goal attainment to self-esteem, ignoring non-goal performance
dimensions, and increases in stress. They argued that all these
could be avoided if those concerned were aware of them. But
they accepted (2009: 334) that simply urging people to do their
best rather than setting specific and difficult goals can result in
better performance: ‘Focusing on reaching a specific
performance outcome on a new, complex task can lead to
‘‘tunnel vision’’ – a focus on reaching the goal rather than on
acquiring the skills required to reach it. In such cases, the best
results are attained if a learning goal is assigned – that is, a goal
to acquire the requisite task knowledge.’
There are three other issues relating to setting objectives: (1)
an over-emphasis on quantification, (2) the use of the ‘SMART’
acronym and (3) linking individual and organizational
objectives.
Over-emphasis on quantification
A performance objective or goal describes what someone has to
accomplish. Ideally, objectives should be defined as specific
targets – for example, ‘reduce reject levels by 3 per cent within
nine months’, ‘introduce x by y’. The problem is that, as a
hangover from the largely discredited management-byobjectives system, many organizations insist that all objectives
should be quantified in this way. For some jobs or parts of jobs
where the job holder is responsible for providing advice, this
can be difficult. For example, HR business partners are there,
among other things, to provide advice and support to their line
manager clients. A quantified target of, say: ‘Provide a
minimum of five pieces of good advice a week’ would be
meaningless. But it is possible to define the conditions that
would exist if the task of providing advice has been well done,
for example: ‘The advisory aspect of the job will have been
done well when the job holder consistently provides prompt,
good and actionable advice to line manager clients as required.’
This can be termed a standard of performance. Line managers
risk being frustrated by having to pursue the will-o’-the-wisp of
quantification for the sake of quantification.
Use of the SMART acronym
The acronym ‘SMART’ is often used to define a good
performance objective or goal. Traditionally, S stands for
specific (sometimes stretching), M for measurable, A for agreed,
R for realistic and T for time-related. But an emphasis on being
SMART may give managers the impression that everything has
to be quantified, which leads to frustration when they find out
that it can’t be done and results in the setting of unrealistic
targets. And a formulaic approach like this can lead to
superficial assessments.
Aligning individual and organizational objectives
Textbooks on performance management usually recommend
that the process of cascading should be used to align individual
objectives with organizational goals. But they do not make it
clear how this can be done. It is difficult. Individual roles can
seem to be remote from the organization’s goals. Where the
attempt is made to establish a link it can too easily be expressed
as a bland declaration of intent rather than a specific objective.
As Cappelli and Tavis (2016: 66) noted:
In the traditional model, business objectives and strategies cascaded
down the organization. All the units, and then all the individual
employees, were supposed to establish their goals to reflect and
reinforce the direction set at the top. But this approach works only when
business goals are easy to articulate and held constant over the course
of a year… That’s often not the case these days, and employee goals may
be pegged to specific projects. So as projects unfold and tasks change,
how do you coordinate individual priorities with the goals for the whole
enterprise, especially when the business objectives are short-term and
must rapidly adapt to market shifts?
The role of line managers
However well designed, the effectiveness of a performance
management system ultimately depends on the commitment
and skills of line managers. Posthuma and Campion (2009: 47)
remarked that:
One of the most dreaded tasks managers face is meeting with
employees to discuss their job performance. These meetings present a
dilemma for managers. On one hand, managers need to give
constructive criticism so that employees can improve their
performance. On the other hand, managers do not like to give negative
feedback because of the bad feelings that often result. It is not
surprising, then, that managers avoid giving accurate evaluations, give
overly generous evaluations or avoid the process altogether.
Performance management only works when managers want it
to work and have the skills to make it work. The paradox is that
managers with the required motivation and skills don’t need to
be propped up by a bureaucratic performance management
system. The issue is not the design and administration of such a
system but the urgent need to find and develop managers who
will act as performance leaders with or without a system.
The following were the findings of research conducted by the
Institute for Employment Studies (2011: 15):
Training in performance management was quite haphazard or cursory
in several of the cases. It could be included as a small item in a general
introduction to management. Such training often concentrated on how
to fill in the forms rather than the purpose of performance
management or how to have performance and development
conversations. Some cases had modules in managing poor
performance, but performance management training was often not
mandatory. Training still tends to the ‘sheep dip’ approach rather than
being tailored to the manager’s needs and level of existing expertise….
We argue that interventions to improve performance management
should cease their exclusive focus on reinventing formal system
features. Although well-developed tools and systems can facilitate
performance management, these alone do not yield effective
performance management. In lieu of making further changes to formal
performance management systems, we argue for devoting more
attention to improving manager–employee communication and aspects
of the manager–employee relationship and propose an approach we
believe holds promise for improving performance management
processes in organizations.
References
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appraisal experience, Personnel Review, 39, pp 375–96
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Harvard Business Review, April, pp 40–50
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Business Review, Oct, pp 58–67
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in Action: Current trends and practices, CIPD, London
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Chartered Institute of Personnel and Development (2016) Could Do Better: What
Works in Performance Management, CIPD, London
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CIPD, London
Colbert, S A (2010) Get Rid of the Performance Review, Hachette Book Group, New
York
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
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and Development, London
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pitfalls of goal setting, Organizational Dynamics, 35 (4), pp 332–40
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05
Performance management
developments
Introduction
The response to the issues raised in the previous chapter has
been a number of developments in how performance is
managed. These are described in this chapter:
the nature of typical performance management systems;
the annual performance review or appraisal;
performance conversations;
strength-based assessment;
rating;
forced distribution and ranking;
objective setting;
performance pay.
Performance management systems
The conclusions reached by the Institute for Employment
Studies (2011: 17–18) following its research were:
Performance management is about how people are managed all year
round. This is the central message which so often seems to get lost. So
managers and employees need to hear about performance
management throughout the year, not just when the forms have to be
filled in…. They should hear about performance management in terms
of priorities, feedback and development and how these link to business
results. These messages need to come from senior managers, not just
from HR. Even just talking about managing performance (what people
do) rather than performance management (an odd piece of HR jargon)
may help HR people remember what this is really about when they are
talking to others.
The fundamentals of performance management are setting priorities,
giving feedback and agreeing action, especially development action. All
the other stuff – ratings, links to reward, competencies, potential and
talent assessments – are legitimate concerns but should not be allowed
to compromise the quality of actually managing performance. If your
managers are still struggling with giving honest feedback or with
agreeing sensible priorities, leave the other clutter out for now.
Murphy (2020: 26) suggested that the reform of performance
management was needed because:
Forcing supervisors and managers to act as judges, evaluating
employee behaviour, rewarding compliance, and sanctioning deviation
from externally imposed plans and strategies prevents them from
functioning effectively as leaders.
The importance of leadership in performance management was
stressed long ago by Douglas McGregor (1957: 90) when he
wrote in the Harvard Business Review that: ‘The modern
emphasis upon the manager as a leader who strives to help his
subordinates achieve both their own and the company’s
objectives is hardly consistent with the judicial role demanded
by most appraisal plans.’
Performance reviews
The conventional once-a-year performance review presents the
biggest problem in performance management. The emphasis
now is to make performance management about good
conversations, not just a system. Cappelli and Tavis (2016: 64)
pointed out that:
Conversations between managers and employees occur when projects
finish, milestones are reached, challenges pop up, and so forth –
allowing people to solve problems in current performance while also
developing skills for the future.
At Standard Chartered Bank the performance review process is
called ‘conversations that count’.
For some time, the thrust has been to replace the annual
performance review with more frequent performance and
development conversations, often called ‘check-ins’, which
provide for ongoing feedback and include the discussion and
revision of objectives, priorities and development plans. A
survey conducted by the Center for Effective Organizations
(CEO), University of Southern California (Ledford et al 2016)
found that nearly every company in the sample (97 per cent)
used this approach.
As two of the respondents to the 2014 e-reward survey of
performance management commented:
Don’t view performance management as an annual task
such as appraisals; view it as a daily part of operations.
Don’t use appraisals as a means of dealing with
performance issues, tackle them as soon as they become
apparent through use of performance improvement plans
for example, or if it is a conduct issue, adopt a different
line.
Don’t make the appraisal such a big ‘event’. It should be
part of a continuous process of coaching and feedback.
Microsoft’s Director of Global Performance Programmes, as
quoted by e-reward (2016), explained that:
The outcome of the old end-of-year review usually felt like a judgement,
rather than an opportunity for employees to learn and get better. The
previous approach tried to do too many things. It was like a Swiss army
knife of performance management – we were using it for everything
from allocating reward to categorizing talent. The ratings people
received became an overarching label of everything anyone in the
company felt they needed to know about someone. And it became a gate
to things – whether or not an employee could transfer, for example, or
even whether or not they should transfer. It wasn’t intentional, but it
happened. And our employees didn’t like it – which worked against the
programme’s ability to help improve performance.
The focus of our current approach is designed to help people deliver
great impact by working together, reflecting and getting feedback more
often, and more intentionally considering learning and growing – and
as a result deliver continually better business results. Regular
performance conversations have been separated from the reward
conversations. Instead of the end-of-year review, managers and
employees have a short reward discussion to share the merit, bonus and
stock outcomes with the employee. Meanwhile, the regular discussions
employees and managers have during the year focus on the impact
someone is having, what they are learning and what they can do in the
upcoming few months – there is no discussion of rewards.
At Adobe the annual review meeting has been replaced by
manager and employee ‘check-ins’ covering expectations,
feedback, growth and development agenda, to be whenever
sensible, but at least quarterly. At Deloitte every team leader is
required to check in with each team member once a week.
These check-ins are not in addition to the work of a team leader;
they are the work of a team leader. Gap has abandoned formal
reviews and performance ratings – instead, managers and
employees are encouraged to have 12 informal, undocumented
conversations (called ‘touch-base’ meetings) about
performance over the course of the year. In IBM’s ‘checkpoint’
approach, managers are encouraged to give formal feedback to
employees at least quarterly – but also to have regular informal
conversations with their team members. Whereas before, the
whole year was effectively geared towards that one, end-of-year
assessment, under the new programme the end-of-year
conversation is simply a recap of everything that’s been
discussed over the last 12 months. Pierre Nanterme, CEO of
Accenture, explained to a Washington Post interviewer in 2015
what was happening to performance management in his
company:
Performance is an ongoing activity. It’s every day after any client
interaction or business interaction or corporate interaction. It’s much
more fluid. People want to know on an ongoing basis, am I doing right?
Am I moving in the right direction? Do you think I’m progressing?
Nobody’s going to wait for an annual cycle to get that feedback. Now it’s
all about instant performance.
Strength-based assessment
Bouskila-Yam and Kluger (2011) proposed a fundamental
reorientation of performance appraisal and feedback. Rather
than attempting to measure performance levels or to give
feedback about performance deficiencies, they proposed a
strength-based performance appraisal system that builds on
peoples’ strong points (see also Chapter 9). Strength-based
assessment has become a significant aspect of new-look
performance management.
Rating
After reducing reliance on an annual review, the most popular
development is to abolish rating. A survey of 430 organizations
by the Human Capital Institute quoted by Ledford and Benson
(2019) found that 12 per cent had abandoned performance
ratings; examples include Accenture, Adobe, Deloitte, IBM and
Microsoft.
An experimental study of ratingless reviews was conducted
by Ledford and Benson (2019) in an organization that already
had an innovative and effective performance management
process. Data collected from the pilot and comparison units
before and after the change appeared to indicate that ratingless
reviews had a positive effect by increasing focus on
development (on some indicators but not all), and no clear
negative effects. There was not even any apparent negative
effect on the perceived fairness of performance pay increases,
despite concerns raised about how performance pay can be
administered effectively without ratings. However, analysis
suggested that positive results were primarily the result of
more frequent feedback, especially when that feedback was
developmental, rather than the ratingless reviews. Ledford and
Benson observed that a difficult problem in this research was
that of disentangling the effects of ratingless reviews from other
changes in performance management – especially ongoing
feedback – that are often introduced at the same time.
A sophisticated study by DirecTV, the US TV programme
provider, was quoted by Ledford and Benson. After adopting
ratingless reviews, the company tracked results over three
years. The results showed higher employee satisfaction with
performance management and more equitable pay
distribution. Managers felt empowered to make pay decisions
and differentiate pay, and they conducted more coaching. An
assessment was made of 1,100 managerial comments from the
reviews and it was found that the commentary became longer
and more effective over the three years.
But the research by Ledford and Benson (page 19) led to the
conclusion that ‘most of the benefits claimed for ratingless
reviews are not the result of that change, per se, but rather are
the result of two important factors that prior research has
shown to be related to performance management effectiveness:
the frequency of feedback and especially the degree to which
the feedback is developmental’.
Forced ranking
Forced ranking or ‘stack ranking’ systems as described in
Chapter 4 were used in General Electric in Jack Welch’s time
and in other large US firms such as Enron. However, according
to Cappelli and Tavis (2016), GE has now abandoned this
practice, as have most other organizations that previously used
it.
Objectives
The definition of objectives is an important feature of
performance management in order to provide direction and a
basis for assessing performance. The tendency now is to treat
them as a natural process of management rather than a rigid
system of setting quantitative ‘SMART’ objectives. As the CIPD
(2020: 3) noted:
Today, many employers do not solely rely on measurements of
employees’ outputs. Rather, they balance these with learning and
development objectives and assessments of employees’ behaviour, such
as how supportive they are of colleagues. These can be of longer-term
importance to the organisation.
Some organizations, such as Microsoft, are referring to
priorities rather than objectives as a means of providing
guidance on all aspects of the work. The priorities can cover
developmental and behavioural requirements as well as targets
and delivery timescales and can indicate how their
achievement will be assessed.
Performance pay
Performance pay may conflict with the developmental
purposes of performance management. This is most likely to be
the case if ratings are used. Organizations are attempting to get
over the problem of focusing on performance management as
a means of deciding on pay awards referred to in Chapter 4 by
holding development and pay review meetings on separate
dates, often several months apart (decoupling).
Advantages and disadvantages of developments
Table 5.1 Comparison of developments
Skip table
Development
Advantages
Disadvantages
Annual performance review
Replace the
annual
performance
review with more
frequent
performance and
development
conversations or
‘check-ins’, which
provide informal
feedback and
include the
discussion and
revision of
priorities and
development
plans.
Gets rid of the ‘dishonest annual
ritual’ of the yearly formal
performance review and appraisal
session, which is often dreaded by
both managers and individuals and, if
done at all, is carried out
perfunctorily. This is replaced by less
formal conversations that arise
naturally out of the normal process
of work.
Abolishing the annual
review means that
there will no longer be
an opportunity to hold
what might be called a
‘stock-taking exercise’,
which provides a
defined framework for
development planning
and objective setting.
Strength-based review
Performance
Offers a more positive and
reviews focus on progressive basis for developing
the identification, performance and potential.
analysis and
development of
strengths rather
than on
performance
problems.
Ratings
Possible danger of
concentrating so much
on strengths that
insufficient attention is
paid to dealing with
performance problems.
Development
Advantages
Disadvantages
Abolish ratings.
Overcomes the fundamental
objections to rating performance.
These are that ratings are largely
subjective and it is difficult to
achieve consistency between the
ratings given by different managers.
Even if objectivity is achieved, to
sum up the total performance of a
person with a single rating is a gross
over-simplification of what may be a
complex set of factors influencing
that performance. To label people as
‘average’ or ‘below average’, or
whatever equivalent terms are used,
is both demeaning and demotivating.
Abolishing ratings
would mean that the
following advantages
would disappear:
they provide a
convenient
means of
summing up
judgements
they motivate
people by giving
them something
to strive for in
the shape of
higher ratings
they guide
performance pay
decisions*
they provide a
basis for
identifying
potential.
* It can also be argued
that it is impossible to
have performance pay
without rating, but
there are ways of
overcoming this.
Forced ranking
Abolish forced
ranking.
Removes the climate of fear and the
likelihood that those ranked highest
on the scale are more competitive
and less cooperative than those
ranked lower.
Link with performance pay
No longer possible to
use forced ranking as a
means of identifying
those employees who
should be dismissed for
poor performance.
Development
Advantages
Disadvantages
Decouple
performance pay
decisions from
performance
reviews.
Avoids the conflict between focusing Makes the process
on performance management as a
more complex.
means of deciding pay increases and
satisfying its developmental
purposes.
Objective setting
Replace complex
objective-setting
procedures
involving, for
example, the
requirement for
‘SMART’
objectives, key
result areas and
key performance
indicators, with a
system based
simply on
determining and
agreeing a limited
number of key
priorities.
The process is simpler and easier to
understand and operate. Managers
can feel that they have better things
to do than draw up lists of key result
areas and performance indicators
and may find it difficult to meet the
SMART objective criteria.
Abandoning the
discipline of setting
SMART objectives
related to rigorous
definitions of key
result areas and
performance indicators
might result in a
vacuum that would not
be filled by the vaguer
concept of priorities.
This might fail to
provide people with
adequate information
about job requirements
and leave them with
insufficient direction.
Performance pay
Decouple
performance pay
decisions from
performance and
development
meetings.
Enables performance review
Easier to deal with all
meetings to pay attention to
the administrative
developmental considerations rather purposes of the review
than concentrate on the impact on
at the same time (pay,
pay.
assessing potential and
identifying potential).
Holding the pay review
separately may reduce
the motivational
impact of the review
when it is associated
with financial reward.
These developments are generally worthwhile, but instituting
them piecemeal is unlikely to solve the problem of the
traditional performance system. A radical approach is required
and this is provided by focusing on performance leadership, as
described in the next chapter.
References
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goal setting, Human Resource Management Review, 21 (2), pp 137–47
Cappelli, P and Tavis, A (2016) The performance management revolution, Harvard
Business Review, Oct, pp 58–67
Chartered Institute of Personnel and Development (2020) Performance Management:
an introduction, CIPD, London
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
e-reward (2016) Performance Management Case Studies, e-reward, Stockport
Institute for Employment Studies (2011) Performance Management: The
Implementation Challenge, IES, Brighton
Ledford, G E and Benson, G S (2019) Ratingless performance reviews: a quasiexperiment, CEO Working Paper Series, WorldatWork, Nov, pp 1–28
Ledford, G E, Benson, G S and Lawler, E E (2016) A study of cutting-edge
performance management practices: ongoing feedback, ratingless reviews and
crowdsourced feedback, WorldatWork Journal, Second quarter, pp 8–24
McGregor, D (1957) An uneasy look at performance appraisal, Harvard Business
Review, May–June, pp 89–94
Murphy, K R (2020) Performance management will not die but it should, Human
Resource Management Journal, 30 (1), pp 13–31
Washington Post (2015) Accenture CEO explains why he’s overhauling
performance reviews, available at: https://www.washingtonpost.com/news/on-lea
dership/wp/2015/07/23/accenture-ceo-explains-the-reasons-why-hes-overhaulingperformance-reviews/ (archived at https://perma.cc/U5H6-ERD7)
PART TWO
Performance management
processes
06
Performance leadership
Introduction
Managing performance is what managers do all the time. It is
not something they only do in an annual appraisal session as
part of a performance management system. It is about good
management, not simply holding meetings and ticking boxes
on a form. As Pulakos et al (2015: 51) commented:
The problem is that formal performance management (PM) systems
have reduced PM to intermittent steps and processes that are
disconnected from day-to-day work and behaviors that actually drive
performance: communicating ongoing expectations, providing
informal feedback in real time, and developing employees through
experience. To deliver on its promise, PM needs to shift from focusing
on the formal system to focusing on the PM behaviors that matter every
day.
Good managers ensure that levels of engagement are high in
their departments. The outcomes of research on how ‘engaging
managers’ do this is described in the first part of the chapter.
The conclusion is reached that they are, in effect, acting as
performance leaders. What this involves is examined in the
second part of the chapter.
What engaging managers do
Research was conducted for the Institute for Employment
Studies by Dilys Robinson (2013) in order to obtain information
on how ‘engaging managers’ – people who inspire and motivate
their teams to perform well – behaved in their dealings with
people, especially their own teams. The following are a
selection of the comments made by these managers and the
people they managed.
Comments by managers
I do give them a bigger picture, a brief overview of the company line and how it
affects them, and what their impact on it is. This is why we do it, this is what we
want to achieve, this is why we want to achieve it and this is what the result
will be if we get to the goal that we want to get to.
It never really gets to the situation where there’s like a really great big formal
sit-down to say let’s review everything you’ve done.
I ensure that people understand what is expected of them. I try to encourage
people to think of the wider objectives of [the organization] and how they fit in.
To keep the team generally motivated and performance levels up, I will make sure I’m
speaking to people, praising them when they do a good job, finding out what their
problems are, helping them with whatever needs to be done.
Comments by employees about managers
I feel like I can see anything that we do does fit with the strategy... I’ve never
sat there and thought, why are we doing this?
You really know where you are and what your goals are.
I think it’s just the way she approaches things, as if she has confidence in your
ability. She’ll tell you if you’re not on track... so she doesn’t let you go gaily down
the road, off on the wrong track.
It’s that there’s constant feedback as well... you don’t have to wait until the end
of that year to be told what your failings are or what your good points are.
She keeps us informed all the time how well we’re all doing separately and then
as a team together. All the time, each week she says, we’re doing well or we’re
not doing well or what we need to do to improve.
As soon as she came in, she had a plan of action saying: well I want to sit in
when you’re doing reviews, your team talks. I want to see how you address your
agents, I want to see how you facilitate a meeting for example... she’s given us
hints and tips, a way we can move forward, what we’re doing well, what we can
continue, what we can do differently the next time.
I think she’s really good at letting you know if you should be doing something
that you’re not, or something a bit more in some area or another, without
making you feel as if you’ve had a lecture from the headmaster. You just
suddenly think, mmm, yes, I’d better go and think about that, and get on with it,
or sometimes in my case, well, I knew that anyway, so perhaps I’d better go and
do whatever it was I’ve been putting off, or whatever. And it’s not meant, or it
doesn’t come out in a, come and see me or anything, it just comes up in the
conversation.
This is how Dilys Robinson described the key behaviours of
such ‘engaging managers’:
Managers were very clear in their expectations, which
gave a focus and a sense of purpose to their teams.
Managers were good at seeing that team members knew
what they were supposed to be doing. But the managers
did not prescribe activities, go into great detail, or ‘micro
manage’ in any way. Rather, they explained the task, its
intended outcome and why the team was being asked to
do it, and then allowed people to get on with it.
Managers set clear quality and behavioural standards, so
their teams knew the level at which they should be
operating. The teams appreciated the way in which the
managers acted as role models by following these
standards themselves.
Managers were aware of how individuals and the team as
a whole were doing, and gave frequent feedback (both
positive and, when things were not going so well,
remedial). Team members appreciated the timely and
frequent feedback they received.
The aim of any policy for managing performance is to have
managers who act like this – who lead rather than simply
manage performance. This is the concept of performance
leadership.
The concept of performance leadership
Leadership was defined by Stogdill (1950: 3) as ‘an influencing
process aimed at goal achievement.’ This is precisely what
performance leadership is. To lead people is to influence, guide
and inspire. It is the process of getting people to do their best to
achieve a desired result. Leaders are concerned with
performance, although these must also have the interests of
their team members at heart. A distinction can be made
between the processes of management and leadership.
Management is about the systematic achievement of results by
effectively utilizing and controlling all available resources, such
as people, money, information and equipment. Leadership
focuses on the most important resource: people. Thus
performance management is a system designed to get results
by treating people as a resource to be organized, controlled, and
exploited like any other resource. Alternatively, performance
leadership is the process of enhancing performance by focusing
on the motivation, development and well-being of people.
The significance of leadership was emphasized by Murphy
(2020: 25): ‘I believe it would be possible to create successful
performance management systems by focusing on the
behaviours that have consistently been shown to be essential to
successful leadership.’ He referred to a well-established theory
of leadership behaviour originally devised by the Ohio State
researchers Halpin and Winer (1957) and developed by Bass
and Bass (2008). This identified two dimensions of leadership
behaviour:
Initiating structure – specifying ways and means of
achieving the objectives of the group and coordinating the
activities of its members.
Consideration – exhibiting concern for the well-being of
employees and maintaining internal harmony and
satisfaction.
Both these behaviours can make a significant contribution to
achieving high performance levels. As Murphy points out, they
are applied in the important process of cascading organizational
and unit level goals to become team and individual goals. This
is the role of the manager as a translator and communicator.
As performance leaders, managers set the direction, make
available the resources needed to get results, motivate their
team members, help people to develop their skills (coaching),
monitor their progress, provide feedback by means of
constructive conversations (see Chapter 12) and ensure that
corrective action is taken when necessary. Performance
leadership skills comprise the ability to:
inspire others;
persuade others willingly to behave differently;
clarify what needs to be done and why;
communicate a sense of purpose to individuals and their
team;
get people into action so that the task is achieved;
understand that leaders cannot create performance
themselves but are conduits for performance through
their influence on others.
It is sometimes said that leaders are born, not made. This is a
rather discouraging statement for those who are not leaders by
birthright, should any such leaders exist. It may be true to the
extent that some exceptional people seem to be visionaries,
have built-in charisma and a natural ability to impose their
personality on others. However, even they will develop and
hone these qualities through progressive experience in dealing
with situations demanding leadership and by observing
effective leaders in action. Burgoyne (2010: 43) commented
that: ‘The will to lead is largely innate but the ability to do it well
is largely learnt.’ And the organization can help with talent
management and leadership development programmes.
A competency profile as illustrated in Table 6.1 can be used as
a basis for identifying learning and development needs,
preparing learning programmes and reviewing performance.
Table 6.1 Example of competency profile for a
performance leader with positive and negative
indicators
Skip table
Competency
heading
Act as a performance leader.
Competency
definition
Constantly seeks ways of developing team members and
improving their performance.
Competency
requirement
Fully understands what the team and individual team
members are expected to do and how they should
behave in doing it.
Creates a clear structure by explaining what needs to
be done and why.
Ensures that as far as possible, individual objectives are
aligned with the strategic goals of the organization.
Allows people to get on with it.
Fully aware of how the team and its members are doing.
Provides frequent and timely feedback (both positive
and, when things were not going so well, remedial).
Guides and coaches team members so that they develop
their skills and potential and can perform their work
effectively.
Considerate when relating to team members on any
matters concerning their work.
Positive
indicators
The team achieves high levels of productivity, quality
and customer service.
The levels of engagement of team members are high.
Team members are enthusiastic about learning and are
actively improving existing skills or developing new
ones.
Negative
indicators
Inadequate levels of productivity and quality of
customer service.
Low levels of morale as indicated by engagement
surveys, absenteeism, employee turnover.
No interest in or enthusiasm for learning.
Conclusion
To achieve high levels of performance it is not enough to tinker
around with traditional performance management activities,
such as performance reviews and rating as advocated by
reinvention enthusiasts like Buckingham and Goodall (2015).
The well-established problems and limitations of traditional
performance management systems – as described in detail in
Chapter 5 and typified by the famous remark of Keith Grint
(1993: 64) that: ‘Rarely in the history of business can such a
system have promised so much and delivered so little’ – are too
deep-rooted for that. More recently, Pulakos and O’Leary (2011:
146) in the introduction to their seminal article ‘Is performance
management broken?’ stated that:
We propose that a significant part of the problem is that performance
management has been reduced to prescribed steps within formal
administrative systems that are disconnected from the day–to–day
activities that determine performance management effectiveness (e.g.,
communicating clear work expectations, setting short–term objectives
and deadlines, and providing continual guidance). We argue that
interventions to improve performance management should cease their
exclusive focus on reinventing formal system features. Although well–
developed tools and systems can facilitate performance management,
these alone do not yield effective performance management. In lieu of
making further changes to formal performance management systems,
we argue for devoting more attention to improving manager–employee
communication and aspects of the manager–employee relationship and
propose an approach we believe holds promise for improving
performance management processes in organizations.
As Kevin Murphy (2020:16) argued in his challenging Human
Resource Management Journal article ‘Performance
management will not die but it should’: ‘The persistent failure
of a wide range of approaches to improving performance
appraisal and performance management systems suggests that
a new strategy is needed.’ That new strategy is performance
leadership.
References
Bass, B and Bass, R (2008) The Bass Handbook of Leadership: Theory, Research and
Managerial Implications, Simon & Schuster, New York
Buckingham, M and Goodall, A (2015) Reinventing performance management,
Harvard Business Review, April, pp 40–50
Burgoyne, J (2010) Crafting a leadership and management development strategy, in
Gower Handbook of Leadership and Management Development, eds J Gold, R
Thorpe and A Mumford, Gower, Farnham, pp 42–55
Grint, K (1993) What’s wrong with performance appraisal? A critique and a
suggestion, Human Resource Management Journal, 3 (3), pp 61–77
Halpin, A W and Winer, B J (1957) A factorial study of the leader behaviour
descriptions, in Leader Behavior: Its description and measurement, eds R M Stogdill
and A E Coons, Bureau of Business Research, Ohio State University, Columbus, pp
39–51
Murphy, K R (2020) Performance management will not die but it should, Human
Resource Management Journal, 30 (1), pp 13–31
Pulakos, E D and O’Leary, R S (2011) Why is performance management broken?
Industrial and Organizational Psychology, 4 (2), pp 146–64
Pulakos, E, Hanson, R M and Moye, N (2015) Performance management can be
fixed: an on-the-job experiential learning approach for complex behavior
change, Industrial and Organizational Psychology, 8 (1) pp 51–76
Robinson, D (2013) The Engaging Manager and Sticky Situations, Institute for
Employment Studies, Brighton
Stogdill, R M (1950) Leaders, membership and organization, Psychological Bulletin,
25, pp 1–14
07
Performance and development
planning
Introduction
Performance and development planning involves reaching
agreements that set out the outcome of discussions between
managers and individual members of their team; first, on what
the latter are expected to do and achieve, and second, how they
should develop their skills and abilities, progress their careers
and, as necessary, improve their performance to ensure that
expectations are met. These can be formal and elaborate affairs,
made during an annual performance review. They may be
stuffed with jargon such as SMART goals, critical success factors
and key performance indicators. This is the traditional
approach, which is summarized in the first section of this
chapter. Alternatively, and preferably, the plans can be
relatively informal and discussed at any time during the year
whenever necessary. Managers will continue to be involved in
defining roles, setting objectives and agreeing development
plans, but these natural processes are not buried in the depths
of a bureaucratic performance management system.
Performance and development planning – the
traditional approach
The traditional approach to performance and development
planning has the following acronym-ridden features:
1. Role profiles are agreed that set out the key result areas of
the role (KRAs). Key result areas are the elements or core
tasks of a role for which clear outputs or outcomes can be
defined, each of which makes a significant contribution to
achieving the overall purpose of the role.
2. SMART (specific, measurable, achievable, relevant, timebased) objectives are set for each key result area.
3. Critical success factors (CSFs) are defined that indicate the
knowledge and skills and behavioural competencies
required to successfully perform the role.
4. Key performance indicators (KPIs) are identified. These
are the metrics or other sources of information that
measure levels of performance by indicating what results
have been achieved.
5. Performance improvement plans are prepared that spell
out what employees need to do to achieve better results.
6. Personal development plans are agreed that describe how
employees can develop their knowledge and skills and
thus improve performance and enhance their career
prospects.
This approach appears to be logical and comprehensive. But
there is one fundamental problem: it is too complex. The
managers who are expected to use it have to carry out a
sequence of elaborate activities using unfamiliar jargon.
What they want to do, and what they need to do, is be clear
about what they expect their team members to achieve, convey
those expectations to them, assess the extent to which what
needs to be done has been done, deal with any problems this
assessment reveals and support the development of the skills
and abilities of their team members. This amounts to quite a lot,
but it is what managers as performance leaders do as a matter
of course and they don’t necessarily need an elaborate
performance management system in order to do it. What they
really need is help and advice through coaching and mentoring,
supplemented, but not replaced, by formal training. The aim
should be to encourage managers to ensure that roles and
objectives are defined and agreed and that development plans
are made and implemented as discussed below.
Defining roles
A role is the part played by individuals in carrying out their
work. People need to understand what their role is in order to
do their job properly and to develop the necessary knowledge
and skills.
Roles do not have to be defined formally on paper, although
for reference purposes some record can usefully be made of
what role holders are generally there to achieve (the purpose of
the role) and the important responsibilities involved in
achieving that purpose (usually called key result areas – a piece
of jargon, but helpful jargon). Such records are often called role
profiles, in which the focus is on results to distinguish them
from the more traditional job description, which generally was
limited to listing tasks or duties. A role profile need not be a
huge document. A role can and should be described on the
classic one side of one sheet of paper.
Methods of preparing a formal role description or role profile
(if this is required) in terms of its overall purpose and key result
areas are set out below.
Overall purpose
This section should convey in one sentence a broad picture of
the role – a succinct account of what the role-holder is there to
achieve. For example:
to administer appeals and the processing and recording of
donations;
to plan and implement brand promotion strategies;
to specify, develop, implement and ensure the
maintenance of production engineering equipment and
processes in accordance with production requirements;
to supervise a team providing full financial accounting
services for a profit centre.
Key result areas
The following steps are required to describe the key result areas
in a formal role profile:
1. Define the overall purpose of the role.
2. Conduct an analysis of the role to identify the main
activities required to achieve its overall purpose.
3. Group the main activities identified by the role analysis
together so that no more than five or six areas remain. If
the number is extended much beyond that, the role
profile will become over-complex and it will be difficult to
be specific about tasks or duties.
4. Define each activity in one sentence, starting with a verb
in the active voice, to provide a positive indication of what
has to be done and eliminate unnecessary wording.
Examples are: plan, prepare, produce, implement, process,
provide, schedule, complete, dispatch, maintain, liaise
with and collaborate with.
5. Describe what is done as succinctly as possible, for
example: test new systems, post cash to the nominal and
sales ledgers, dispatch packed output to the warehouse,
schedule production, ensure that management accounts
are produced, prepare marketing plans.
6. State briefly the purpose of the activity as a key result area
in terms of outcomes, outputs or standards to be achieved.
For example:
test new systems to ensure they meet agreed
systems specifications;
post cash to the nominal and sales ledgers in order to
provide up-to-date and accurate financial
information;
dispatch to the warehouse planned output so that all
items are removed on the same day they are packed;
schedule production to meet laid-down output and
delivery targets;
ensure that management accounts are produced that
provide the required level of information to
management and individual managers on financial
performance against budget and on any variances;
prepare marketing plans that support the
achievement of the marketing strategies of the
enterprise, are realistic, and provide clear guidance
on the actions to be taken by the development,
production, marketing and sales departments;
plan and implement sales campaigns to meet sales
targets;
achieve sales volume and contribution targets;
respond to customer queries and complaints within
one working day.
An example of a formal role profile is given in Figure 7.1.
Figure 7.1 Example of a role profile
Figure 7.1 details
Good managers will make sure that their team members know
what is expected of them without resource to an elaborate
process of job analysis and a formal role profile. Here’s what
four people said about their managers to Dilys Robinson (2013):
He’s very focused on [how] everything that we do fits in
with the higher strategic initiatives... so we all pretty much
know what we’re supposed to be doing and where it fits in,
and why.
He gives direction. He shows interest and gives advice
when needed. You really know where you are and what
your goals are.
He gives a steer. If you need help he gives it; otherwise, he
trusts you to get on with it.
There’s a lot of sitting down, explaining direction, defining
roles and responsibilities.
Defining objectives
The process of defining objectives or goals as described in detail
in Chapter 11 is a key part of performance and development
planning. Objectives set out the direction people should take
and provide the criteria needed to assess performance and
progress. They are a means of communicating the
organization’s strategies to employees. Statements of the key
result areas for a role in effect define the overall objectives for
each of the main activities involved in carrying out the role.
Where appropriate, specific targets can be attached to these
areas, either in terms of quantified results or a specific project
or task to be achieved by a certain date.
Development planning
Development planning is the process first of identifying needs
to acquire or extend knowledge and skills (learning needs) or to
overcome performance or behavioural problems (performance
improvement needs). Then decisions are made on how these
needs should be satisfied. Performance management has an
important developmental role. As Lawler et al (2012: 193)
noted: ‘A key issue for any performance management system is
how effectively it identifies the skill needs of individuals and
assures that they are adequate.’
Traditionally, performance management has provided
learning and performance development opportunities through
the processes of concluding performance agreements and
reviewing performance. This can still happen if a formal annual
review system is in place. But it is best to provide these
opportunities throughout the year.
Learning is inseparable from activity and, like performance
management, is a continuous process. Every task carried out by
someone presents a learning opportunity, and it is the duty of
managers to help people become aware of this and to support
the day-to-day learning that takes place. They should enable
people to understand how to tackle a new task and what
additional knowledge or skills they will need. Guidance can be
provided by asking questions on what individuals need to know
and be able to do to undertake a task, leaving them as far as
possible to think for themselves but helping them when
necessary.
Feedback throughout the year, rather than during an annual
performance review, is also an important means of helping
people to learn and overcome performance or behavioural
problems. They can be asked to analyse their performance and
their behaviour – the results they achieved in undertaking a
task and the ways in which those results were achieved. Where
they recognize a need for improvement, they can discuss with
their manager any additional coaching, training or experience
they require.
Development plans are always related to work and the
capacity to carry it out effectively. They are not just about
identifying training needs and suitable courses to satisfy them.
Training courses may form part of the development plan, but a
minor part; other learning activities such as those listed below
are more important:
learning in the flow of work – learning while working by
gaining personal experience and by observing and
obtaining guidance from colleagues;
coaching;
adopting a role model (mentor);
extending the role (job enrichment);
project work – special assignments;
involvement in other work areas;
involvement in communities of practice (learning from
others carrying out similar work);
action learning;
e-learning;
guided reading.
The emphasis should be on self-directed learning – as much as
possible individuals should be able to plan and implement their
own learning programmes with help and advice as required.
But the learning programme can be defined in a personal
development plan. There is more on performance management
and learning in Chapter 18.
References
Lawler, E E, Benson, G S and McDermott, M (2012) What makes performance
appraisals effective?, Compensation & Benefits Review, 44 (4), pp 191–200
Robinson, D (2013) The Engaging Manager and Sticky Situations, Institute for
Employment Studies, Brighton
08
Assessing performance
Introduction
Performance assessment is the evaluation or measurement of
how well someone is doing. It is carried out informally as part
of the normal process of management when managers and
individuals talk about work, but in a formal performance
management system it is usually a major part of a performance
review. Performance assessment is sometimes called
performance appraisal, especially when it includes ratings. It is
preceded by performance analysis in which an examination
takes place of how well a job has been done and the factors that
have affected results. Performance assessment is supposed to
generate information that enables the three purposes of
traditional performance management systems to be achieved:
improving performance, developing people and the
administration of performance pay and talent management.
The first section of this chapter is concerned with
performance analysis. The following sections deal with the
different methods of performance assessment, namely: rating
(by far the most popular), forced distribution and forced
ranking, narrative assessments and visual assessment.
Performance analysis
In his seminal article for the Harvard Business Review, ‘An
uneasy look at performance appraisal’, Douglas McGregor
(1957) suggested that the emphasis should be shifted from
appraisal to analysis. The article was written a long time ago,
but its message is just as relevant today (except for pronoun
use), and the persistence of the concept of top-down
judgemental appraisal in many organizations suggests that
there is still much to be learnt from McGregor in this area, as in
a lot of others. He wrote (page 91):
This (the shift to analysis) implies a more positive approach. No longer
is the subordinate being examined by the superior so that his [sic]
weaknesses may be determined; rather he is examining himself in
order to define not only his weaknesses but also his strengths and
potentials… He becomes an active agent, not a passive ‘object.’
McGregor (1960) was the first commentator to suggest that
attention should be on the future rather than the past in order
to establish targets and seek the best means of reaching them.
Performance analysis should be based on clear and agreed
standards and relevant evidence (evidence-based performance
management) rather than on opinion. The assessment of
results should be founded on measurable or recognisable
outcomes, and assessments of behaviour should be supported
by illustrative examples in the shape of critical incidents.
The analysis should not be reserved for a formal once-a-year
performance review session. Instead, it should take place
during informal conversations between the manager and the
individual held frequently throughout the year about what is
required, what is happening, how and why it is happening and
what should be done about it. This approach was illustrated by
what two managers said to Dilys Robinson (2013):
I treat people the way I want them to treat me. If I want them to achieve
X, Y or Z they need to know what it is that I want from them to start off
with. I like to talk to them about what the goals are and then how we
are going to get there... And through regular one-to-ones and coaching
and observations and feedback, that’s where I highlight any gaps and
identify, okay, you’re not performing in this area, so what are you going
to do?
I’ve developed over the years, the last couple of years, more of a
coaching style to performance management. Very much discussion,
very much gathering information, gathering the ideas, looking at how
realistic those sorts of ideas are going to be, throwing out a few
scenarios and a few what ifs with people and generally encouraging
people to set their own targets and their own objectives... I’m on the
phone every day of the week reviewing what we’ve done and just
looking at it, challenging, looking for new ideas.
Rating
Rating involves an assessment by a reviewer of the level of
performance of an employee expressed on a scale. Murphy and
Cleveland (1995) stated that effective appraisal systems are
those where the raters have the ability to measure employee
performance and the motivation to assign the most accurate
ratings. Since the days of merit rating and then performance
appraisal, rating still reigns supreme. The 2014 e-reward survey
of performance management in the UK found that 79 per cent
of respondents used ratings. Research by Gorman et al (2017) in
the US established that 84 per cent of respondents used either
numerical ratings or numerical ratings together with written
comments.
To many people, rating is the ultimate purpose and the final
outcome of performance appraisal. Academics, especially US
academics, have been preoccupied with rating – what it is, how
to do it, how to improve it, how to train raters – for the last 50
years. Many problems with rating have been identified, as
discussed in Chapter 4, but it doesn’t seem to have occurred to
many that these could readily be overcome if rating weren’t
used at all.
The theory of rating
The theory underpinning all rating methods is that it is possible
as well as desirable to measure the performance of people on a
scale accurately and consistently and categorize them
accordingly. As DeNisi and Pritchard (2006: 254) commented:
‘Effective performance appraisal systems are those where the
raters have the ability to measure employee performance and
the motivation to assign the most accurate ratings.’
Murphy and Cleveland (1995) distinguished between
judgement and ratings. A judgement is a relatively private
evaluation of a person’s performance in some area. Ratings are
a public statement of a judgement, which is made for the
record. Wherry and Bartlett (1982) produced the following
theory of the rating process:
Raters vary in the accuracy of ratings given in direct
proportion to the relevancy of their previous contacts with
the person being rated.
Rating items that refer to frequently performed acts are
rated more accurately than those which refer to acts
performed more rarely.
The rater makes more accurate ratings when forewarned
of the behaviours to be rated because this focuses
attention on the particular behaviours.
Deliberate direction to the behaviours to be assessed
reduces rating bias.
Keeping a written record between rating periods of
specifically observed critical incidents improves the
accuracy of recall.
An analysis of the rating process based on neuroscience
research was made by David Rock, Director of the
NeuroLeadership Institute, reported by Justine Hofherr (2011):
People worry companies won’t know how to rate performance or
differentiate pay without them, but that’s not true. Most companies
making the switch are giving managers more discretion in who gets
raises and who doesn’t, calling the traditional numerical ranking
system ‘counter-intuitive’ to getting employees to improve.
It seems really logical to give people a number and identify them with a
one through five rating, but it has these unintended consequences that
you might not notice unless you have a lot of time. We human beings
are very focused on social interactions. We are very obsessed with our
social status. Calling people a number activates a deep sense of danger
in people. It’s just how we’re built.
While some companies were concerned a lack of performance reviews
would make top performers feel unappreciated. Employees from all
different performance levels said they were happier without numerical
ratings.
Instead of using numbers, these companies encouraged managers to
describe employees’ performance after getting to know them through
regular interactions. This not only led to managers talking more with
employees, but also improved the quality of the conversations. Rather
than focusing on past performance, employees and their managers
reported setting goals, planning development and taking action.
Rating scales
Rating scales summarize the level of performance achieved by
an employee. This is done by selecting the point on a scale
(sometimes referred to as a ‘performance anchor’) that most
closely corresponds with the view of the assessor on how well
the individual has been doing. A rating scale is supposed to
assist in making judgements and it enables those judgements to
be categorized to summarize the assessment of overall
performance.
Number of levels
There is a choice of the number of levels in a standard rating
scheme – there can be three, four, five or even six levels. Five
levels are by far the most popular, as was shown by the 2014 ereward survey where the distribution of level numbers
between respondents was:
three – 9 per cent;
four – 18 per cent;
five – 61 per cent;
six – 2 per cent.
When confronted with a five-level scale, raters can be tempted
to over-concentrate on the middle rating and avoid
discriminating sufficiently between superior and inferior
performers. Alternatively, five level scales can lead to ‘rating
drift’ – a tendency to push ratings into higher categories. This
can only be avoided by carefully wording the level descriptions
to ensure that the middle category is used appropriately and by
training managers in rating methodology.
Supporters of three grades contend that people are not
capable of making any finer distinctions between performance
levels. They know the really good and poor performers when
they see them and have no difficulty in placing the majority
where they belong, that is, in the middle category.
Those who prefer more than three grades take the opposite
but equally subjective view that raters do want to make finer
distinctions and feel uncomfortable dividing people into
superior (average or above average) sheep, and inferior (below
average) goats. They prefer intermediate categories in a fivepoint scale or a wider range of choice in a four- or six-point
scale.
The advocates of a larger number of points on the scale also
claim that it assists in making the finer distinctions required in
a performance-related pay system. But this argument is only
sustainable if it is certain that managers are capable of making
such fine distinctions (and there is no evidence that they are)
and that these can be equitably reflected in meaningful pay
increase differentials.
However, a study by Bartol et al (2001) that compared
employees who were assessed against a five-point scale and
those who were judged against a three-category scale found
that, with a five-point scale, employees were more confident
that they could improve their performance, set higher goals for
themselves and went on to see higher rating improvements.
This was probably because it was perceived to be easier to
move up to a higher level on a five-point scale than it would be
on a three-point scale.
Rating scale definitions
A rating scale can be constructed alphabetically (a, b, c etc), or
numerically (1, 2, 3 etc). Five-level scales, as in the example
below, typically provide for two superior performance levels, a
fully satisfactory level and two shades of less than capable
performance. The rationale is that raters prefer this degree of
fineness in performance definition and can easily recognize the
middle grade and distinguish those who fall into higher or
lower categories. It is also in accord with a typical way in which
the normal curve of distribution (the Gaussian curve) is
expressed, where the middle category includes 60 per cent of
the population, the next higher or lower categories each
comprise 15 per cent of the population and the remaining 10
per cent is distributed equally between the highest and lowest
category. But, the belief that the distribution of performance
conforms to the normal distribution is highly questionable. It
has not been substantiated by research and cannot be used as a
justification for a five-level rating scale.
A scale may simply define levels alphabetically, for example:
a = excellent, b = good, c = satisfactory, d = not entirely
satisfactory and e = unsatisfactory. Alternatively, scale levels
can be described verbally as in the following example of a fivepoint scale:
a. Exceptional performance: Exceeds expectations and
consistently makes an outstanding contribution.
b. Well-balanced performance: Consistently performs in a
thoroughly proficient manner.
c. Acceptable performance: Meets the normal expectations of
the role.
d. Barely effective performance: Does not meet all objectives
or role requirements of the role; performance
improvements in certain aspects of the role are needed.
e. Unacceptable performance: fails to meet most objectives or
requirements of the role. Significant performance
improvements are required.
Another approach is to have a rating scale that refers to
achievement levels and provides positive reinforcement. This is
in line with a strengths-based approach (see chapter 9) and a
culture of continuous improvement. The four-level example
given below emphasizes the positive and improvable nature of
individual performance.
Very effective: Achieves all the objectives of the job. Exceeds required
standards and consistently performs in a thoroughly proficient manner
beyond normal expectations.
Effective: Achieves required objectives and standards of performance
and meets the normal expectations of the role.
Developing: Achievements are stronger in some aspects of the job than
others. Most objectives are met but there is room for performance
improvements in some areas.
Improvable: Achievements are generally below expectations. There is
considerable room for improvement in several definable areas.
Positive definitions aim to avoid the use of terminology for
middle-ranking but entirely acceptable performers such as
‘satisfactory’ or ‘competent’, which seem to be damning people
with faint praise.
This scale deliberately avoids including an ‘unacceptable’
rating or its equivalent on the grounds that if someone’s
performance is totally unacceptable and unimprovable this
should have been identified during the continuous process of
performance management and corrective action initiated at the
time. This is not something that can be delayed for several
months until the next review when a negative formal rating is
given, which may be too demotivating or too late. If action at
the time fails to remedy the problem, the employee may be
dealt with under a capability procedure and the normal
performance review suspended until the problem is overcome.
However, the capability procedure should still provide for
performance assessments to establish the extent to which the
requirements set out in the informal or formal warnings have
been met. Note also that in order to dispel any unfortunate
associations with school reports; this ‘positive’ scale does not
include alphabetic or numerical ratings. Some organizations
have included ’learner/achiever’ or ’unproven/too soon to tell’
categories for new entrants to a grade for whom it is too early
to give a realistic assessment.
An example of a three-point scale used in a financial
institution is given in Figure 8.1. Each point can be regarded as a
category rather than a rating, as shown by the links made
between the categories and the value of the pay award
associated with them.
Figure 8.1 A three-level rating scheme
Figure 8.1 details
Graphic rating scales
A graphic rating scale provides guidance on ratings by
anchoring the rating scale with statements describing the
results or sort of behaviour that indicate that a particular rating
level is justified. The intention is that these ‘anchors’ should
ease the choice of levels and obtain consistency in the
judgements made by different assessors. The most typical
graphic rating scales are: behaviourally anchored rating scales
(BARS) and a development of these, behavioural observation
scales (BOS).
Behaviourally anchored rating scales
Behaviourally anchored rating scales were originally conceived
by Smith and Kendall (1963). They consist of specific
behavioural descriptions defining points against each scale (
‘behavioural anchors’), which represent a dimension, factor or
work function, considered important for performance. The
statements range from a description of the worst-quality
performance to one that describes the best, with all the other
statements at appropriate intervals between. The aim is to
guide managers on which level to select.
The behavioural descriptions in such scales are supposed to
discourage the tendency to rate on the basis of generalized
assumptions about personality traits (which are probably
highly subjective) by focusing attention on specific work
behaviours. But there is still room for making subjective
judgements based on different interpretations of the definitions
of levels of behaviour and how they relate to the employee’s
behaviour.
BARS take time and trouble to develop and are not in
common use except in a modified form as the dimensions in a
differentiating competency framework.
Behavioural observation scales
Behavioural observation scales as developed by Latham and
Wexley (1977) attempt to avoid the BARS problem of focusing
on specific behaviours by using more generalized behavioural
statements. They consist of summated scales based on
statements about desirable or undesirable work behaviour.
These are complete behavioural statements, for example:
‘Conducts performance reviews on time’, ‘Conducts the
performance review as a dialogue with the employee.’ The
headings are devised through the factor analysis of critical
incidents. Factor analysis is the statistical analysis of the
interactions between the effects of random (independent)
variables. The assessor records the frequency with which an
employee is observed engaged in a specified behaviour on a
five-point Likert scale. An example of a behavioral item for
appraising a sales representative is: ‘Knows the price of
competitive products’ and this is assessed on the following
scale:
Skip table
Never
Seldom
Sometimes
Rating
1
2
3
Frequency (% of
time)*
0
1–20%
21–40%
Ge
4
*Managers record the frequency with which they have observed the employee
behaving in this way.
According to Latham et al (2007), behavioural observation
scales are regarded as the most practical rating method by
users. It was claimed that they produce fewer rating errors than
other methods, as long as raters have been trained in their use.
Their superiority to other scales arises from the fact that they
are based on Wherry and Bartlett’s (1982) theory of rating
(summarized earlier in this chapter). This included the
recommendation that recorded critical incidents should be
used to help improve the validity of assessments. But their
elaborate nature has restricted their use. Kane and Bernardin
(1982) detected what they called a fatal flaw in this system. They
pointed out:
This scale is used to rate the observed occurrence rates of selected
behaviors identified as being illustrative of desirable and undesirable
ways of carrying out job functions. Each rating interval is assumed to
connote a constant degree of performance satisfactoriness, regardless
of the behavior it is used to characterize (allowing, of course, for its
transformation to its scale complement in the case of undesirable
behaviors). The problem that this scale design raises is that a given
occurrence rate interval does not, in fact, connote a constant level of
performance satisfactoriness for all job behaviors.
Achieving accuracy in ratings
A key issue in rating is the extent to which ratings can
objectively indicate performance levels.Murphy and Cleveland
(1995) suggested that rating accuracy is improved when:
good and poor performance are clearly defined;
the principle of distinguishing among workers in terms of
their levels of performance is widely accepted;
there is a high degree of trust in the system;
low ratings do not automatically result in the loss of
valued rewards;
valued rewards are clearly linked to accuracy in
performance appraisal.
Research by Roberts (1994) indicated that acceptance is
maximized when the performance measurement process is
perceived to be accurate, the system is administered fairly, the
assessment system doesn’t conflict with the employee’s values
and when the assessment process does not exceed the bounds
of the psychological contract. He suggested that to increase the
acceptability of assessments reviewers should:
Pay less attention to mechanics and place more emphasis
on process.
Avoid basing conclusions on a small number of instances.
Learn to seek information on external factors that may
influence performance.
Document employee performance.
Involve individuals in the process through a genuine
invitation to participate.
Appreciate that reviewers do not have all the relevant
performance information and that the employee is an
important source.
Encourage self-appraisal.
Provide regular informal feedback, bearing in mind that
once-a-year performance appraisal is unlikely to meet
employee feedback requirements.
Achieving consistent ratings
It is very difficult to ensure that ratings made by different
managers are consistent with one another. One method to deal
with this problem is to hold ‘consistency’ workshops for
managers who discuss how ratings can be objectively justified
and test rating decisions on simulated performance review
data. The aim is to build a level of common understanding
about rating levels. This is called ‘frame of reference training’
(Bernadin et al, 1995). The training attempts to teach managers
how to match a rating to performance by ensuring that the
definitions of rating levels are understood and providing
guidance and practice on how to use them.
Another method is to get groups of managers together to
review the pattern of each other’s ratings and challenge
unusual decisions or distributions. This process of calibration or
moderation is time-consuming, but is possibly the best way to
achieve a reasonable degree of consistency, especially when the
group members share some knowledge of the performances of
each other’s staff as internal customers.
A less time-consuming but more directive method is for HR to
monitor the distribution of ratings and challenge any unusual
patterns or what appear to be unwarrantable differences
between departments’ ratings.
Consistency of a sort and at a price can also be achieved by
forced distribution and forced ranking as described later.
Arguments for rating
The arguments for rating are:
It satisfies a natural wish people have to know precisely
where they stand. But this is only desirable if the
manager’s opinion is honest, justified and fair, and the
numbers or letters convey what is really felt and are
meaningful.
It provides a convenient means of summing up
judgements so that high or low performances can easily
be identified (as long as the judgements are consistent and
fair).
It motivates people by giving them something to strive for
in the shape of higher ratings (as long as they know what
they have to do to get a better assessment).
It is not possible to have performance pay without an
overall rating (assuming performance pay is wanted or
needed and that there are indeed no alternatives, which
there are – see Chapter 21).
It can provide a basis for identifying high-flyers for a talent
management programme or for generally predicting
potential. Past performance is only a predictor of future
performance, however, when there is a connecting link,
that is, there are elements of the present job that are also
important in a higher-level job.
Arguments against rating
Ratings are largely subjective and it is difficult to achieve
consistency between the ratings given by different managers.
Rating is judgemental and looks backward while performance
management should be developmental rather than
judgemental and forward-looking rather than dwelling on the
past. Because the notion of ‘performance’ is often unclear,
subjectivity can increase. Even if objectivity is achieved, to sum
up the total performance of a person with a single rating is a
gross over-simplification of what may be a complex set of
factors influencing that performance – to do this suggests that
the rating will be a superficial and arbitrary judgement.
Labelling people as ‘average’ or ‘below average’, or whatever
equivalent terms are used, can be both demeaning and
demotivating. The whole performance review meeting may be
dominated by the fact that it will end with a rating, thus
severely limiting the crucial forward-looking and
developmental focus of the meeting. This is particularly the
case if the rating governs performance pay increases.
Conclusions on rating
There are strong arguments both for and against rating. The
majority of organizations favour it because they believe that:
(1) it informs merit pay decisions, (2) it identifies high-flyers for
talent management purposes or poor performers for remedial
action or dismissal, and (3) it tells employees where they stand
and gives them something to strive for. Some either ignore the
cons or are unaware of them. But many are concerned with the
real problems of inaccuracy and inconsistency and do not
accept that the ways of tackling these as discussed above are
sufficient. Some organizations don’t have ratings (21 per cent of
the respondents to the 2014 e-reward survey) but most are
reluctant to abandon them, especially when ratings are relied
on to inform performance pay decisions (how to do without
ratings in these circumstances is considered in Chapter 21).
Forced distribution and forced ranking
Forced distribution means that raters have to conform to a laiddown distribution of ratings at different levels. In its softer
form, when the distribution is suggested rather than
mandatory, it is called guided distribution. The pattern of forced
distribution may correspond to the normal bell-shaped curve,
which has been observed to apply to IQ scores, although, as
mentioned in Chapter 3, there is no evidence that performance
in an organization is distributed normally – there are so many
other factors at work, such as recruitment and development
practices. Employees subjected to forced distribution have to be
allocated to sections of the curve in accordance with
performance assessments. For example, as illustrated in Figure
8.2, the highest-level performers would be placed in category A
– the first 15 per cent of the curve. The middle 70 per cent
would be placed in category B in the centre of the curve, and
the bottom 15 per cent would be placed in category C.
Figure 8.2 Forced distribution of ratings
Figure 8.2 details
Other distributions can be adopted, for example 15 per cent A,
75 per cent B and 10 per cent C, on the assumption that a
company’s recruitment and development activities produce
more high-level performers than also-rans. Three categories are
the most common, although a five-level A to E system is used in
some organizations. The latter is a less popular choice because
it requires more refinement of judgement than is likely to be
possible and creates an underclass of Ds who have been forced
into that group whether or not they are below par.
Forced distribution achieves consistency of a sort, but the
practice is based on the false assumption that levels of
performance are distributed normally. And managers and staff
rightly resent being manipulated in this way. Only 12 per cent
of respondents to the 2014 e-reward performance management
survey used it.
Forced distribution can form the basis of a forced ranking or
‘stack ranking’ system in which the rank order is divided into
percentiles, for example the top 20 per cent, the middle 70 per
cent and the bottom 10 per cent into which employees are
placed.
The classification can be used to identify those who are fasttracked in talent management programmes, or those who may
not survive.
Forced ranking first became famous, or infamous, when it
was used by Jack Welch at General Electric (GE) to identify highflyers and poor performers. The latter were ‘let go’, hence the
terms ‘rank and yank’ for this procedure. GE has now
abandoned it.
Supporters of forced ranking say it is a good way of weeding
out unsatisfactory employees as well as identifying and
rewarding the top players. But it doesn’t work. Before
imploding, thanks to the actions of its own top performers,
Enron used a complicated system to rank and yank its
employees. The ‘rank and yank’ approach may have its
advocates, but Meisler (2003), in an article tellingly called ‘Dead
man’s curve’, thought that: ‘For most people– especially those
with outmoded concepts of loyalty and job security – the
prospect of a Darwinian struggle at the work place is not a
happy one.’
Research conducted by Garcia as reported in Machine Design
(2007) established that in forced ranking systems, individuals
will care less about performing well on a given task and instead
shift their focus to performing relatively better on a scale.
Those ranked highest on the scale are more competitive and
less cooperative than those ranked lower.
A further difficulty is that, when an organization gets rid of
the bottom 10per cent, a proportion of those in the average
category will drop down automatically into the unsatisfactory
category without any change to their level of performance. As
Ed Lawler, quoted by Aguinis (2005) commented, if a prescribed
percentage of employees is let go every year because they have
been placed in the ‘C’ category, this will at some time cut into
the ‘bone’ of the organization. Research by Meisler (2003) found
that for this reason after about three iterations forced
distribution systems became ineffective. A simulation by
Scullen et al (2005) established that, while there were
improvements in performance in the first few years of the
operation of forced ranking, this drains away and eventually
becomes zero. O’Malley (2003) described forced ranking as a
‘gross method of categorising employees into a few evaluative
buckets.’
A forced ranking approach will not work unless employees
understand what is expected of them, there are fair procedures
for reviewing and classifying levels of performance, and
employees trust their managers to use these procedures to
assess their performance correctly. These are exacting
requirements.
Narrative assessment
A performance assessment may be recorded in a narrative
consisting of a written summary of views about the level of
performance achieved. This can supplement or replace rating
and if done well – a big if – can provide better information
about how someone is performing than a crude rating scale.
The following are guidelines on completing one:
Get to the point – quantity is no indication of quality when
it comes to feedback, so focus efforts on capturing the
most important points of feedback, concentrating on
outcomes and ensuring that each point is supported by
tangible evidence.
Comment equally on both what has been achieved and
how it has been delivered. Emphasize both what the
individual has done and how they have gone about doing
it, making explicit reference to the core values of the
organization.
Reflect the dialogue that has occurred throughout the year
in what should have been effective and regular
performance conversations – it should not be a surprise to
the individual concerned.
Highlight strengths and areas for development – provide
acknowledgement of positive contributions, and be
constructive in commenting on what the individual might
have done differently or to a higher standard.
Prepare a succinct, results-focused summary. If a rating
system is in operation, it can be used in a rating calibration
session. This is a meeting of a number of managers to
review the pattern of each other’s ratings and challenge
unusual decisions or distributions. For this purpose you
should ensure that it is short, impactful and can be
delivered verbally in 30–60 seconds.
Highlight strengths and areas for development – provide
acknowledgement of positive contributions, and be
constructive in commenting on what the individual might
have done differently or to a higher standard. In
accordance with the concept of strength-based
performance management (see Chapter 9), performance
reviews should focus on what people do well and should
work towards establishing goals that are based on
strengths rather than weaknesses.
This method was adopted by 27 per cent of the respondents to
the 2004 e-reward contingent pay survey. It at least ensures that
managers have to collect their thoughts together and put them
down on paper. But the results can be bland, misleading and
unhelpful from the viewpoint of deciding what should be done
to develop talent or improve performance. Early research on
performance appraisal systems by Kay Rowe (1964) led her to
produce the following superficial and bland picture of what
they can look like:
Has tact and is loyal. Shows initiative and leadership. A good organizer
with sound judgement. Expresses himself in speech and writing
moderately well. Has potential.
Businesses with performance pay schemes may disagree with
this overall approach. The majority (73 per cent) of the
respondents to the 2004 e-reward contingent pay survey
depended on performance ratings to indicate the size of an
increase or whether there was to be an increase at all. Even
those without such pay schemes like to follow the traditional
path of summarising performance by ratings ‘for the record’,
although they are not always clear about what to do with the
record.
Analytical performance narratives
Narrative performance assessment can be made more
meaningful if it is carried out within a framework. This could be
provided on a ‘what’ and ‘how’ basis. The ‘what’ is the
achievement of previously agreed goals related to the headings
on a role profile. The ‘how’ is behaviour as described in
competency frameworks. The results for each ‘what and how’
heading can be recorded following a joint analysis during a
review meeting. A framework for such an analysis is shown in
Figure 8.3.
Figure 8.3 Analytical narrative assessment
framework
Managers need to be trained in how to use this framework and
how well they do so should be checked so that, if necessary,
guidance can be given on how they could do better.
Visual methods of assessment
An alternative approach to rating is to use a visual method of
assessment. This takes the form of an agreement between the
manager and the individual on where the latter should be
placed on a matrix or grid as illustrated in Figure 8.4, which was
developed for a charity. A ‘snapshot’ is thus provided of the
individual’s overall contribution, which is presented visually
and can therefore provide a better basis for analysis and
discussion than a mechanistic rating. The assessment of
contribution refers both to outputs and to behaviours.
Figure 8.4 A performance matrix
Figure 8.4 details
The review guidelines accompanying the matrix are:
You and your manager need to agree an overall assessment. This will be
recorded in the summary page at the beginning of the review document. The
aim is to get a balanced assessment of your contribution through the year. The
assessment will take account of how you have performed against the
responsibilities of your role as described in the role profile; objectives achieved
and competency development over the course of the year. The assessment will
become relevant for pay increases in the future.
The grid on the annual performance review summary is meant to provide a
visual snapshot of your overall contribution. This replaces a more conventional
rating scale approach. It reflects the fact that your contribution is determined
not just by results, but also by your overall approach towards your work and
how you behave towards colleagues and customers.
The evidence recorded in the performance review will be used to support where
your manager places a mark on the grid.
Their assessment against the vertical axis will be based on an assessment of
your performance against your objectives, performance standards described in
your role profile, and any other work achievements recorded in the review.
Together these represent ‘outputs’.
The assessment against the horizontal axis will be based on an overall
assessment of your performance against the competency level definitions for
the role.
Note that someone who is new in the role may be placed in one of the lower
quadrants but this should be treated as an indication of development needs, not
as a reflection on the individual’s performance.
A similar ‘matrix’ approach has been adopted in a financial
services company. It is used for management appraisals to
illustrate their performance against peers. It is not an ‘appraisal
rating’ – the purpose of the matrix is to help individuals focus
on what they do well and also any areas for improvement. Two
dimensions – business performance and behaviour
(management style) are reviewed on the matrix as illustrated in
Figure 8.5 to ensure a rounder discussion of overall
contribution against the full role demands rather than a shortterm focus on current results. This is achieved by visual means
– the individual is placed at the relevant position in the matrix
by reference to the two dimensions. For example, a strong
people manager who is low on the deliverables would be placed
somewhere in the top-left quadrant but the aim will be
movement to a position in the top-right quadrant.
Figure 8.5 Performance matrix in financial services
company
A performance matrix used by a division of Unilever is shown
in Figure 8.6. This measures the ‘how’ of performance on the
vertical axis and the ‘what’ on the horizontal axis. The matrix
model also contains guidelines on the possible actions that can
be taken for each assessment quadrant.
Figure 8.6 Assessment and action matrix – Unilever
Figure 8.6 details
Those organizations that have used visual assessments are
enthusiastic about the extent to which it takes the heat out of
rating and provides a sound basis for discussing and
implementing development needs. But its effectiveness still
depends on the quality of the performance analysis and it can
be criticized as an over-formalized approach to the basic
process of performance analysis and assessment. And, in the
last analysis, it is still a form of rating.
Conclusions
Performance analysis is a necessary and important
performance management activity as a means of identifying
development needs, but it is one of the most difficult ones to get
right. Attempts to use mechanistic methodologies for
performance assessment involving rankings or ratings can
prove of doubtful value. The arguments against them backed
by research are convincing. However, they are extensively
used because they provide ‘quick-fix’ information on
performance levels. HR departments like them because they
provide a readily available standard, which can be used for a
multiplicity of purposes.
Many organizations believe that performance pay and talent
management can only function if there are ratings. It is true
that some form of assessment is necessary, but it need not be a
rating scale as part of an annual performance review. Pay
reviews are best kept separate – decoupled – from performance
reviews as the introduction of performance pay considerations
is likely to divert attention from the key purpose of those
reviews: that of developing people. However, it is still necessary
to place people in categories such as those whose contribution
deserves an above average, average or below average increase
or none at all. But this is a process of categorisation, not rating.
It could be regarded as proxy rating, but at least it avoids the
problems referred to earlier of a rating issued as part of a
performance management review with its unfortunate
resemblance to a school report. Similarly, potential can be
categorized in special talent management procedures, for
example: considerable potential, some potential, unlikely to
progress above present level.
The various types of graphic rating scale may provide better
guidance on rating, but they are elaborate and require a lot of
extensive research to prepare. They are therefore little used.
Analytical performance management methods are better.
There is much to be said for the visual assessment approach,
although it has its drawbacks, as mentioned earlier.
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09
Conducting performance
reviews
Introduction
Performance reviews analyse and assess how people are
carrying out their role. Reviews are conducted by managers,
who provide feedback and discuss with individuals progress in
achieving work and development objectives and the factors
that have led to those results. They agree plans for developing
skills and abilities and, where necessary, improving
performance.
Reviews can be informal or formal. Informal reviews are the
process by which performance is managed throughout the
year. Performance is reviewed as it occurs both by individuals
as well as their managers, comparing what happened with what
should have happened. Informal feedback can take place
whenever a manager comments on a piece of work or an action
taken by an individual at work: ‘Well done’; ‘That’s exactly what
I wanted’; ‘Could we discuss another way of doing this next
time?’; ‘Something seems to be going wrong. Let’s discuss why
and what can be done about it.’ In this informal process,
managers meet individual members of their teams whenever
appropriate to hold performance conversations in which
feedback is provided, revised objectives or any corrective
action required is agreed and coaching and other learning
activities are initiated. The outcome of such meetings may not
be formally documented unless action to deal with poor
performance through a capability procedure is initiated.
However, if a formal review system is in operation, managers
may take notes for reference when preparing to conduct a
review meeting.
Formal reviews are meetings in which performance is
analysed more systematically. The tradition is to have such
reviews once a year or, in a minority of organizations, twice a
year. This approach has been much criticized. Its weaknesses,
as pointed out by many commentators (see Chapter 4), are:
the implication of the most typical traditional approach –
one annual review meeting – is that performance only
needs to be assessed once a year;
judgements tend to be subjective – attempts to introduce
reliable criteria for measuring performance have
generally failed;
they focus on past performance, not future development;
they usually involve top-down judgements on the
performance of employees;
they attempt to achieve too much and, in so doing, often
fail to achieve anything;
managers are reluctant to carry out proper appraisals and
employees dread ritualistic appraisal meetings;
the process is excessively bureaucratic, time consuming
and demotivating.
(CIPD, 2020)
In short, in the words of Armstrong and Murlis (1998: 242), the
traditional performance appraisal meeting is a ‘dishonest
annual ritual’.
Because of these disadvantages, many organizations, as
described later in this chapter, have recently replaced their
annual performance review system with a process of informal
or at least semi-formal ‘performance conversations’
(sometimes called ‘check-ins’) which take place as and when
required during the year. Such one-to-ones involve dialogue
and the joint analysis of performance. They are constructive
and forward-looking, not top-down judgemental affairs. These
are concerned with how people are carrying out their work as
well as what they have achieved and the emphasis is on future
development rather than on conducting a postmortem on past
events.
In this chapter the traditional formal review or appraisal is
dealt with first. Overcoming the weaknesses of the traditional
approach by encouraging the use of performance
conversations comes next. The chapter concludes with a
description of the strength-based review process as a means of
improving the quality of such conversations.
The traditional performance review
The traditional approach to performance reviews has been
described realistically by Aguinis (2005: 39–40) as follows:
The appraisal meeting is often seen as the Achilles’ heel of the entire
process [of performance appraisal]. This is because many managers are
uncomfortable about providing feedback, particularly when
performance is deficient. This high level of discomfort, which often
translates into anxiety and the avoidance of the appraisal interview, can
be mitigated by training those responsible for feedback... At this point,
however, let’s emphasize that people are apprehensive about both
receiving and giving performance information.
The many purposes that the traditional performance review or
appraisal meeting is intended to serve but often fails to do so
are:
assessment – to review how well individuals have
performed their jobs;
objective setting – to set new objectives and revise existing
ones;
development planning – to agree performance and
personal development plans;
motivation – to provide positive feedback and recognition;
communication – to serve as a two-way channel for
communication about roles, expectations, relationships,
work problems and aspirations;
reward – to assess performance in order to inform reward
decisions, especially those concerning performance pay;
talent management – to identify potential as part of a talent
management programme;
poor performance – to identify under-performers so that
corrective action can be taken.
Figure 9.1 Performance management form (part 1)
Figure 9.1 details
Figure 9.2 Performance management form (part 2)
Figure 9.2 details
To achieve these purposes, formal reviews include an overview
and analysis of performance since the last review, comparing
results with agreed objectives. Ideally, reference is made to
events that illustrate performance as discussed during the year
(they shouldn’t be brought up at a formal meeting for the first
time). The level of performance achieved is assessed so that
individuals know where they stand. In many cases it is rated as
described in Chapter 8. Formal reviews are usually documented
on paper or recorded on a computer. An example of a
performance review form is illustrated in Figures 9.1. and 9.2.
This system makes demands that those involved find difficult
to fulfill. Clear guidance and proper training are needed to deal
with the situation. That is why it is essential to take special care
in developing and introducing the system and in training
managers and their staff. The problem is that adequate training
seldom happens. Research conducted by Armstrong and Baron
(2005) revealed that if training took place at all it was often
limited to no more than a half or whole day introductory
session – wholly inadequate when the complexities of the task
of conducting formal performance reviews are considered. The
Institute for Employment Studies (2011) also found that training
in performance management practice was inadequate. A
complete change to traditional practices is required and this can
be achieved by replacing the annual formal review with more
frequent informal or semi-formal performance conversations
as described next.
Performance conversations
The flawed traditional annual performance review should be
replaced by the use of performance conversations. These are
part of the normal process of management. They take place
whenever managers discuss with a member of their team what
they are doing, how well they are doing it and how they can do
even better. They can usefully become development
conversations when the discussion is extended to how skills,
knowledge and abilities can be enhanced as a means not only of
improving performance but also of developing potential and
furthering a career. Research by Ledford et al (2016) established
that ongoing feedback through more frequent conversations
took centre stage in organizations adopting newer approaches.
This is in line with the argument of Gratton and Ghoshal
(2002) that the emphasis should be on the core of the appraisal
and development process, that is, on ‘improving the quality of
conversations’, rather than going through ‘dehydrated rituals’.
The case for performance conversations was made by Purse
(2017: 50) as follows:
To help line managers build more trusting relationships with their
direct reports, it is important to have authentic, honest and open
conversations with them. These could include: agreeing mutual
expectations – making sure it’s not just a one-way street; showing
genuine appreciation; challenging unhelpful behaviour; and
importantly, it’s about having conversations in which you get to know
the people reporting to you and build trust in the relationship. None of
these actions are complicated, and it’s not that managers don’t have the
skills to do them – it’s that they often haven’t made the emotional
commitment required.
In her report for the Institute for Employment Studies, Wendy
Hirsh (2018: 5) illustrated how performance conversations
worked (see Figure 9.3). She wrote:
As we all know, saving everything up for a once a year ‘Big Bang’ flouts
the principle of continuous improvement and development, which
requires timely feedback and support. The very simple idea of regular
‘one-to-ones’ has helped many organizations embed relatively more
frequent work-related conversations between employees and their
managers… One-to-ones are more than a chat, but not so formal that
they constrain the conversation or feel intimidating. What we might
call ‘semi-formal’ conversations are often just right for addressing
performance and development. If one-to-one air time is planned in, it
becomes easier to use different occasions for different purposes. One-toones don’t have to be face-to-face. Once you know someone, a phone or
video call can be very effective. One-to-ones also encourage the giving
of feedback as events happen. This can be through a quick word face-toface or on the phone, via email or an app. Once we talk a bit more, it
just gets easier to raise issues whenever we need to.
Conducting performance conversations
The degree to which performance conversations are formalized
can vary. At one end of the scale, when and how they take place
is left entirely to the discretion of managers with reliance being
placed on their performance leadership skills. Line managers
would be expected to act like those quoted in Chapter 6 – to be
very clear in their expectations and to give focus and a sense of
purpose to the individuals in their teams. Performance
leadership would be exercised through the contacts that take
place during the day-to-day flow of work. Informal
conversations may be initiated by remarks such as: ‘How are
things going?’; ‘Any problems?’; ‘Good work!’; ‘How did this
happen?’; ‘Are there any better ways of getting this done?’; ‘Do
you need any help?’ Some managers will do this naturally and
the aim will be to identify and select people with those inbuilt
abilities. But even when they are ‘naturals’ they may well
benefit from additional training in performance management
skills including conducting performance conversations,
providing feedback and coaching. This could cover the
guidelines set out below.
At the other extreme, there would be more formality and the
number, timing and format of the conversations would be laid
down. Performance would be rated and the outcome of
discussions recorded and reported to HR.
In between these extremes, the amount of discretion allowed
to managers and the extent to which their performance
management activities are guided or controlled can vary
according to the circumstances, although they would be
expected to take note of guidelines. These circumstances
include the ability of managers to be effective performance
leaders, the amount of training in performance management
skills the organizations are prepared to give and, importantly,
the culture and prevailing management style of the
organization.
How often performance conversations are held is a matter of
choice. There is no ‘right’ frequency. They can and should arise
spontaneously as the occasion presents itself. However, some
firms do stipulate how often they should take place. At Adobe
managers have some discretion but check-ins are usually
conducted about once a month, as they are at Gap. At IBM
‘checkpoints’ take place at least every quarter. Microsoft
expects every employee to have a minimum of two (what they
call) ‘connects’ every year; beyond that, there are no strict
rules. Deloitte requires check-ins to take place weekly.
As reported by Cappelli and Tavis (2016: 67): ‘At General
Electric, the PD@GE app (‘PD’ stands for ‘performance
development’) allows managers to call up notes and materials
from prior conversations and summarize that information.
Employees can use the app to ask for direction when they need
it. IBM has a similar app that adds another feature: It enables
employees to give feedback to peers and choose whether the
recipient’s boss gets a copy. Amazon’s Anytime Feedback tool
does much the same thing. The great advantage of these apps is
that supervisors can easily review all the discussion text when
it is time to take actions such as award merit pay or consider
promotions and job reassignments.’
Performance conversation guidelines
1 Prepare
Take a few minutes to prepare before holding the conversation:
Look at any notes taken after the previous conversation to establish if any
follow-up action is required.
Review how well individuals are carrying out the work – accomplishing tasks,
meeting priorities and deadlines, achieving objectives – and form views about
the reasons for any success or failure.
Decide on where to give praise.
If there are any performance problems, consider what steps might be
undertaken to overcome them.
Give thought to any changes that have taken place or are contemplated in the
individuals’ role and their work and development objectives.
Consider any other points you would like to raise.
2 During the conversation
Create an informal environment in which a full, frank (but friendly) exchange of
views can take place. It is best to start with a fairly general discussion before
getting into any detail. The aim should be to put individuals at ease and create
a non-threatening atmosphere.
Explain the purpose of the meeting, emphasizing that it is a joint affair.
If possible, begin with praise for some specific achievement, but this should be
sincere and deserved. Praise helps people to relax – everyone needs
encouragement and appreciation.
Allow individuals to do most of the talking so that they can express their views
fully, respond to any comments you make and feel that they are getting a fair
hearing. The meeting should take the form of a dialogue between two
interested and involved parties, both of whom are seeking a positive
conclusion.
Discuss performance not personality – discussions on performance should be
based on factual evidence, not opinion. Always refer to actual events or
behaviour and to results compared with agreed performance measures.
Individuals should be given plenty of scope to explain why something did or did
not happen.
Encourage the analysis of performance – don't just hand out praise or blame.
Analyse jointly and objectively why things went well or less well and what can
be done to maintain a high standard or to avoid problems in the future. Focus on
strengths rather than weaknesses.
Ask open-ended questions or provide leads to get the employee talking, for
example:
What are the main things you have been working on?
How well do you think you are doing?
Tell me about any of your successes and why you think they were
achieved.
Tell me if there have been any problems in getting your work done.
If there have been problems, what do you think can be done about
them?
Do you have any questions about your work and its priorities?
Is there any more help I can give?
Are there any things you feel you need to know more about or be able to
do to get your work done well?
Invite individuals to assess their own performance. This is to see how things
look from their point of view and to provide a basis for discussion – many
people underestimate themselves
Provide feedback. Recognize accomplishment. Refer to what has gone well but
also indicate any areas where there is room for improvement. Individuals need
to know how they are getting on. Concentrate on how things could be done
better rather than on criticism. Feedback needs to be based on factual evidence
and careful thought should be given to what is said and how it is said so that it
motivates rather than demotivates people.
3 At the end of the conversation
Review and agree any priorities and objectives that need to be revised. Include
developmental as well as work objectives. Discuss learning and development
needs and how they might be satisfied by the employee (self-directed learning),
by you (coaching) or by the organization (formal training).
Ask if the employee has any ideas for improving how work gets done in the
department or section. Summarize the main points that emerged and agree
actions. The aim should be to end the meeting on a positive note.
4 After the conversation
Make a brief note of the key points and agreed actions for future reference. Review
your own performance, did you:
Ask the right questions?
Listen actively?
Provide constructive feedback?
Cover all the points as planned?
Ensure that the employee’s work priorities were updated?
As far as you can judge, leave the employee more highly engaged and
motivated than they were before the meeting?
Figure 9.3 Features of effective performance and
development conversations
SOURCE Hirsh (2018: 4)
Figure 9.3 details
Strength-based assessment
The conclusions reached by the CIPD (2016) on formal reviews
or appraisals were that, while performance appraisal can be
effective in improving performance, in many cases it can
decrease it. It was recommended that a strength-based
approach should be adopted to overcome the problems of the
traditional top-down meeting.
A strength-based assessment or review uses the ‘appreciative
enquiry technique’ that focuses not so much on finding out
what has gone wrong but on the more positive approach of
identifying what is working well and using that information as a
basis for planning further development. Kluger and Nir (2010)
stated that the purpose of the strength-based review was:
to bring the positive aspects of employee experiences into focus and
discover what processes work well in the organization. This is
accomplished by first eliciting stories of concrete successes, that is,
stories regarding instances and events in which employees were at their
best, and then by inquiring into the facilitating conditions that allowed
them to perform at their best.
Bouskila-Yam and Kluger (2011) backed this notion of a
fundamental reorientation of performance appraisal and
feedback. Rather than attempting to measure performance
levels, they proposed a strength-based approach They referred
to the ‘deficit model’ of performance which concentrates on
giving feedback about performance deficiencies and argued
(page 140) that, as opposed to this model: ‘the strength-based
approach to personal development assumes that progress
toward excellence is not a function of improving on
weaknesses, but is a function of building on one’s strengths.’
In a strength-based review managers elicit success stories
with questions like: ‘Could you tell me about anything that has
gone particularly well in your work recently?’ The advantage of
this type of question is that it provides a basis for a positive
discussion on future development. This doesn’t mean that
managers should ignore what needs to be done to overcome
performance problems, but this should not be given
prominence in a review.
References
Aguinis, H (2005) Performance Management, Pearson Education, NJ, USA
Armstrong, M and Baron, A (2005) Managing Performance: Performance
Management in Action, CIPD, London
Armstrong, M and Murlis, H (1998) Reward Management, 4th edn, Kogan Page,
London
Bouskila-Yam, O, and Kluger, A N (2011) Strength-based performance appraisal and
goal setting, Human Resource Management Review, 21 (2), pp 137–47
Cappelli, P and Tavis, A (2016) The performance management revolution, Harvard
Business Review, Oct, pp 58–67
Chartered Institute of Personnel and Development (2016) Could Do Better: What
Works in Performance Management, CIPD, London
Gratton, L and Ghoshal, S (2002) Improving the quality of conversations,
Organizational Dynamics, 31 (3), pp 209–23
Hirsh, W (2018) Effective performance, development and career conversations at
work, Institute for Employment Studies, London
Institute for Employment Studies (2011) Performance management: the
implementation challenge, available at: http://www.employment-studies.co.uk/sy
stem/files/resources/files/mp89.pdf (archived at https://perma.cc/8Q28-EANT))
Kluger, A and Nir, D (2010) The feedforward interview, Human Resource
Management Review, 20, pp 235–46
Ledford, G E, Benson, G S and Lawler, E E (2016) A study of cutting-edge
performance management practices: ongoing feedback, ratingless reviews and
crowdsourced feedback, WorldatWork Journal, Second quarter, pp 8–24
Purse, N (2017) How to construct effective engagement, People Management, April, p
50
10
Multi-source feedback
Introduction
The aim of multi-source feedback is to achieve a balanced
assessment of an individual’s performance by obtaining the
views of a number of people about it. The most typical method
is 360-degree feedback. More limited use is being made of
crowdsourced feedback. As part of a performance management
system multi-source feedback can supplement or, infrequently,
replace traditional top-down methods of assessment. This
chapter covers the practice of 360-degree feedback under the
following headings:
360-degree feedback defined;
The rationale for 360-degree feedback;
Methodology
Advantages and disadvantages;
Introducing 360-degree feedback.
The last section of the chapter deals with crowdsourced
feedback.
360-degree feedback defined
360-degree feedback is the assessment of someone’s
performance by a number of stakeholders, as shown in Figure
10.1. The most common arrangement is for the assessors to
consist of the individual’s manager and subordinates.
Colleagues and customers can also be included. Assessments
are fed back to the individual concerned, usually as ratings
against various performance dimensions.
Figure 10.1 360-degree feedback
The term 360-degree feedback is sometimes used loosely to
describe upward feedback where this is given by subordinates
to their managers. This is the most common method and is
more properly described as 180-degree feedback.
The incidence of 360-degree feedback is not particularly
widespread. In the USA, research by Gorman et al (2017) found
that only 23 per cent of the responding organizations used it. In
the UK, a survey by e-reward (2014) established that it was
adopted by an even smaller proportion of respondents – 19 per
cent.
The rationale for 360-degree feedback
A rationale for 360-degree feedback was produced by Turnow
(1993) who stated that it offers multiple perspectives each of
which can provide different yet relevant information. He
explained that 360-degree feedback is based on two
assumptions: (1) that awareness of any discrepancy between
how we see ourselves and how others see us increases selfawareness, and (2) that enhanced self-awareness is a key to
maximum performance, and thus becomes a foundation block
for development programmes. Through feedback, recipients
receive useful information about their strengths and
weaknesses which can guide their development and indicate
any performance areas where there is room for improvement.
London and Beatty (1993) suggested that 360-degree feedback
can become a powerful organizational intervention to increase
awareness of the importance of aligning leader behaviour,
work unit results and customer expectations. It recognizes the
complexity of management and the value of inputs from
various sources. It takes account of the beliefs that managers
should not be assessing behaviours they cannot observe, and
that the leadership behaviours of subordinates may not be
known to their managers.
Methodology
The processes of 360-degreefeedback typically obtain data by
means of questionnaires that measure from different
perspectives the behaviours of individuals against a list of
competencies. In effect, they ask for an evaluation: ‘How well
does x do y?’ The competency model may be one developed
within the organization, or the competency headings may be
provided by the supplier of a questionnaire. A typical
questionnaire may cover aspects of performance such as
leadership, teamwork, openness to new ideas, valuing other
people’s opinions and readiness to recognize achievements. An
analysis of the results may be presented as a profile, an
example of which is shown in Figure 10.2.
Figure 10.2 Example of 360-degree profile
Feedback
The feedback is usually anonymous and may be presented to
the individual (most commonly), or to the individual’s
manager, or to both the individual and the manager. It may be
given by the generators of the feedback on a scale against each
heading. This can refer both to importance and performance.
For example, the importance of each item could be rated on a
scale of 1 (not important) to 6 (essential), and performance
could be rated on a scale of 1 (weak in this area) to 6
(outstanding). Graphical presentation as shown in Figure 10.2,
but without a numerical scale, may be preferable as a means of
easing the process of assimilating the assessment (as the harsh
impact of ratings could damage self-confidence).
Managers may be encouraged to rate themselves for the
items on which they are rated by their assessors. Self-ratings
draw the attention of managers to the results and any needs for
self-development.
Data processing
Questionnaires are processed with the help of software usually
provided by external suppliers. This enables the data collection
and analysis to be completed swiftly, with the minimum of
effort and in a way which facilitates graphical as well as
numerical presentation.
Action
The action generated by the feedback will depend on the
purposes of the process: developmental, evaluative or
administrative (performance pay or identification of potential).
If the purpose is primarily developmental, the action may be
left to individuals as part of their personal development plans,
but the planning process may be shared between individuals
and their managers if they both have access to the information.
Coaches from inside or, commonly, outside the organization
can review the feedback with the individual and discuss its
implications and any development activities that may therefore
be appropriate.
Even if the data only goes to the individual it can be discussed
in a performance review meeting so that joint plans can be
made, and there is much to be said for adopting this approach.
Advantages and disadvantages
Table 10.1 360-degree feedback advantages and
disadvantages
Skip table
Advantages
Individuals get a broader perspective of how
they are perceived by others than previously
possible.
It gives people a more rounded view of their
performance.
Feedback is perceived as more valid and
objective, leading to acceptance of results
and the actions required.
Disadvantages
People do not always
give frank or honest
feedback.
People may be put
under stress in
receiving or giving
feedback.
Overreliance on
technology.
Too much bureaucracy.
Can be time-consuming
and resource-intensive.
The disadvantages can be reduced if not eliminated by careful
design, involving stakeholders in the development programme,
communication, training and follow-up. But Grint (1993: 71)
asserted that: ‘the “honest opinions” of subordinates look more
like the barbs on a whale harpoon than gentle and constructive
nudges’ and that: ‘upward appraisal replaces the subjectivity of
a single author appraisal with the subjectivity of a collective
author appraisal.’ Frisch (2001: 8) commented that anonymous
feedback is not necessarily a good thing: ‘What happens in
highly political, “out for yourself” organizational cultures is that
anonymous feedback becomes an opportunity to get even or
“take shots”. Feedback that taps into power struggles and turf
disputes can be personally damaging and yet hide behind the
anonymity of the process.’ And research by Maurer et al (2002)
established that actual feedback ratings had only very weak
relationships with subsequent involvement in development
activity. It is more important to have a work environment in
which support for skills development is provided by the
organization, and where line managers and employees are
encouraged to pursue self-directed learning programmes.
Introducing 360-degree feedback
360-degree feedback is not an easy option. It takes a lot of effort
to develop and implement and the disadvantages may
outweigh the advantages. This may explain its relatively low
take-up. If it is decided to go ahead the following steps are
required:
1. Define objectives – it is important to define exactly what
360-degree feedback is expected to achieve. It will be
necessary to spell out the extent to which it is concerned
with personal development, evaluation (appraisal) or pay.
2. Decide on recipients – who are to be at the receiving end of
feedback.
3. Decide on who will give the feedback – the individual’s
manager, direct reports, team members, other colleagues
or internal and external customers. A decision will also
have to be made on whether HR staff or outside
consultants should take part in helping managers to make
use of the feedback. A further decision will need to be
made on whether or not the feedback should be
anonymous (it usually is).
4. Decide on the areas of work and behaviour on which
feedback will be given – this may be in line with an existing
competency model or it may take the form of a list of
5.
6.
7.
8.
9.
headings for development. Clearly, the model should fit
the culture, values and type of work carried out in the
organization. But it might be decided that a list of headings
or questions in a software package would be acceptable, at
least to start with.
Decide on the method of development – the questionnaire
could be designed in-house but most organizations
installing 360-degree feedback purchase a package from a
consultancy or software house.
Decide on data analysis and presentation – the aim should
be to keep it as simple as possible and, if an external
provider is used, this will need to be carefully considered
and will be important factor in making the choice.
Plan initial implementation programme – it is desirable to
pilot the process, preferably at top level or with all the
managers in a function or department. The pilot scheme
will need to be launched with communications to those
involved about the purpose of 360-degree feedback, how it
will work and the part they will play. The aim is to spell
out the benefits and, as far as possible, allay any fears.
Training in giving and receiving feedback will also be
necessary.
Analyse outcome of pilot scheme – the reactions of those
taking part in a pilot scheme should be analysed and then
the necessary changes made to the process, the
communication package and the training.
Plan and implement a full programme – this should include
briefing, communicating, training and support from HR
and, possibly, the external consultants.
10. Monitor and evaluate – maintain a particularly close watch
on the initial implementation of feedback, but monitoring
should continue. This is a process that can cause anxiety
and stress, or produce little practical gain in terms of
development and improved performance for a lot of
effort.
Crowdsourced feedback
An alternative but much less used (for good reason) method of
multi-source feedback is what is known as ‘crowdsourced
feedback’. This involves the provision by any employee of
performance feedback on any other employee through social
platforms on a computer or smartphone. This can be done on
an enterprise social network – an internal social network that
functions in the same way as social networks such as Facebook.
A survey by Ledford et al (2016) in the US, where crowdsourced
feedback is mainly happening, found that only 12 per cent of
respondents used it and that was in conjunction with more
conventional individual feedback.
The advantage claimed for crowdsourced feedback is that it
enables helpful feedback to be delivered to an individual by a
wider selection of people at any time than does 360-degree
feedback and requires much less systems support and training.
But feedback is anonymous and there is a danger of prejudicial,
negative and demotivating comments being made. In the US
the system is therefore known as (SMB) – ‘Screw my buddy’.
References
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
Frisch, M H (2001) Going around in circles with ‘360’ tools: have they grown too
popular for their own good?, Human Resource Planning, 24 (2), pp 7–8
Gorman, C A, Meriac, J P, Roch, S G, Ray, L J and Gamble, J S (2017) An exploratory
study of current performance management practices: Human resource
executives’ perspectives, International Journal of Selection and Assessment, 25 (2),
pp 193–202
Grint, K (1993) What’s wrong with performance appraisal? A critique and a
suggestion, Human Resource Management Journal, 3 (3), pp 61–77
Ledford, G E, Benson, G S and Lawler, E E (2016) A study of cutting-edge
performance management practices: ongoing feedback, ratingless reviews and
crowdsourced feedback, WorldatWork Journal, Second quarter, pp 8–24
London, M and Beatty, R W (1993) 360-degree feedback as competitive advantage,
Human Resource Management, 32 (2/3), pp 353–72
Maurer, T, Mitchell, D and Barbiette, F (2002) Predictors of attitudes towards a 360degree feedback system and involvement in post-feedback management
development activity, Journal of Occupational and Organizational Psychology, 75,
pp 87–107
Turnow, W W (1993) Introduction to special issue on 360-degree feedback, Human
Resource Management, 32 (2/3) pp 211–19
PART THREE
Performance management
skills
11
Defining objectives
Introduction
Objectives indicate what has to be accomplished. Their
definition is a fundamental activity in managing performance.
They provide direction and a basis for monitoring performance,
and they help to communicate the organization’s strategic goals
to employees.
This chapter starts with a definition of the meaning of the
term ‘objectives’ and continues with a review of the conceptual
background and a description of the processes of defining
objectives and strategic alignment.
The meaning of objectives
The terms ‘objectives’ and ‘goals’ are often used
interchangeably, both meaning an outcome to be achieved. But
it is possible to distinguish between them. Goals are expressions
of overall ambitions and intentions. They set out what, in
general, an organization or an individual wants or needs to do
in the longer term. Objectives are specific aims or targets, the
achievement of which will support the attainment of these
goals.
Thus the strategic goals for a business could be to increase
market share, to improve productivity and to minimize
harmful impact on the environment. In each of those areas
objectives could be set in the form of quantified targets or a
definition of some other form of measurable achievement.
Individuals have overall goals, for example, to improve
performance, behave in accordance with accepted standards,
develop skills or further their careers. They also have objectives
in the form of the precise actions and measurable steps
required to achieve overarching goals – those of the
organization (the process of strategic alignment) as well as their
own. There are two types of objectives: performance and
personal.
Performance objectives
Performance objectives are generally expressed by simply
defining each of the main activities the role involves in terms
that indicate the expected outcomes or the purpose of the
activity. Objectives can be expressed as targets – the
quantifiable results to be obtained – or as standards – the
conditions that exist when a job has been well done. They can
also be defined as projects – a task or undertaking to be
achieved. These are the ‘key result areas’ – the elements of a
role for which clear outcomes are defined, each of which makes
a significant contribution to achieving its overall purpose.
Those areas for a team leader could be:
1. Agree objectives with team members that support the
attainment of the organization’s goals.
2. Plan with team members work schedules and resource
requirements that will ensure that team objectives will be
achieved.
3. Agree with team members the allocation of tasks to
ensure the best use of their skills and capabilities.
4. Coordinate the work of the team to ensure that team goals
are achieved.
5. Review the performance of the team as a whole and of its
individual members.
6. Conduct informal conversations with individual team
members whenever appropriate to provide feedback,
discuss progress and agree any actions required.
Where appropriate, specific targets, tasks or standards can be
attached to key result areas, for example:
‘increase sales by X%’, ‘reduce reject levels by Y%’,
‘improve the customer satisfaction index by two points’;
‘introduce x by y’;
‘performance will be up to standard when callers are dealt
with courteously at all times even when they are being
difficult’.
Personal objectives
Personal objectives are either developmental (learning and
growth) or behavioural (for example team working, people
management, customer focus).
The conceptual background
The conceptual background to the use of objectives in
performance management is provided by the notion of
management by objectives, control theory and goal theory.
Management by objectives
The term ‘management-by-objectives’ was first coined a long
time ago by Peter Drucker in his seminal book The Practice of
Management (1955: 117). He argued that:
What the business enterprise needs is a principle of management that
will give full scope to individual strength and responsibility and at the
same time give common direction of vision and effort, establish
teamwork and harmonize the goals of the individual with the common
weal. The only principle that can do this is management by objectives
and self-control.
Drucker was followed by another influential commentator,
Douglas McGregor (1960), who wrote that the main factor in the
management of individual performance should be the analysis
of the behaviour required to achieve agreed results, not the
assessment of personality. He pointed out that this is partly
management by objectives, which is concerned with planning
and measuring results in relation to agreed targets and
standards, but retains the concept that individual performance
is about behaviour as well as results.
Management by objectives (MBO) as a management
technique became popular in the 1970s, but was unfortunately
hijacked by management consultants who advised that it was
all about achieving quantified targets and ignored McGregor’s
views. The bureaucratic systems they introduced collapsed
under the weight of the paperwork they generated, and MBO
vanished from the scene, although it did linger on in the form
of results-based performance appraisal. More recently the
views of McGregor have finally been accepted and performance
assessment is about both the ‘what’ (results) and the ‘how’
(behaviour).
Goal theory
Goal theory was developed by Latham and Locke (1979) on the
basis of extensive research. As described in chapter 2, the
theory states that people perform better when they have
specific and challenging but reachable goals.
Lawler et al (2012) observed that goals provide a very
effective approach to directing individuals to support the
business strategy of the organization and can translate
strategies from an organizational objective to specific individual
behaviours. They found it difficult to imagine an effective
performance management scheme that does not utilize goals in
some way.
Control theory
Control theory is about the corrective action that is taken when
a person (or a machine) becomes aware through some form of
feedback that there is a discrepancy between what is expected
and what actually happens. Feedback as a means of shaping
behaviour is recognized as a crucial part of performance
management.
Characteristics of an effective objective
An effective objective indicates clearly what has to be achieved.
The characteristics of an effective objective when it is expressed
as a target are that it should be:
aligned: consistent with the goals and values of the
organization and supporting their achievement;
precise: specific, clear and well-defined;
measurable: related to quantified or qualitative
performance measures or standards;
challenging: to stimulate high standards of performance
and to encourage progress;
achievable: but not too easily;
agreed by the manager and the individual concerned;
time-related: the time scale or date for reaching targets
should be specified.
The process of defining objectives
The definition of objectives provides direction and a basis for
assessing performance. As Chamberlin (2011) put it, when
defining objectives the aim is to ensure that people understand:
(1) what they have to do, (2) that they are able to do it, (3) that it
is something they should be doing, (4) how they are progressing
along the way and (5) when they have done it.
Clearly, the approach to defining objectives will vary
according to the type of job. It will be fairly straightforward in a
routine job or in one which is mainly controlled by the process
on which the employee is working. It will be more complex in
less routine jobs and in knowledge work. For some roles it may
not be feasible to do much more than define the overall
purpose of the role and, broadly, the direction to be pursued
and the end-results to be sought.
In situations where there is some scope for defining
objectives as targets and clear advantages in doing so,
traditional approaches to performance management involved
setting objectives at an annual meeting for review the following
year. By then they could be overtaken by events and out of
date. It is generally recognized that, except in the more routine
jobs, this is inappropriate in a ‘VUCA’ context, one in which
conditions of volatility, uncertainty, complexity and ambiguity
prevail. The tendency now is to treat it as a natural process of
management rather that a rigid system of setting quantitative
‘SMART’ objectives.
As a natural process, objectives will be defined when
necessary at any time in the year during the flow of work. This
may be no more than an on-the-spot agreement that something
needs to be done. Consideration is given to any changes in
requirements or circumstances and the impact that these have
on work activities and priorities. Plans are agreed on how to
proceed. The managers quoted in Chapter 3 adopted this
approach.
From time to time a more formal review of objectives can be
undertaken to make sure that they are aligned to corporate or
departmental goals and properly reflect current and anticipated
requirements. A formal process of defining objectives will
certainly be necessary when a new role has been created, when
someone begins a new job or when changes to the organization
or work requirements have taken place that substantially affect
an existing role. The process of defining objectives in any of
these circumstances consists of three steps:
1. Purpose. The identification, definition and agreement of
the purpose of the role – the overall contribution that the
role-holder is expected to make to attaining corporate and
departmental goals.
2. The key result areas (KRAs). These are the elements or
core tasks of a role for which outputs or outcomes can be
defined, each of which makes a significant contribution to
achieving the overall purpose of the role. An output is a
result which can be measured quantifiably and expressed
as a target. An outcome is a visible effect such as the
completion of a project or task or the achievement of a
performance standard that cannot be measured in
quantified terms. There are components in all jobs that are
difficult to measure quantifiably as outputs. But all jobs
produce outcomes even if they are not quantified. Key
result areas can be set out in a role profile and as long as
they indicate what has to be achieved they are in effect
objectives. In jobs where quantified targets or specific
standards cannot be determined, they can serve that
purpose perfectly well. Where targets or standards can be
set, they add dimensions to the key result areas that
become the basis for assessing progress.
3. Key performance indicators (KPIs). These answer the
question: ‘How will we know when the results specified in
this area have been achieved?’. A KPI may be a metric – a
measure providing data that indicate in quantitative terms
the outcome of an activity, for example performance in
terms of sales value, output (units produced), throughput
(units processed), productivity, cost per unit of output, the
volume of such things as customer complaints, defective
components (rejects) or waste, or the speed with which
orders are processed or enquiries dealt with. If the use of
metrics is not possible a qualitative KPI can be used in the
form of a statement which defines the conditions that
exist when a job has been well done.
Use of jargon terms such as key result areas or key
performance indicators may help in clarifying the process of
definition, but they are not essential. Defining objectives is
simply a matter of clarifying expectations in terms of what in
general someone has to do and what in particular they are
expected to achieve, and then gaining understanding of how
they and their manager will know that it has been achieved.
Employees should participate fully in the process. This is
important because it means that they are more likely to
understand and accept what they are expected to do and are
therefore more likely to do it. It will be necessary to ensure that
the discussion leads to a better understanding of organizational
goals and how employees can help to translate them into action
with support from the organization and their managers –
strategic alignment.
Strategic alignment
Strategic alignment enables the meaning and significance of
corporate goals and values to be communicated to employees.
It is concerned with integrating the performance goals of
individuals with the strategic goals of the organization and
aligning individual behaviours with the behavioural values of
the organization, such as customer care and concern for the
environment. This can be done by ensuring that the
organization’s competency framework and individual
competency requirements reflect corporate values and that
individual behaviour is assessed by reference to framework
headings. Strategic alignment can take the form of ‘cascading’
goals, but it can be helped by the use of the balanced scorecard.
Cascading goals
The strategic alignment of performance goals starts with the
definition of corporate or business goals as part of
organizational strategic management and performance
management systems. These are ‘cascaded’ to provide the basis
for defining the goals for which individuals are accountable, as
illustrated in Figure 11.1.
Figure 11.1 Strategic alignment of goals
Figure 11.1 details
The balanced scorecard
The balanced scorecard helps to focus the attention of
individuals on the part they can play in helping to attain the
organization’s strategic goals by providing a framework for
analysing, comparing and integrating individual objectives. The
aim of the concept of the balanced scorecard as originally
formulated by Kaplan and Norton (1992, 1996) was to counter
the tendency of companies to concentrate on short-term
financial reporting. They emphasized that no single measure
can provide a clear performance target or focus attention on
the critical areas of the business. Managers want a balanced
presentation of both financial and operational measures. Their
concept of the scorecard required managers to answer four
basic questions, which means looking at the business from four
related perspectives, as shown in Figure 11.2.
Figure 11.2 The balanced scorecard
Figure 11.2 details
Some organizations have replaced the innovation and learning
perspective with a broader people or human capital element.
Kaplan and Norton stressed that the balanced scorecard
approach should be used as the cornerstone of a management
system that communicates strategy and aligns individuals with
the strategy, At Lloyds Banking Group, for example, it provides
the framework for objective setting.
References
Chamberlin, J (2011) Who put the ‘art’ in SMART goals?, Management Services,
Autumn, pp 22–27
Drucker, P (1955) The Practice of Management, Heinemann, London
Kaplan, R S and Norton, D P (1992) The balanced scorecard – measures that drive
performance, Harvard Business Review, Jan–Feb, pp 71–79
Kaplan, R S and Norton, D P (1996) Using the balanced scorecard as a strategic
management system, Harvard Business Review, Jan–Feb, pp 75–85
Latham, G P and Locke, E A (1979) Goal setting – a motivational technique that
works, Organizational Dynamics, Autumn, pp 442–47
Lawler, E E, Benson, G S and McDermott, M (2012) What makes performance
appraisals effective?, Compensation & Benefits Review, 44 (4), pp 191–200
McGregor, D (1960) The Human Side of Enterprise, McGraw-Hill, New York
12
Providing feedback
Introduction
Feedback is provided by managers informally during the year
or formally in performance review meetings. Individuals can
also provide feedback for themselves. It can also be given by
subordinates or internal customers as part of a multiple-source
feedback system (see Chapter 10). This chapter deals with
individual feedback under the following headings:
Feedback defined.
The nature of feedback.
Use of feedback.
How effective is feedback?
Continuous feedback.
Providing constructive feedback.
An alternative approach – the ‘feedforward’ interview.
Guidelines on providing feedback.
Feedback defined
Feedback is the provision of information to people on how they
have performed in terms of results, events, critical incidents
and significant behaviours. Feedback can be positive when it
tells people that they have done well, constructive when it
provides advice on how to do better, and negative when it tells
people that they have done badly. Feedback reinforces effective
behaviour and indicates where and how behaviour needs to
change.
In systems engineering, feedback transmits information on
performance from one part of a system to an earlier part of the
system in order to generate corrective action or to initiate new
action. Performance management has the characteristics of a
system in that it provides for information to be presented
(feedback) to people on their performance, which helps them to
understand how well they have been doing and how effective
their behaviour has been. The aim is for feedback to promote
this understanding so that appropriate action can be taken. This
can be positive action taken to make the best use of the
opportunities the feedback has revealed, or corrective action
where the feedback has revealed that something has gone
wrong.
Systems engineers design self-regulating systems that
generate their own feedback and respond to this information of
their own volition. The same principle can be applied in
performance management – individuals can be encouraged to
understand the performance measures that are available for
them to use in order to provide their own feedback and to
develop their own plans for performance development and
improvement. It helps if feedback is built into the job in that
information is readily available about the extent to which the
performance objectives set out for the role have been achieved.
Such self-generated feedback is a highly desirable feature of a
full performance management process, but there will always be
a need for managers to provide feedback based on their own
observations and understanding.
The nature of feedback
The five sub-dimensions of feedback were described by
Ivancevich (1982) as equity, accuracy, clarity, motivational
impact and anxiety. The enhancement of motivational impact
and the reduction of anxiety can be achieved if feedback is
positive and constructive. It is positive when it recognizes
success and constructive when it identifies areas for
improvement that can lead to effective action. A positive
approach is to treat mistakes or errors of judgement as
opportunities for learning so that they are less likely to be
repeated in the future. Feedback is negative and unhelpful
when perceived failings are dwelt on as matters for blame.
Feedback is an important feature of evidence-based
performance management. It should be presented in a way that
enables individuals to recognize and accept its factual nature.
Of course, there will often be room for some interpretation of
the facts, but such interpretations should start from the actual
situation as reported in the feedback, not from the subjective
views expressed by the provider of the feedback.
Use of feedback
As London et al (2004) noted, feedback plays a key role, along
with goal setting, in the self-regulation of performance.
Feedback focuses attention on performance goals that are
important to the organization, helps discover errors, maintains
goal direction, influences new goals, provides information on
performance capabilities and on how much more effort/energy
is needed to achieve goals, and provides positive reinforcement
for goal accomplishments.
Giving regular feedback as an important part of the
continuous process of performance management was well
described by Lee as follows:
The use of feedback in reviewing and developing
performance (Lee, 2005: 55)
Performance conversations should include a two-way exchange to ensure that the
employee fully understands what is good, what is bad, and why the good performance is
good and the bad is bad. With accurate descriptions of the nuances of performance the
employee can better understand how his or her past actions or activities affected
performance outcomes and how future efforts are likely to contribute to future
performance. Accurate descriptions or diagnoses of performance are crucial, for
understanding and improvement are possible only through timely feedback.
Lee (pages 56–57) also pointed out that: ‘Although many people
confuse the two, feedback and appraisal are fundamentally
different things. Feedback is information-based, whereas the
basis of appraisal is judgement or evaluation. Furthermore,
feedback is an ongoing activity, and appraisal is periodic’.
Douglas McGregor (1960: 87) wrote some time ago on the
timing of feedback. He observed that people: ‘can learn a great
deal from a mistake, or a particular failure in performance,
provided it is analyzed while all the evidence is immediately in
hand.’ Lee commented as follows on the issue of the timing of
feedback, one that that has become prominent recently:
The timing of feedback (Lee, 2005: 59)
The longer the gap between performance events and performance feedback, the
greater the challenge of remembering with clarity the character and quality of the
performance events… two semi-annual or one annual performance conversation
cannot manage performance alone. They might be effective in documenting some
performance parameters but they are not likely to be effective in managing, regulating
and improving performance. Good supervision with ample feedback is good
performance management.
How effective is feedback?
Research on feedback suggests that when individuals receive
negative feedback they are often discouraged rather than
motivated to improve. Kluger and DeNisi (1996) cautioned that
not all feedback interventions result in improvements.
Following their meta-analysis, based largely on performance
appraisal feedback research, they concluded that, in over a
third of the cases, feedback actually resulted in less effective
performance. The analysis suggested that there may be many
factors that influence how individuals react to feedback that
affect who will improve following feedback and who will not.
DeNisi and Kluger (2000) commented that feedback
interventions are more likely to be effective if they keep the
employee’s attention focused on objectives at the taskperformance level and least likely to be effective if they are
applied at a personal level. Research by Gray (2001) identified
two factors that influenced the degree to which receivers
valued their feedback: (1) the extent to which the feedback was
trustworthy and (2) the extent to which it was constructive.
Dweck’s (2006) mindset research showed that performance
feedback itself may not be the issue, but rather how feedback is
interpreted. She found that people with a growth mindset
benefit from performance feedback by using it constructively
to improve their skills and performance, while those with a
fixed mindset tend to maintain a perception of fixed ability and,
therefore, are unlikely to learn from feedback or change their
behaviours.
Murphy et al (2018: 21) observed: ‘The persistent gap between
the feedback people feel they should get (ie that their
performance is good) and the feedback they do get (ie that their
performance is not that good) contributes to a destructive cycle
of cynicism and distrust that undermines the value of
performance evaluations and performance feedback.’
Continuous feedback
One of the most serious problems with the traditional annual
performance review is that feedback is in effect an annual
event. It recalled the past, often imperfectly, but the remoteness
and artificiality of the process meant that it had little or no
impact on performance, currently or in the future.
To overcome this problem, the emphasis now is on
continuous feedback, which takes place informally as
appropriate during the year or is sometimes part of a process of
frequent performance and development conversations. For
some organizations, the drawback of this approach is that it
may be difficult to keep records of any salient discussions or
agreements.
Providing constructive feedback
As far as possible, feedback should be constructive. It should
point the way to building strengths and overcoming
performance problems rather than just telling people that they
are wrong (negative feedback). But if performance problems do
exist the individual concerned must be made aware of them so
that corrective action can be taken. If individuals can be
encouraged to recognize the problems for themselves, so much
the better. They will then be more willing to take action. But
this doesn’t always happen and they have to be informed that a
problem exists. Many managers find it difficult to do this,
especially in a formal or semi-formal meeting. They worry in
case the employee reacts badly and an unpleasant situation
arises.
This problem can be minimized if managers keep closely in
touch with the members of their team, getting to know each
individual in order to anticipate possible behaviour. If people
see that their manager is approachable and ready to listen they
are more likely to come to them with their concerns. It is far
better to nip problems in the bud by having a quiet word at the
first sign something is going wrong rather than waiting for
them to become more entrenched or complicated. The issue
should never be shelved until a formal review meeting.
An alternative approach – the ‘feedforward’
interview
The traditional feedback interview is a backward-looking and
often negative approach. It involves identifying what has gone
wrong. The ‘feedforward interview’ (FFI) has been proposed as
an alternative and superior method. As described by Budworth
et al (2015: 48):
The focus in a feedforward interview, in contrast to a traditional
performance appraisal, is primarily on behavioural intentions or goals
rather than an employee’s performance in the past. It is a strengthbased rather than a deficit-based model. The implicit, if not explicit,
assumption underlying the feedforward interview is that people excel
when they understand their pattern of strengths and learn how to
broaden them in different job-related contexts.
Research conducted by Budworth and her colleagues showed
that, in two control groups, the managers in one group who
received a feedforward interview performed significantly better
than those in the other group who had standard feedback. This
is because the feedforward interview adopts a coaching
approach where the conversation is more two-way and
managers are more inquiring rather than simply informing and
directing their employees. This has a positive impact on
people’s perceived fairness of the appraisal.
Guidelines on providing feedback
1. Build feedback into the job. To be effective feedback should
be built into the job or provided soon after the activity has
taken place.
2. Provide feedback on actual events. Feedback should be
given on actual results or observed behaviour. It should
be backed up by evidence. It should not be based on
supposition about the reason for the behaviour. You
should, for example, say: ‘We have received the following
complaint from a customer that you have been
uncooperative, would you like to comment on this?’
rather than: ‘You tend to be aggressive with customers.’
3. Describe; don’t judge. The feedback should be presented as
a description of what has happened; it should not be
4.
5.
6.
7.
8.
accompanied by a judgement. If you start by saying: ‘I
have been informed that you have been rude to one of
our customers; we can’t tolerate that sort of behaviour’,
you will instantly create resistance and so prejudice an
opportunity to encourage improvement.
Refer to and define specific behaviours. Relate all your
feedback to specific items of behaviour. Don’t indulge in
transmitting general feelings or impressions. When
commenting on someone’s work or behaviour define
what you believe to be good work or effective behaviour
with examples.
Emphasize the ‘how’ not the ‘what’. Focus attention more
on how the task was tackled rather than on the result.
Use questioning techniques to clarify the facts. Ask
questions rather than make statements – ‘Why do you
think this happened?’, ‘On reflection is there any other
way in which you think you could have handled the
situation?’, ‘How do you think you should tackle this sort
of situation in the future?’
Select key issues. There is a limit to how much criticism
anyone can take. If you overdo it, the shutters will go up
and you will get nowhere. Select key issues and restrict
yourself to them. It is a waste of time to concentrate on
areas that the individual can do little or nothing about.
Focus on aspects of performance the individual can
improve.
Provide positive and constructive feedback. People are
more likely to work positively at improving their
performance and developing their skills if they feel
empowered by the process. Provide feedback on the
things that the individual did well in addition to areas for
improvement. Focus on what can be done to improve
rather than on criticism. Use the ‘feedforward approach’
as described earlier.
9. Handle the conversation carefully. Maintain control. Stay
clear of emotive language. Allow people to have their say
and listen to them, but make it clear that rudeness or any
other form of unacceptable behaviour will not be
tolerated. If, in spite of the facts, the individual is in denial,
restate the evidence, indicate what happens next (possibly
another meeting after a cooling off period) and close the
meeting.
10. Ensure feedback leads to action. Feedback should indicate
any actions required to develop performance or skills.
References
Budworth, M, Latham, G and Manroop, L (2015) Looking forward to performance
improvement: a field test of the feedforward interview for performance
management, Human Resource Management, 54 (1), pp 45–54
DeNisi A S and Kluger A N (2000) Feedback effectiveness: Can 360-degree appraisals
be improved?, Academy of Management Executive, 14 (1) pp 129–39
Dweck, C (2006) Mindset: The New Psychology of Success, Random House, New York
Gray, A (2001) Individual differences in 360-degree feedback, in The Feedback
Project, University of Surrey, Roehampton
Ivancevich, J M (1982) Subordinates’ reactions to performance appraisal
interviews: a test of feedback and goal-setting techniques, Journal of Applied
Psychology, 67, pp 581–87
Kluger, A N and DeNisi, A (1996) The effects of feedback interventions on
performance: a historical review, a meta-analysis, and a preliminary feedback
theory, Psychological Bulletin, 119, pp 254–84
Lee, C D (2005) Rethinking the goals of your performance management system,
Employment Relations Today, 32 (3), pp 53–60
London, M, Mone, E M and Scott, J C (2004) Performance management and
assessment: methods for improved rater accuracy and employee goal setting,
Human Resource Management, 43 (4), pp 319–36
McGregor, D (1960) The Human Side of Enterprise, McGraw-Hill, New York
Murphy, K R, Cleveland, J N and Hanscom, M (2018) Performance Appraisal and
Management: Why does it fail and how can it be fixed?, Sage, Thousand Oaks CA
13
Coaching
Introduction
This chapter starts with a definition of coaching. It continues
with sections on the skills used by managers when they act as
coaches and the development of a coaching culture.
Coaching defined
Coaching is defined as a personal (usually one-to-one) method
of helping people to develop their skills and levels of
competence. As described by Kinicki et al (2013: 5): ‘It involves
managerial behaviours aimed at improving employee
performance.’ The need for coaching may arise from formal or
informal performance reviews, but opportunities for coaching
will emerge during normal day-to-day activities. Every time a
manager delegates a new task to someone, a coaching
opportunity is created to help the individual learn any new
skills or techniques needed to get the job done. Every time a
manager provides feedback to an individual after a task has
been completed, there is an opportunity to help that individual
do even better next time. Coaching as part of the normal
process of management consists of:
Making people aware of how well they are performing by,
for example, asking them questions to establish the extent
to which they have thought through what they are doing.
Controlled delegation – ensuring that individuals not only
know what is expected of them but also understand what
they need to know and be able to do to complete the task
satisfactorily. This gives managers an opportunity to
provide guidance at the outset – guidance at a later stage
may be seen as interference.
Using whatever situations that may arise as opportunities
to promote learning.
Encouraging people to look at higher-level problems and
how they would tackle them.
Lee (2005: 58) explained: ‘The coaching model of performance
management redefines the relationship between the supervisor
and the subordinate. The two work together to help the
subordinate perform at his or her very best.’ Coaching involves
short-term interventions designed to remedy problems that
interfere with the employee’s performance, but it is also
concerned with longer-term development and continuous
learning.
The process of coaching
Coaching is essentially a non-directive form of development.
Evered and Selman (1989) defined the following characteristics
that define good coaching: developing a partnership,
commitment to producing a result, responsiveness to people,
practice and preparation, a sensitivity to individuals, and a
willingness to go beyond what has already been achieved.
Woodruffe (2008) suggested that coaching should aim to:
amplify an individual’s own knowledge and thought
processes;
improve the individual’s self-awareness and facilitate the
winning of detailed insight into how the individual may be
perceived by others;
create a supportive, helpful, yet demanding, environment
in which the individual’s crucial thinking skills, ideas and
behaviours are challenged and developed.
Coaching can provide motivation, structure and effective
feedback if managers have the required skills and commitment.
When coaching, managers look for the best in people and try to
build on their strengths, rather than dwelling on their
weaknesses. The aim is to help people to help themselves.
Coaching encourages self-directed learning using any resources
such as e-learning that are available. It is not a matter of spoonfeeding people.
Coaching may be informal, but it needs to be planned. It is
not simply checking from time to time on what people are
doing and then advising them on how to do it better. Nor is it
occasionally telling people where they have gone wrong and
throwing in a lecture for good measure. As far as possible,
coaching should take place within the framework of a general
plan of the areas and direction in which individuals will benefit
from further development. Coaching plans should be
incorporated into the personal development plans set out in a
performance agreement.
Coaching skills
A good coach is one who questions and listens. Coaching will be
most effective when the coach understands that their role is to
help people to learn and when individuals are motivated to
learn. The latter should be aware that their present level of
knowledge or skill, or their behaviour, needs to be developed if
they are going to perform their work to their own and to others’
satisfaction. Individuals should be given guidance on what they
should be learning and feedback on how they are doing, and,
because learning is an active not a passive process, they should
be actively involved with their coach, who should be
constructive, building on strengths and experience.
To do all this, good coaches have listening, analytical and
interviewing skills and the ability to use questioning
techniques, give and receive performance feedback and create
a supportive environment. Good coaching is about encouraging
people to think through issues, getting them to see things
differently, enabling them to work out solutions for themselves
which they can ‘own’, and empowering them to do things
differently. Hallbom and Warrenton-Smith (2005) recommend
the following coaching techniques:
Ask high-impact questions – ‘how’ and ‘what’ open-ended
questions that spur action rather than ‘why’ questions that
require explanations.
Help people to develop their own answers and action
plans.
Identify what people are doing right and then make the
most of it rather than just trying to fix problems –
coaching is success driven.
Build rapport and trust – make it safe for employees to
express their concerns and ideas.
Get employees to work out answers for themselves –
people often resist being told what to do, or how to do it.
Developing a coaching culture
Following CIPD research, Clutterbuck and Megginson (2005)
described a coaching culture as one where coaching is the
predominant style of managing and working together and
where commitment to improving the organization is embedded
in a parallel commitment to improving the people. A culture of
coaching is linked to the basic performance management
processes of providing feedback and reinforcement.
In a coaching culture, managers believe that people can
succeed, that they can contribute to their success and that they
can identify what people need to be able to do to improve their
performance. They recognize that coaching can provide
motivation, structure and effective learning and see
performance management as an enabling, empowering process
that focuses on learning requirements. Effective managers are
those who embed coaching into the heart of their management
practice.
Developing a coaching culture in which managers have the
skills and commitment to coach informally as well as on more
formal occasions is difficult. It takes time and is a matter of
guidance, training, encouragement and the example provided
by senior managers and colleagues. Coaching must be
recognized as a core competency for managers. HR or learning
and development specialists have an important role. They can
act as mentors (or establish a team of mentors) to provide
guidance and encouragement.
References
Clutterbuck, D and Megginson, D (2005) Making Coaching Work, CIPD, London
Evered, R D and Selman, J C (1989) Coaching and the art of management,
Organizational Dynamics, 18 (2), pp 16–32
Hallbom, T and Warrenton-Smith, A (2005) The manager as coach, Journal of
Innovative Management, Summer, pp 39–48
Kinicki, A J, Jacobson, K J, Peterson, S J and Prussia, G E (2013) Development and
validation of the performance management behavior questionnaire, Personnel
Psychology, 66 (1), pp 1–45
Lee, C D (2005) Rethinking the goals of your performance management system,
Employment Relations Today, 32 (3), pp 53–60
Woodruffe, C (2008) Could do better? Must do better!, British Journal of
Administrative Management, Jan, pp 14–16
14
Managing underperformance
Introduction
Performance management is a positive process that involves
building on strengths. But it is also about helping people to
improve. This may not be a problem – the improvements
required may be marginal and easily achieved. Sometimes,
however, underperformance is more serious and has to be
managed. This chapter starts with an analysis of the problem
and then describes ways of dealing with underperformers
including handling challenging conversations and invoking a
capability procedure.
The problem of underperformance
A survey covering 139 organizations with a combined total of
300,000 staff conducted by IRS (Wolff, 2008) found that fourfifths had experienced underperformance to some extent while
one in 10 had experienced it to a considerable extent. Only 8
per cent of respondents felt that their efforts to deal with poor
performance had been successful and two-thirds of them did
not consider that managers at their organization were capable
of managing it.
Managers, as Schaffer (1991) pointed out, sometimes use a
variety of psychological mechanisms for avoiding the
unpleasant truth that performance gaps exist. These
mechanisms include:
Evasion through rationalisation. Managers may escape
having to demand better performance by convincing
themselves that they have done all they can to establish
expectations.
Reliance on procedures. Management may rely on a
variety of procedures, programmes and systems to
produce better results. Top managers say, in effect, ‘Let
there be performance-related pay, or performance
management or whatever’ and sit back to wait for these
panaceas to do the trick, which, of course, they won’t
unless they are part of a sustained effort led from the top
and are based on a vision of what needs to be done to
improve performance.
Attacks that skirt the target. Managers may set tough goals
and insist that they are achieved, but still fail to produce a
sense of accountability in subordinates.
Approaches to managing underperformance
To avoid these problems, managing underperformance should
be a positive process that is based on feedback throughout the
year and looks forward to what can be done by individuals to
develop their skills and overcome performance problems and,
importantly, how managers can provide support and help.
Charles Handy (1989) suggested this should be about
‘applauding success and forgiving failure.’ He thought that
mistakes should be used as an opportunity for learning –
‘something only possible if the mistake is truly forgiven because
otherwise the lesson is heard as a reprimand and not as an offer
of help.’
When dealing with poor performers the following comments
by Howard Risher (2005) should be remembered: ‘Poor
performance is best seen as a problem in which the employer
and management are both accountable. In fact, one can argue
that it is unlikely to emerge if people are effectively managed.’
This is another way of expressing the old army saying: ‘There
are no bad soldiers, only bad officers.’
Poor performance may be wholly or partly the fault of the
system. When looking at underperformance it is necessary to
consider systemic as well as individual problems.
Respondents to the IRS survey (Woolf, 2008) suggested that
the key to solving poor performance is communication,
coupled with clarity about expectations and goals, early
intervention and ensuring managers have a clear view of the
underlying problem before applying a solution. It is important
to ensure that underperforming employees understand and
acknowledge that there is a problem when it can be attributed
to them and accept some responsibility for achieving a solution.
Depending on the cause, provision of support through training
or coaching and regular contact with the line manager is also
important. But by far the most effective measure is to have
competent and confident managers who are prepared to tackle
the problem. Most respondents to the survey advocated an
agreed improvement plan as the first step followed by regular
but informal progress reviews. The specific approaches adopted
by respondents to the IRS 2008 survey were:
the manager and employee jointly agree a performance
improvement plan with time scales – 81 per cent;
the manager and the employee agree to more regular,
informal performance reviews – 68 per cent;
a joint agreement on the provision of specific coaching or
training – 61 per cent;
the manager agrees to provide more coaching or guidance
– 52 per cent;
a joint re-evaluation of performance expectations – 52 per
cent.
These are all valid ways of managing underperformance, but
they will be most effective if they are incorporated in a staged
procedure, as described below, which can provide a framework
for managers and a basis for guidance and training.
The five basic steps
The five basic steps required to manage underperformers are:
1 Identify and agree the problem
Analyse the feedback and, as far as possible, obtain agreement
from the individual on what the shortfall has been. Feedback
may be provided by managers, but it can, in a sense, be built
into the job. This takes place when individuals are aware of
their targets and standards, know what performance measures
will be used and either receive feedback/control information
automatically or have easy access to it. They will then be in a
position to measure and assess their own performance and, if
they are well-motivated and well-trained, take their own
corrective actions. In other words, a self-regulating feedback
mechanism exists. This is a situation which managers should
endeavour to create on the grounds that prevention is better
than cure.
2 Establish the reason(s) for the shortfall
When seeking the reasons for any shortfalls, the manager
should not crudely try to attach blame. The aim should be for
the manager and the individual jointly to identify the facts that
have contributed to the problem. It is on the basis of this factual
analysis that decisions can be made on what to do about it by
the individual, the manager or the two of them working
together.
It is necessary first to identify any causes which are due to
weaknesses in the system or outside the control of either the
manager or the individual. Factors that are within the control of
the individual and/or the manager can then be considered.
What needs to be determined is the extent to which the reason
for the problem is a fault in the system itself or the way in
which the system has been managed or operated. If it is
established that the individual is at least partly responsible for
the poor performance it can then be agreed whether this is
because they:
did not receive adequate support or guidance from their
manager;
did not fully understand what they were expected to do;
could not do it – ability;
did not know how to do it – skill;
would not do it – attitude.
3 Decide and agree on the action required
Action may be taken by the individual, the manager or both
parties. This could include:
taking steps to improve skills or change behaviour – the
individual;
changing attitudes – this is up to individuals as long as
they accept that their attitudes need to be changed; the
challenge for managers is that people will not change their
attitudes simply because they are told to do so; they can
only be helped to understand that certain changes to their
behaviour could be beneficial not only to the organization
but also to themselves;
providing more support or guidance – the manager;
clarifying expectations – joint;
developing abilities and skills – joint, in the sense that
individuals may be expected to take steps to develop
themselves but managers may provide help in the form of
coaching, additional experience or training.
Whatever action is agreed, both parties must understand how
they will know that it has succeeded. Feedback arrangements
can be made, but individuals should be encouraged to monitor
their own performance and take further action as required.
4 Support the action
Provide the coaching, training, guidance, experience or
facilities required to enable agreed actions to happen.
5 Monitor and provide feedback
Both managers and individuals monitor performance, ensure
that feedback is provided or obtained and analysed, and agree
on any further actions that may be necessary.
Handling challenging conversations about
performance
Many managers find it difficult to have conversations with
individuals about performance problems. In advance, these can
look difficult and, in practice, they can be challenging if the
manager wants to achieve desired changes or improvements in
performance. They can be even more challenging in prospect if
it is feared that unpleasantness can occur in the shape of lack of
cooperation or outright hostility. The following is a 12-point
guide to handling challenging conversations.
1.
Don’t wait until a formal review meeting. Have a quiet word at the first sign
that something is going wrong.
2.
3.
Get the facts in advance – what happened, when and why?
Plan the meeting on the basis of the facts and what is known about the
individual. Define what is to be achieved.
4.
Set the right tone from the start of the meeting – adopt a calm, measured,
deliberate but friendly approach.
5.
Begin the conversation by explaining the purpose of the meeting, indicating to
the individual what the issue is and giving specific examples.
6.
7.
Focus on the issue and not the person.
Ask for an explanation. Ask unloaded questions to clarify the issues and
explore them together.
8.
9.
10.
11.
Allow people to have their say and listen to them.
Keep an open mind and don’t jump to conclusions.
Acknowledge the individual’s position and any mitigating circumstances.
Ask the employee for proposals to resolve the situation, discuss the options
and if possible agree on action by the individual, the manager or jointly.
12.
If agreement cannot be reached, managers may have to define the way
forward, with reasons – they are in charge!
Here are some comments by managers about dealing with
underperformers recorded by Dilys Robinson (2013)
See the individual as soon as it happens, and resolve it... so, if there is
something that needs to be done, you do it.
It’s easy to not do things; it’s easy to shy away from things. But it doesn’t
really help you in the long run.
It’s important to highlight things at the time and nip things in the bud
straight away.
I would try and informally do it as the first port of call. So maybe an
informal meeting, a chat with somebody, there could be underlying
problems, what have you... there are often other things underlying the
performance issue or the attendance issue.
You’ve got to look back and think, actually, okay, the person not
performing, is that because of him or is that because of a decision we’ve
made?
If an organization can select, develop and encourage managers
to think and behave like these do, then it doesn’t need a formal
performance management system at all.
Use of a capability procedure
Every attempt should be made to deal with performance
problems as they arise or at least consider them dispassionately
at a review meeting. However, further action to deal with
underperformers may be necessary. When confronted with
such situations, many organizations have recognized that to go
straight into a disciplinary procedure and its associations with
misconduct is not the best way to handle them. They believe it
is better to have a special capability procedure for performance
issues, leaving the disciplinary procedure as the method used to
deal with cases of misconduct. A capability procedure is
typically staged as follows:
1. If a manager believes that an employee’s performance is
not up to standard, an informal discussion is held with the
employee to establish the reason and to agree the actions
required to improve performance by the employee and/or
the manager.
2. Should the employee show insufficient improvement over
a defined period, a formal interview will be arranged with
the employee (together with a representative if so
desired). The aims of this interview will be to (a) explain
the shortfall between the employee’s performance and the
required standard, (b) identify the cause(s) of the
unsatisfactory performance and determine what – if any –
remedial treatment (training, retraining, support and so
on) can be given, (c) set a reasonable period for the
employee to reach the standard and (d) agree on a
monitoring system during that period and tell the
employee what will happen if that standard is not met.
3. At the end of the review period, a further formal interview
will be held, at which time (a) if the required
improvement has been made the employee will be told of
this and encouraged to maintain the improvement, (b) if
some improvement has been made but the standard has
not yet been met, the review period will be extended, (c) if
there has been no discernible improvement and
performance is still well below an acceptable standard,
consideration will be given to whether there are
alternative vacancies which the employee would be
competent to fill – if there are, the employee will be given
the option of accepting such a vacancy or being
considered for dismissal, (d) in the absence of suitable
alternative work, an employee who is clearly below an
acceptable standard is liable to be dismissed.
4. Employees may appeal against their dismissal.
Although capability action can be used as a means of
overcoming performance problems, it should be treated as a
separate procedure and not regarded as part of the normal
processes of performance management. These processes
should help to identify performance problems, which they will
deal with on the spot, if at all possible. Only if this fails are these
problems transferred to the capability system for resolution.
This separation of performance management processes and
capability procedures is important because of the serious harm
that would be done to the positive performance improvement
and developmental aspects of performance management if
employees felt that the process was simply being used to collect
evidence for use in taking disciplinary action. Performance
reviews can become threatening affairs if they are perceived as
placing sticks in the hands of management with which they can
beat employees.
If the problem has to be transferred to the capability
procedure it is highly desirable to state what the problem is in
full, with any supporting evidence that is available. Reference
can be made to the fact that the problem was identified earlier
as part of the continuing process of performance management,
but the content of any performance review form produced
following a review meeting should not be used as evidence. The
capability warning must be complete in itself.
In practice, this may not cause much difficulty as long as the
manager follows guidelines for managing performance
throughout the year. These would suggest that immediate
action is taken to deal with performance problems – they
should not be saved up for discussion at a formal review
meeting sometime after the event. Raising problems
immediately means that they are dealt with as a normal
management process, and the capability procedure should only
be resorted to when this process fails in spite of every effort to
make it succeed.
References
Handy, C (1989) The Age of Unreason, Business Books, London
Risher, H (2005) Getting serious about performance management, Compensation &
Benefits Review, Nov/Dec, pp 18–26
Robinson, D (2013) The engaging manager and sticky situations, Institute for
Employment Studies, Brighton
Schaffer, R H (1991) Demand better results and get them, Harvard Business Review,
March–April, pp 142–49
Wolff, C (2008) Managing employee performance, IRS Employment Review, 890, 4
Feb, pp 1–12
PART FOUR
Applications of performance
management
15
Managing organizational
performance
Introduction
The management of organizational performance is the
continuing responsibility of top management who plan,
organize, monitor and control activities and provide leadership
to achieve strategic goals and satisfy the needs and
requirements of stakeholders. Individual and team
performance management systems as discussed elsewhere in
this book play an important part. But they function within the
context of what is done to manage organizational performance
and to develop effective work systems.
Managing organizational performance is a complex business
that is examined in this chapter under the following headings:
The process of managing organizational performance.
The strategic approach to managing organizational
performance.
Business performance management systems.
ProMES.
Organizational capability.
Performance management and human capital
management.
Measuring performance.
The process of managing organizational
performance
Gheorghe and Hack (2007) observed: ‘Actively managing
performance is simply running a business – running the entire
business as one entity. It’s a continuous cycle of planning,
executing, measuring results and planning the next actions. In
the context of a larger strategic initiative, that means
continuous improvement.’ They noted that:
The fundamental problem managers face as they make day-to-day
decisions is an inability to link their actions to key performance
measures. What managers need is more enterprise intelligence,
actionable information that enables them to know where their
problems are, in real time, know who their key performers are without
combing through a stack of reports, know where their company is at
risk, before the numbers turn bad, and, most of all, know which process
could improve performance.
The management of organizational performance is a strategic
approach that has to take account of the needs of multiple
stakeholders and makes use of business performance
management systems. Sink and Tuttle (1990) stated it includes
five dimensions.
1. Creating visions for the future.
2. Planning – determining the present organizational state,
and developing strategies to improve that state.
3. Designing, developing and implementing improvement
interventions.
4. Designing, redesigning, developing, and implementing
measurement and evaluation systems.
5. Putting cultural support systems in place to reward and
reinforce progress.
As described in the rest of the chapter, the management of
organizational performance is based on processes of strategic
performance management, supported by the use of a business
performance management system. In general it is concerned
with developing organizational capability which means
creating a high-performance culture, human capital
management and talent management. In particular it makes
use of various approaches to measuring and monitoring
performance.
The strategic approach to managing
organizational performance
A strategic approach to managing organizational performance
takes a broad and long-term view of where the business is going
and focuses on managing performance in ways which ensure
that this strategic thrust is maintained. The objective is to
provide a sense of direction in an often turbulent environment
so that the business needs of the organization and the
individual and collective needs of its employees can be met by
the development and implementation of integrated systems for
managing and developing performance.
Organizational performance management systems are
strategic in the sense that they are aligned to the business
strategy of the organization and support the achievement of its
strategic goals. They focus on developing work systems and the
working environment as well as developing individuals. To
create the systems and make them function effectively it is
necessary to ensure that the strategy is understood, including,
as Kaplan and Norton (2000) put it: ‘The crucial but perplexing
processes through which intangible assets will be converted
into tangible outcomes.’ The notion of mapping strategy was
originated by them as a development of their concept of the
balanced scorecard.
Strategy maps show the cause-and-effect links by which
specific improvements create desired outcomes. They describe
the elements of the organization’s systems and their
interrelationships. They therefore provide a route map for
systems improvement leading to performance improvement.
In addition, they give employees a clear line of sight into how
their jobs are linked to the overall goals of the organization and
provide a visual representation of a company’s critical goals
and the relationships between them that drive organizational
performance. Bourne et al (2003) call them ‘success maps’
which act as diagrams which show the logic of how the goals of
the organization interact to deliver overall performance. An
example of a strategy map is given in Figure 15.1.
Figure 15.1 A strategy map
Figure 15.1 details
This map shows an overall objective to improve profitability as
measured by return on capital employed. In the next line, the
map indicates that the main contributors to increased
profitability are increases to the gross margin (the difference
between the value of sales and the cost of sales), improvements
to operational capability and better cost management. At the
next level down, the objective is to increase sales turnover in
order to increase the gross margin. How this is to be achieved is
set out in the next group of goals and their interconnections
comprising increases in customer satisfaction and sales force
effectiveness, innovations in product/market development and
marketing, and improvements in customer service and quality
levels. The key objective of improving operational capability is
underpinned by developments in high-performance working
and the contribution of the organization’s human capital. The
latter is supported by human resource management goals in
the fields of performance management, talent management,
employee engagement and learning and development.
The overall objective of increasing profitability in this
example addresses the concerns of only one section of the
stakeholders of an organization: the investors. This need would
probably be given precedence by many quoted companies. But
there are other goals that relate to their other stakeholders, for
example those related to corporate social responsibility. These
could be catered for in separate strategy maps. Better still, they
could be linked to their commercial goals. Public and voluntary
sector organizations will certainly have goals that relate to all
their stakeholders as well as their overall purpose. A
stakeholder approach to strategic performance management is
required.
Performance management strategy is based on the resourcebased view that it is the strategic development of the
organization’s rare, hard-to-imitate and hard-to-substitute
human resources that produces its unique character and
creates competitive advantage. The strategic goal will be to
‘create firms which are more intelligent and flexible than their
competitors’ (Boxall, 1996) by developing more talented staff
and by extending their skills base, and this is exactly what
performance management aims to do. Armstrong and Ward
(2005) summed up the strategic role of performance
management:
There is also opportunity for performance management to help drive
through organizational change. Instead of being a tactical initiative,
perhaps performance management has a more strategic role to play.
The challenge is for performance management to retain a strategic role
rather than tending towards tactical activities, such as the process.
Performance management can provide a new way of looking at
performance and help to embed new behaviours and facilitate the move
to a culture that is both more open and more focused on the
achievement of new outputs.
The strategic approach adopted by Johnson & Johnson was
described by Wortzel-Hoffman and Boltizar (2007) as follows:
As we embarked on developing an integrated performance and
development process into the organization, we knew that driving
change and an enhanced process requires a cultural shift within an
organization. The best performance management becomes a
continuous process and is not a one-time event; it takes time and effort
and a dedication to developing people. We also knew that from a
business standpoint it was critical to build and develop the talent
pipeline of the organization to meet the aggressive business goals and
dynamically changing marketplace.
Implementing strategic organizational performance
management
Strategic organizational performance management starts with a
definition of the areas of activity and achievement that are
most important to the organization. These could be called
organizational key result areas. In a business they might
include all or a selection of the following:
financial (profitability, shareholder value, cost control etc);
market share;
sales;
productivity;
quality;
customer service;
innovation;
people management;
corporate social responsibility.
Strategic goals can be set in each of these areas to which
individual goals can be aligned as described in Chapter 5.
Alignment is a key aspect of performance management.
The stakeholder approach to strategic organizational
performance management
Atkinson et al (1997) argued that a company exists to serve the
goals of its multiple stakeholders – employees, customers,
suppliers, regulators and the community at large, as well as
shareholders. Companies must provide for explicit or implicit
contracts with them. Performance management systems
should guide the design and implementation of processes that
satisfy the requirements of each stakeholder group and
monitor and evaluate the extent to which the organization is
meeting these needs.
The performance prism
A multiple stakeholder framework for performance
management – the performance prism – was formulated by
Neely et al (2002). This is based on the proposition that
organizations exist to satisfy their stakeholders and that their
wants and needs should be considered first. Neely et al
contended that companies in particular must assume a broader
role than simply delivering value to their shareholders. To be
successful over time, even for and on behalf of shareholders,
businesses must address multiple stakeholders. If companies do
not give each of their stakeholders the right level of focus, both
their corporate reputation and their market capitalization – and
therefore shareholder value – are likely to suffer in one way or
another. The performance prism can facilitate or structure the
analysis of multiple stakeholders in preparation for applying
performance measurement criteria. Neely et al explained the
term ‘performance prism’ as follows:
A prism refracts light. It illustrates the hidden complexity of something
as apparently simple as white light. So it is with the Performance Prism.
It illustrates the true complexity of performance measurement and
management. It is a thinking aid which seeks to integrate five related
perspectives and provide a structure that allows executives to think
through the answers to five fundamental questions:
1. Stakeholder satisfaction: Who are our stakeholders and
what do they want and need?
2. Stakeholder contribution: What do we want and need from
our stakeholders?
3. Strategies: What strategies do we need to put in place to
satisfy these wants and needs?
4. Processes: What processes do we need to put in place to
satisfy these wants and needs?
5. Capabilities: What capabilities – people, practices,
technology and infrastructure – do we need to put in place
to allow us to operate our processes more effectively and
efficiently?
Moullin (2002) described how in a charity the performance
prism was used to develop a ‘success map’, which showed the
main needs of the various stakeholders. Performance
measurements were then developed for each group of them
followed by an integrative strategy.
Business performance management systems
A business performance management (BPM) system can be
used to support the achievement of the performance
management strategy. It is an information technology (IT)
based approach to organizational performance management
described by Frolick and Ariyachandra (2006) as a series of
business processes and applications designed to optimize both
the development and the execution of business strategy. There
are two primary tasks. First, to facilitate the creation of strategic
goals and second, to support the subsequent management of
the performance required to reach those goals. Strategic goals
are developed by stipulating specific goals and key
performance indicators that are meaningful to the
organization. The goals and indicators are then associated with
operational metrics for planning, monitoring and control
purposes that are linked to the business strategy. BPM is
concerned with the entire enterprise in contrast to other IT
applications which focus on specific operational areas such as
customer relations.
The BPM framework consists of four core activities as shown
in Figure 15.2. The first two steps represent the formulation of
business strategy, while the last two define how to modify and
execute strategy. This closed-loop process captures business
strategy and then translates it into strategically aligned business
operations.
Figure 15.2 The business performance planning
cycle
SOURCE Frolick, M and Ariyachandra, T R (2006)
A BPM system as provided by suppliers such as Oracle is based
on a common database that allows every department of a
business to store and retrieve information in real time. The
information has to be reliable, accessible and easily shared. A
modular approach means that businesses can select the
software modules they need from the vendor and add new
modules of their own.
Transactional systems, such as enterprise resource planning
(a company-wide information system designed to coordinate all
the resources, information and activities needed to complete
business processes such as order fulfilment or billing),
customer relationship management (CRM), supply chain
management (SCM) and human capital management (HCM),
help to run day-to-day business operations. Business
performance management systems integrate these other
systems and enable executives to manage the business
strategically by providing information across all functions. This
is aligned to strategic imperatives by answering three basic
questions: (1) Where have we been? (2) Where are we now? (3)
Where are we going? and providing the basis for answering the
fourth key question: (4) How do we get there?
Pritchard (2008) pointed out that any enterprise-wide
business performance management improvement initiative
must include managers and employees from across the
organization. All functions have to operate in unison. If the
company doesn’t integrate financial and non-financial data,
there is only so much that a business performance
management tool can do to help decision-makers understand
the results.
ProMES
‘ProMES’ stands for Productivity Measurement and
Enhancement System. As described by Pritchard et al (2008),
ProMES is an intervention aimed at enhancing the productivity
of work units within organizations through performance
measurement and feedback. Productivity is defined as how
effectively an organization uses its resources to achieve its
goals. The theoretical background of ProMES is provided by
expectancy theory, which postulates that people are motivated
by the anticipation of how their efforts will lead to satisfying
their needs. The motivation process is a resource-allocation
process through which energy is allocated across actions or
tasks to maximize the person’s anticipated need satisfaction.
Against this background, a ProMES intervention takes place in
the following steps:
1. A design team is set up in the function or department
concerned.
2. The team defines the objectives of the department and the
associated quantitative performance indicators.
3. ‘Contingencies’ are defined. These relate the amount of
each performance indicator to its value for the
organization.
4. A feedback system is created. This generates performance
levels that are converted into effectiveness scores.
5. Feedback meetings are held with departmental staff to
identify ways of making improvements and those
approved are then implemented.
Extensive research quoted by Pritchard et al (2008) showed that
the application of ProMES has significant and lasting effects.
Organizational capability
Organizational capability is the capacity of an organization to
function effectively. It is about the ability of an organization to
identify its critical success factors, guarantee high levels of
performance for each of these factors, achieve its purpose,
deliver results and meet the needs of its stakeholders. The
development of organizational capability is concerned with the
organization as a system.
The aim is to increase organizational effectiveness by
obtaining better performance from people, getting them to
work well together, improving organizational processes – such
as the formulation and implementation of strategy and the
achievement of high quality and levels of customer service –
and facilitating the management of change.
This has to take place in a context in which organizations are
increasingly embracing a new management culture based on
inclusion, involvement and participation, rather than on the
traditional command, control and compliance paradigm which
Flaherty (1999) claimed: ‘cannot bring about the conditions and
competence necessary to successfully meet the challenges of
endless innovation; relentless downsizing, re-engineering, and
multicultural working holistically.’ This new management
paradigm requires the development of a high-performance
work environment through management practices that value
and support achievement, growth and learning. It also calls for
facilitative behaviours that focus on employee empowerment,
learning and development. In other words, it needs
performance management.
Organizational capability and organizational
development
As described by Beer (1980), organizational development is: ‘A
system wide process of data collection, diagnosis, action
planning, intervention and evaluation.’ Traditionally,
organization development (OD) was based on behavioural
science concepts, but the focus has shifted to a number of other
approaches, such as human capital management, talent
management, change management, high-performance work
systems, total quality management and, importantly,
performance management. Cummins and Worley (2005) noted
that the practice of OD has gone ‘far beyond its humanistic
origins by incorporating concepts from organization strategy
that complement the early emphasis on social processes.’
Organizational capability could be regarded as an outcome of
organizational development but with the focus more on
performance management.
Performance management and human capital
management
Human capital management (HCM) is concerned with
obtaining, analysing and reporting on data that informs the
direction of people management strategies. Performance
management data is an important source of information on
human capital and its contribution to business. Lawler and
McDermott (2003) observed that:
It is very difficult to effectively manage human capital without a
system that measures performance and performance capability… An
effective performance management system should be a key building
block of every organization’s human capital management system.
Given the growing recognition of human capital as a source of
organizational value (the resource-based view) and the
pressure therefore on organizations to collect, analyse and
report on their human capital, performance management data
is likely to become a key source of information both on the
value of human capital and on the management activity
needed to manage and deploy this asset. Performance
management data can be used to:
demonstrate an organization’s ability to raise competence
levels;
assess how long it takes for a new employee to reach
optimum performance;
provide feedback on development programmes, including
induction, coaching and mentoring, in terms of increased
performance or capacity to take on new roles;
demonstrate the success of internal recruitment
programmes;
indicate how successful an organization is at achieving its
goals both at the individual, team and department level;
track skills levels and movement in any skills gap in the
organization;
match actual behaviour against desired behaviour;
assess commitment to values and mission;
assess understanding of strategy and contribution.
Developing a high-performance culture
Organizations achieve sustained high performance through the
systems of work they adopt but these systems are managed and
operated by people. Ultimately, therefore, high-performance
working is about improving performance through people. This
can be done by the development and implementation of a highperformance culture through a high-performance work system
(HPWS). This was described by Becker and Huselid (1998) as:
‘An internally consistent and coherent HRM system that is
focused on solving operational problems and implementing the
firm’s competitive strategy.’ They suggested that such a system:
‘is the key to the acquisition, motivation and development of
the underlying intellectual assets that can be a source of
sustained competitive advantage.’ This is because it has the
following characteristics.
It links the firm’s selection and promotion decisions to
validated competency models.
It is the basis for developing strategies that provide timely
and effective support for the skills demanded to implant
the firm’s strategies.
It enacts compensation and performance management
policies that attract, retain and motivate high-performance
employees.
High-performance work systems embody ways of thinking
about performance in organizations and how it can be
improved. They are concerned with developing and
implementing bundles of complementary practices that, as an
integrated whole, will make a much more powerful impact on
performance than if they were dealt with as separate entities.
The basic features of a HPWS were described by Shih et al
(2005) as follows:
Job infrastructure – workplace arrangements that equip
workers with the proper abilities to do their jobs, provide
them with the means to do their jobs, and give them the
motivation to do their jobs. These practices must be
combined to produce their proper effects.
Training programmes to enhance employee skills –
investment in increasing employee skills, knowledge and
ability.
Information sharing and worker involvement mechanisms –
to understand the available alternatives and make correct
decisions.
Compensation and promotion opportunities that provide
motivation – to encourage skilled employees to engage in
effective discretionary decision-making in a variety of
environmental contingencies.
The contribution of performance management
Performance management contributes to the development of a
high-performance culture by delivering the message in an
organization that high performance is important. It defines
high performance at organizational and individual levels and
links the two by describing how individuals can contribute to
their organization’s results. It explains how performance
should be measured and the steps that should be taken to
monitor results in comparison with expectations. The means of
getting high performance are provided by motivating people,
defining the performance expectations implicit in the
psychological contract, creating high levels of engagement, and
enhancing skills and competencies through feedback, coaching
and personal development planning.
Measuring performance
Managing organizational performance means measuring and
monitoring performance by the use of measures or metrics.
The significance of measurement and the principles governing
its use are discussed below. As also covered in this section, there
is a choice of measures and these can be expressed and
categorized as key performance indicators (KPIs), scorecards, or
the balanced scorecard. They can be communicated by means
of dashboards.
The significance of measurement
As was emphasized by the Association for Management
Information in Financial Services (AMIF, 2005):
Goals, which may vary from organization to organization, are met by
the choices management makes in deploying its resources.
Management’s ability to make informed decisions is tied to the quality
of management information available to them… In order to determine
‘good’ performance versus ‘bad’ performance it is necessary to have a
well-defined base against which to compare actual results. This
includes defining in advance the expectation as to acceptable
performance.
The approach to measurement
The four principles governing the use of performance measures
as defined by Quinn (2003) are:
1. Measure the right things – the system must measure
activities that directly contribute to an organization’s
performance.
2. Clearly communicate what will be measured – measures
that are ill-defined, and/or not communicated will not be
used or understood.
3. Consistently apply the measures – measures should be
applied consistently to all units of the organization; failure
to do so will result in loss of support for the system.
4. Act on the measures – the measurement data must be used
in a constructive way. Not using the data or misapplying
the data will have the same results – a lack of support for
the measurement system.
Neeley et al (2002) counsel that it is necessary to question
constantly what is measured by answering two fundamental
questions: Do we need it? Why do we need it? They comment
that:
We need to evaluate constantly whether or not the measures we have
are the right ones for the organization. And if not, we need to find a way
to get rid of them so that we do not waste time and effort capturing data
that no one is using. In short, we need to practice ‘metricide’ (ie do not
let any metric or measure persist beyond its natural and useful life).
At BP Lubricants, as reported by Elliott and Coley-Smith (2005),
the principles followed in developing the performance
measurement system were:
To focus the business on areas of strategic importance.
To make sure employees have the right information, at
the right time to make the right decisions in support of
strategy.
To clearly understand the value-to-cost relationship of
communication activities.
To develop a measurement mindset that focuses people
on improving performance.
But a word of caution is necessary about the concept of
managing by metrics. Figures can conceal more than they
reveal and it is possible for people to hide behind them. Data
can be misleading. It is not enough just to tick boxes. Metrics
may be a start, but they cannot be relied on by themselves. If
there is a problem the story behind the figures needs to be
investigated, especially when the failure is systemic.
Types of measure
Traditionally, organizational performance measurement
systems were unidimensional – focused entirely on financial
measures related to shareholder value such as return on capital
employed, economic value added, earnings per share,
price/earnings ratio and added value. But such traditional
accounting-based performance measurement systems are
insufficient in modern organizations where it is recognized that
relationships with employees, customers, suppliers and other
stakeholders are crucial aspects of how the organization is
performing. Financial measures cannot evaluate important
factors such as innovation, employee engagement, employee
relations, levels of customer and employee satisfaction,
corporate social responsibility and care for the environment.
These factors are sometimes called leading indicators (Gjerde
and Hughes, 2007) because they inform management of the
progress made on initiatives undertaken to improve
performance. Measures of financial performance are lagging
indicators because they reflect past results. Achieving an
objective related to a lead measure indicates that performance
is on track, and achieving an objective related to a lag measure
shows that the goal has been accomplished. To identify lead
measures it is necessary to establish what are the key factors
that drive performance – the KPIs that form the basis of the
performance monitoring and measurement system.
Jack Welch, former CEO of the General Electric Company, as
quoted by Krames (2004), said that the three most important
things you need to measure in a business are customer
satisfaction, employee satisfaction and cash flow. Sink and
Tuttle (1990) listed seven measurement categories of
organizational performance: (1) effectiveness, (2) efficiency, (3)
quality, (4) quality of working life, (5) innovation, (6) cost and
prices and (7) productivity.
The European Foundation for Quality Management (EFQM)
model has the following elements:
Leadership – how the behaviour and actions of the
executive team and all other leaders inspire, support and
promote a culture of total quality management.
Policy and strategy – how the organization formulates,
deploys and reviews its policy and strategy and turns it
into plans and actions.
People management – how the organization realizes the
full potential of its people.
Resources – how the organization manages resources
effectively and efficiently.
Processes – how the organization identifies, manages,
reviews and improves its processes.
Customer satisfaction – what the organization is achieving
in relation to the satisfaction of its external customers.
People satisfaction – what the organization is achieving in
relation to the satisfaction of its people.
Impact on society – What the organization is achieving in
satisfying the needs and the expectations of the local,
national and international community at large.
Business results – what the organization is achieving in
relation to its planned business goals and in satisfying the
needs and expectations of everyone with a financial
interest or stake in the organization.
Key performance indicators
KPIs are the results or outcomes that are identified as being
crucial to the achievement of high performance and provide
the basis for setting goals and measuring performance. They
are important when measuring individual performance and
they are just as important at the organizational level. They
must take account of the requirements of all stakeholders and
should add social responsibility to the list of business goals by
including discretionary environmental initiatives, diversity and
employee well-being in the set of KPIs.
An organizational KPI is a special kind of metric. It measures
something that is strategically important to the organization,
such as sales per square metre, added value per employee, rate
of stock turnover, cost per unit of output, time to market and
levels of employee engagement. In other words, as Schiff (2008)
put it: ‘A KPI is a metric that matters. You can have many
metrics, but an organization needs only a handful of KPIs.
Everything can’t be considered “key”, or nothing will stand out
from the pack and get the attention it deserves.’ The range of
KPIs in different organizations is typically between six and
twelve.
KPIs provide the basis for defining the crucial goals for which
individuals are accountable. The measurement system has to
ensure that performance in relation to the KPIs is recorded and
analysed and that this information is passed on to accountable
managers for action. Thus they facilitate the alignment of
organizational and business goals.
Scorecards
Scorecards record performance related to a set of KPIs. In
effect, they are report cards on the organization’s performance.
For example, they can show sales per square metre in a store,
comparing actuals with targets and analysing trends. Dagan
(2007) emphasized that: ‘You should also not get carried away
with trying to jam too many KPIs into your scorecard displays.
Although the optimal number depends on your organization, a
rule of thumb is that six to ten KPIs are sufficient in most cases.’
It should be possible to drill down into supporting tabular and
graphical data to investigate any issues raised by the scorecard.
The balanced scorecard
Traditionally, scorecards tended to concentrate on financial
measures. Kaplan and Norton (1992, 1996) devised the balanced
scorecard as a means of ensuring that businesses used both
financial and operational measures, thus achieving a more
balanced view of their performance. They explained that the
balanced scorecard approach ‘puts strategy and vision, not
control at the centre.’ As described in Chapter 11 (Figure 11.2) it
requires managers to look at the business from the four related
perspectives of customers, innovation and learning, internal
performance requirements and finance. Some organizations
have replaced the innovation and learning perspective with a
broader people or human capital element.
Schneiderman (1999) recommended that balanced scorecards
work best when good metrics are available. They should be
clearly defined and easy to understand, accessible when needed
to those who can best use them and linked to an underlying
data system that enables the root causes of poor scorecard
results to be identified and dealt with.
Dashboards
A dashboard is a graphical display designed to convey key
performance measures on an organization’s intranet system to
a wide audience so that they can be assimilated and acted upon
easily and swiftly. Dover (2004) commented that: ‘Dashboards
are predominantly a data-delivery vehicle. Dashboards use
dials, “traffic light” displays and graphs to make performance
information available as and when required.’ An example of a
basic dashboard with just three dials is illustrated in Figure 15.3.
Figure 15.3 Example of a dashboard
As described by Dagan (2007), dashboards provide a rapid and
convenient way for people to assess how they are doing by
reference to the business metrics critical to their place in the
organization. Thus they can promptly initiate corrective action
as needed. Dashboards can be constructed using real-time or
near-real-time feeds from a data warehouse frontline system.
Dashboard displays can be enhanced with charts, graphs or
even tabular data. However, it is important not to make the
entry screen too busy because this might divert attention away
from the important metrics. An alternative is to provide
facilities for obtaining supporting information. For example, if a
traffic light system shows a KPI that is red or yellow, then a
click of the mouse should enable the user to drill down to
pinpoint some of the underlying causes. Drill down could be
available to several layers, with each layer providing even
more details. Examples of a more elaborate dashboard that
incorporates a traffic light system and one based on entirely on
traffic lights are given in Figures 15.4 and 15.5.
Figure 15.4 Example of dashboard with (1) dials, (2)
traffic lights, (3 and 4) graphs
Figure 15.5 Human capital reporting dashboard
Figure 15.5 details
Developing measures
Each of the approaches to performance management based on
measurement described above – scorecards, balanced
scorecards and dashboards – depend on the quality of the
measures (metrics) used. The following steps should be taken
when developing them:
1. Involve as many as possible of those concerned in the
development programme.
2. Identify the key factors that drive performance.
3. Define the key performance indicators (KPIs).
4. Define what metrics are required – what should be
measured and why, in order to provide information on
performance related to each KPI.
5. Decide how to measure – how information related to the
measures and performance with regard to each KPI
should be collected and presented.
6. Set up a system for communicating information on
performance through such media as scorecards or
dashboards.
References
AMIF (2005) Basic tenets of performance management in financial institutions,
Journal of Performance Management, 18 (3), pp 17–21
Armstrong, K and Ward, A (2005) What Makes for Effective Performance
Management?, The Work Foundation, London
Atkinson, A A, Waterhouse, J H and Wells, R B (1997) A stakeholder approach to
strategic performance measurement, Sloan Management Review, 38 (3), pp 25–37
Becker, B E and Huselid, M A (1998) High performance work systems and firm
performance: a synthesis of research and managerial implications, Research on
Personnel and Human Resource Management, 16, pp 53–101
Beer, M (1980) Organization Change and Development: A systems view, Goodyear,
Santa Monica CA
Bourne, M, Franco, M and Wilkes, J (2003) Corporate performance management,
Measuring Business Excellence, 7 (3), pp 15–21
Boxall, P F (1996) The strategic HRM debate and the resource-based view of the
firm, Human Resource Management Journal, 6 (3), pp 59–75
Cummins, T G and Worley, C G (2005) Organization Development and Change, South
Western, Mason, Ohio
Dagan, B (2007) Dashboards and scorecards aid in performance management and
monitoring, Natural Gas & Electricity, Sept, pp 23–27
Dover, C (2004) Dashboards can change your culture, Strategic Finance, Oct, pp 42–
48
Elliott, S and Coley-Smith, H (2005) Building a new performance management
model at BP, SCM, Aug–Sept, pp 4–8
European Foundation for Quality Management, The EFQM model, available at: htt
p://www.efqm.org/ (archived at https://perma.cc/K3PE-8KAX)
Flaherty, J (1999) Coaching: Evoking Excellence in Others, Butterworth-Heinemann,
Burlington MA
Frolick, M and Ariyachandra, T R (2006) Business performance management: one
truth, Information Systems Management, 23 (1), pp 41–48
Gheorghe, C and Hack, J (2007) Unified performance management: how one
company can tame its many processes, Business Performance Management, Nov,
pp 17–19
Gjerde, K A and Hughes, S B (2007) Tracking performance: when less is more,
Management Accounting Quarterly, 9 (1), pp 1–12
Kaplan, R S and Norton, D P (1992) The balanced scorecard – measures that drive
performance, Harvard Business Review, Jan–Feb, pp 71–79
Kaplan, R S and Norton, D P (1996) Using the balanced scorecard as a strategic
management system, Harvard Business Review, Jan–Feb, pp 75–85
Kaplan, R S and Norton, D P (2000) Having trouble with your strategy? Then map it,
Harvard Business Review, Sept–Oct, pp 167–76
Krames, J A (2004) The Welch Way, McGraw-Hill, New York
Lawler, E E and McDermott, M (2003) Current performance management practices,
WorldatWork Journal, Second Quarter, pp 49–60
Moullin, M. (2002) Delivering Excellence in Health and Social Care, Open University
Press, Buckingham
Neely A, Adams, C and Kennerley M (2002) The Performance Prism: The scorecard for
measuring and managing business success, Pearson Education, Harlow
Pritchard, A (2008) The new BPM: enterprise performance management, Business
Performance Management, March, pp 28–30
Pritchard, R D, Harrell, M M, Diaz Granados, D and Guzman, M J (2008) The
productivity measurement and enhancement system: a meta-analysis, Journal of
Applied Psychology, 93 (3), pp 540–87
Quinn, F J (2003) Measurement – the right way, Logistics Management, 42 (3), p 9
Schiff, C (2008) Three things you should know about dashboards, DM Review, June,
p 29
Schneiderman, A M (1999) Why balanced scorecards fail, Journal of Strategic
Performance Measurement, Jan, pp 6–10
Shih, H-A, Chiang, Y-H and Hsu, C-C (2005) Can high performance work systems
really lead to better performance?, Academy of Management Conference Paper, pp
1–6
Sink, D S and Tuttle, T C (1990) The performance management question in the
organization of the future, Industrial Management, 32 (1), pp 4–12
Wortzel-Hoffman, N and Boltizar, S (2007) Performance and development
planning: a culture shift perspective, Organization Development Journal, 25 (2), pp
195–200
16
Managing team performance
Introduction
Teams are groups of employees working together. A team is
defined by interdependence of action, shared responsibility and
agreed performance and process objectives. It is just as
important to pay attention to the management of team
performance as it is to manage individual and organizational
performance. As Purcell et al (1998: 6) observed, teams are the:
‘elusive bridge between the aims of the individual employee
and the objectives of the organisation… teams can provide the
medium for linking employee performance targets to the
factors critical to the success of the business.’ DeNisi and Smith
(2014: 134) stated that:
Even if we know something about improving performance at the
individual level, this is clearly not enough, since we must be able to
improve firm-level performance. One possible way to move up to firmlevel performance is to work through improving team-level
performance. Work is ever more team-oriented, and team performance
is more complicated than individual performance.
The goal of team performance management is to: ‘make all
team members accountable and to motivate them to have a
stake in team performance’ (Aguinis, 2009: 272). This goal is
achieved by following the same sequence as for individual
performance management:
1. Agree objectives – these include performance objectives
and process improvement objectives.
2. Define performance measures, such as the achievement
of output, quality and cost control targets, the satisfactory
conduct and completion of projects, activity levels (eg
speed of servicing), customer service and satisfaction and
financial results.
3. Formulate plans to achieve objectives.
4. Implement plans.
5. Monitor progress.
6. Review and assess achievement.
7. Redefine goals and plans in the light of the review.
The aim should be to give teams with their team leaders the
maximum amount of responsibility to carry out all activities.
The focus should be on self-management and self-direction.
The processes of agreeing performance and process
objectives and assessing achievements through team reviews
are described below.
Agreeing performance objectives
Performance objectives for teams are agreed in much the same
way as individual objectives (see Chapter 11). They will be
based on an analysis of the purpose of the team and its
accountabilities for achieving results. Targets and standards of
performance should be discussed and agreed by the team as a
whole. These may specify what individual members are
expected to contribute. Project teams will agree project plans
that define what has to be done, who does it, the standards
expected and the timescale.
Agreeing process objectives
Process objectives describe how the team is expected to
function in achieving its performance objectives. They are best
agreed by the team getting together and agreeing how they
should conduct themselves as a team. The team competencies
that should be covered are:
interpersonal relationships;
the quality of participation and collaborative effort and
decision-making;
the team’s relationships with internal and external
customers;
the capacity of the team to plan and control its activities;
the ability of the team and its members to adapt to new
demands and situations;
the flexibility with which the team operates;
the effectiveness with which individual skills are used;
the quality of communications within the team and
between the team and other teams or individuals.
Conducting team performance reviews
Team performance review meetings analyse and assess
feedback and control information on their joint achievements
against objectives and project plans. The agenda for such
meetings could be as follows:
1. General feedback review:
progress of the team as a whole;
problems encountered by the team that have caused
difficulties or hampered progress;
helps and hindrances to the operation of the team.
2. Work reviews:
how well the team has functioned
discussion of any problems encountered by
individual team members.
3. Group problem solving:
analysis of reasons for any shortfalls or other
problems;
agreement of what needs to be done to solve them
and prevent their re-occurrence.
4. Update objectives:
review of new requirements, opportunities or
threats;
amendment and updating of objectives and project
plans.
References
Aguinis, H (2009) An expanded view of performance management, in Performance
Management: Putting Research Into Practice, eds J W Smither and M London,
Wiley, San Francisco
DeNisi, A S and Smith, C E (2014) Performance appraisal, performance
management and firm-level performance, Academy of Management Annals, 8 (1),
pp 127–79
Purcell, J, Hutchinson, S and Kinnie, N (1998) The Lean Organisation, IPD, London
17
International performance
management
Introduction
The two interrelated applications of international performance
management are covered in this chapter: first, its use by
multinational firms in their foreign subsidiaries, and second,
how expatriate employees are dealt with. The system adopted
in either case may be essentially similar to a typical national,
one-country approach.
Performance management in the subsidiaries of
multinationals
When considering how to operate performance management,
the dilemma facing multinational enterprises is the extent to
which there should be one standardized system throughout the
organization rather than local systems that fit the
circumstances of the country concerned. This is the issue of
convergence or divergence, as discussed below.
Convergence and divergence
All multinational corporations have the problem of achieving a
balance between international consistency and local autonomy.
They must therefore decide on the extent of convergence
(centralization) or divergence (localization). Briscoe et al (2012)
raised the issue of whether to standardize HRM policies and
practices from headquarters, or localize them to meet local
conditions, or do both (for example a combination of core
policies established by HQ with localized practices to
accommodate local culture).
If the choice is to adopt convergence to some degree or in
selected areas it is necessary to remember Tayeb’s (2005)
proposition that it is generally easier to transfer strategies and
policies than practices. Rather than trying to impose central
practices, in certain cases it may be preferable simply to set out
broad policy guidelines expressing and underpinning the
values that the parent company would like to be applied
throughout the organization. Pudelko and Harzing (2007: 536)
argued that: ‘those who favoured convergence assumed that in
management, best practices can be defined that are universally
valid and applicable, irrespective of national culture or
institutional context.’ But they also observed (page 551) that:
‘We should not expect every subsidiary to be brought into the
best practices scheme in the same way.’
Festing and Eidems (2011) reported that in the course of
increasing globalization, more and more MNEs (multinational
enterprises) are being forced to compete globally and
simultaneously adapt their business strategies to changing local
demands. They also suggested that firms tend not to
standardize a whole HRM system but rather focus on single
practices. Performance management is often one of those
practices.
Research conducted by Reilly and Williams (2012) indicted
that there were upsides and downsides of what they called a
‘one-country’ approach by HR, that is, convergence.
The upsides:
Promotes common values.
Delivers consistent treatment to staff.
Exports good business practice to all parts of the
organization.
Greater control over dispersed operations.
Cost control.
The downsides:
Harmonisation can stifle innovation.
Centre loses touch with sharp end of the business.
Ill-conceived policies subverted at a local level.
HR is focus for frustration as agent of the corporate centre.
Approaches to international performance
management
The amount of convergence or divergence in international
performance management systems can vary in five ways:
1. Total convergence (standardization) – using the parent
company’s scheme throughout the international
organization.
2. Partial convergence – foreign subsidiaries use a version of
the parent company’s system modified to take account of
local factors such as culture and work systems.
Alternatively, they ensure that their own systems conform
to policy guidelines issued by headquarters, possibly
including certain requirements such as the design of the
forms or methods of rating
3. Total divergence (localization) – foreign subsidiaries use
their own systems.
4. Partial divergence – foreign subsidiaries can use their own
systems as long as they are in line with certain basic
principles, for example that performance management
should be a continuous process of joint planning,
agreement, dialogue and feedback (examples of guiding
principles are given in Chapter 22).
5. Dual system – using local, possibly partly converged
schemes, for subsidiary company employees and
reserving the headquarters scheme for expatriates.
Considerations affecting the approach
A system that has worked well at headquarters will not
necessarily transfer well to a foreign subsidiary. A study by
Gerringer et al (2002) covering ten countries found that a
centralized performance management system generally failed
to fulfil its purpose.
The issues discussed below need to be taken into account
when deciding on the type of performance management
system to be used, the extent to which standardized
performance management systems are desirable and, in so far
as they are standardized, how they should be managed. There
are no easy solutions. Each case has to be decided in accordance
with individual circumstances. But it is helpful to be aware of
the potential pitfalls so that action can be taken in advance to
avoid them, as far as possible.
The particular issues affecting the use of performance
management in foreign subsidiaries are cultural differences,
environmental differences, the increased difficulty in
influencing and controlling line managers and the problem of
achieving consistent rating results.
Cultural differences
Cultural differences may affect the ability of a multinational
firm to implement a standardized international system. For
example, Shen (2005) noted that in some Asian countries such
as China and Japan, to ‘save face’, feedback is not normally
given, and group meetings are often held to achieve group
harmony in dealing with performance matters. This aspect of
Asian culture is very different from Western culture where
individualism is emphasized.
Environmental differences
The maturity of subsidiaries in terms of their productivity,
ability to penetrate markets, availability of skilled employees
and work practices will vary and it may be difficult for some
subsidiaries to meet the standards of performance expected by
the parent company. Environmental differences, such as levels
of political stability and standards of living, will also affect the
results achieved by subsidiaries. Garland et al (1990) made the
point that an organization should not fire the manager of a
foreign subsidiary because productivity is half the American
average. Performance at this level could still be considerably
over the average in the country concerned because of
environmental differences. Account should be taken of these
differences, but it is easy for a remote headquarters to be
unaware of how local factors affect performance levels.
Line managers
Even in a one-country domestic setting, performance
management can easily fail because the line managers on
whom the system depends lack the skill or the inclination to do
it properly. In an international organization, control over how
line managers implement performance management will be
even more difficult owing to the diversity of operations, the
geographical separation between headquarters and foreign
subsidiaries and, possibly, the unwillingness of local managers
to take much notice of commands from a remote centre.
Rating problems
The achievement of reliable and consistent appraisal ratings in
a domestic setting is difficult; in an international operation it is
virtually impossible. Care should therefore be taken in
designing and interpreting rating systems. If it is felt that they
are essential it may be best to leave them to the local subsidiary
and not try to introduce a suspect universal system.
What happens in practice
The 2014 e-reward survey of performance management
established that 71 per cent of the respondents’ companies
required subsidiaries to operate the standard corporate
performance management system. Where this was not the
policy, respondents adopted one or the following approaches:
subsidiaries left to decide for themselves – 12 per cent;
subsidiaries required to use performance management
but allowed to have their own system – 11 per cent;
subsidiaries required to use performance management
but allowed to have their own system subject to following
corporate guidelines – 6 per cent.
Briscoe et al (2012) observed that multinational Western
country-of-origin companies were likely to use a standardized
approach to performance management in their subsidiaries.
This was warranted for the sake of global integration,
uniformity, organizational culture cohesiveness, fairness,
mobility of global employees, and as a control mechanism. And
it can be argued that replicating domestic practices simplifies
the process of collecting and interpreting data.
Gregersen et al (1993) found in their research sample of US
multinational firms that 76 per cent of them used the same
standardized appraisal forms internationally. But they also
found that subsidiary firms often tended not to follow corporate
practices and when they did use standardized procedures this
reduced the effectiveness of the appraisals.
The trend towards convergence was confirmed by the
findings of the research conducted by the Global HR Research
Alliance research, reported by Stiles (2007: 39) as follows:
In performance management we might have expected a large
divergence of views in areas such as pay for performance or meritbased promotion, but we found little or no difference across the world.
We witnessed a concerted effort on the part of group HR departments to
maintain global performance standards supported by global
competencies (at foundation, managerial, technical and leadership
level), common evaluation processes and common approaches to
rewards. It was difficult, therefore, to find many distinctive local
practices.
International performance management in
action
Standard Chartered Bank
The international performance management process used by
Standard Chartered Bank is illustrated in Figure 17.1.
Figure 17.1 International performance
management system – Standard Chartered Bank
Figure 17.1 details
Serono SA
As reported by Coleman and Chambers (2005), Serono SA, the
Swiss biotechnology company with offices around the world,
needed a performance management system that was consistent
but was also flexible enough to adjust to the laws governing
employment in each of its far-flung operations.
Each Serono operating unit has its own objectives that are
aligned to overarching corporate goals. Units in each country
tailor their performance management systems for compliance
with local laws, customs and budgets. An information
technology system was developed to automate performance
management for Serono’s global operations. The analytical
tools built into this system enable HR at the centre to gain an
overview of how the organization as a whole is evaluating its
employees. For example, data on assessments presented as bell
curves (graphs showing distributions in the form of a curve
shaped like a bell), reveal the extent to which appraisal scores
are out of line with what is regarded as a normal distribution.
Performance management for expatriates
An expatriate was defined by Lee and Donohue (2012) as: ‘any
individual who relocates from his/her home base to an
international location for business or work purposes and sets
up temporary residence in the host country.’
The management of expatriates on international assignments
is a major factor determining success or failure in a global
business. Expatriates are expensive. They can be difficult to
manage because of the problems associated with adapting to
and working in unfamiliar environments and cultures and
concerns about their development and careers. Managing their
performance presents particular difficulties, and the factors
involved are discussed below.
Factors affecting expatriate performance
Issues such as culture shock and cross-cultural adjustment may
have an adverse impact on the performance of expatriates.
Pinto et al (2012) commented that: ‘Socio-cultural adjustment
and psychological well-being of expatriates and their families
are preconditions for their success.’
One of the challenges of performance management for
expatriates is that the type of skills developed and used in an
international job may be different from those developed and
used in a domestic environment. These include managing a
workforce with cultural differences, dealing with the different
behavioural norms of clients, customers and government
officials, and coping with a different legal system.
It may be feasible to set up a standardized set of performance
factors at headquarters and get the host country evaluators to
use these common headings while setting their own individual
performance goals, bearing in mind corporate goals. Lee and
Donohue (2012) developed and tested an expatriate
performance scale consisting of six elements:
task performance;
management and administration;
teamwork and leadership;
demonstrating effort;
communication performance;
maintaining self-discipline.
Factors affecting performance management for
expatriates
The effectiveness of performance management for expatriates
is affected by the complexity of international business and the
distance separating headquarters and subsidiaries. There may
be problems with the choice of evaluator – should it be
someone in the host country or the home country and, if the
latter, will parent company evaluators know enough about the
people they assess and the performance conditions those
people face? A parent company evaluator’s perception of good
performance may differ from the reality of conditions in the
subsidiary. There may be problems with long-distance
communication. Contacts between the parent company
evaluator and the expatriate being evaluated may be
infrequent. A host country evaluator may lack the experience
of a practised headquarters evaluator, and management at
head office may not trust local assessments. This problem may
be less acute if the initial evaluation is carried out locally and
reviewed at the centre or, better still, if the host country
evaluator discusses the evaluation in advance with the home
country evaluator.
A performance management system for expatriates may
basically resemble the standard headquarters system, but when
operating it the considerations set out above need to be
remembered. When setting performance goals and standards it
is particularly necessary to remember the different conditions
in which expatriates work, the performance issues they have to
face and the special demands made upon them.
The arrangements may vary according to the level of the
employees concerned. Research by Tahvanainen (2000) into
performance management practices at Nokia
Telecommunications found that, although a global,
standardized system was in place, there were differences in
how expatriate performance was evaluated, particularly in
terms of how performance goals were set, who set them and
what type of goals they were. Senior host country managers
were evaluated by more senior managers at headquarters
against the performance goals specified in the incentive
scheme. The evaluation of middle manager expatriates was
typically done by their senior manager in the host country. If
the expatriate also had a manager in the home country, the
host country manager usually discussed the expatriate’s
performance with that home country manager prior to
conducting the evaluation.
References
Briscoe, D R, Schuler, R and Tarique, I (2012) International Human Resource
Management, 4th edition, Routledge, New York
Coleman, T and Chambers, T (2005) Serono case study: global performance,
evaluations and compensation, Compensation & Benefits Review, July–Aug, pp 61–
65
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
Festing, M and Eidems, J (2011) A process perspective on transnational HRM
systems – a dynamic capability-based analysis, Human Resource Management
Review, 21, pp 162–73
Garland, J, Farmer, R N and Taylor, M (1990) International Dimensions of Business
Policy and Strategy, PWS-Kent, Boston MA
Gerringer, J, Frayne, C and Milliman, J (2002) In search of ‘best practices’ in
international human resource management: research design and methodology,
Asia Pacific Journal of Human Resources, 40 (1), pp 9–37
Gregersen H B, Hite, J M and Black, J S (1996) International performance appraisal
in US multinational firms, Journal of International Business Studies, 27, pp 711–13
Lee, L and Donohue, R (2012) The construction and validation of a measure of
expatriate job performance, International Journal of Human Resource
Management, 23 (6), pp 1197–215
Pinto, L H, Cabral-Cardoso, C and Werther, W B (2012) Compelled to go abroad:
motives and outcomes of international assignments, International Journal of
Human Resource Management, 23 (11), pp 2295–314
Pudelko, M and Harzing, A-W K (2007) Country of origin, localization, or
dominance effect? An empirical investigation of HRM practices in foreign
subsidiaries, Human Resource Management, 46 (4), pp 535–59
Reilly, P and Williams, T (2012) The challenges of global HR: one way to go?, People
Management, Sept, pp 28–31
Shen, J (2005) Effective international performance appraisals: easily said, hard to
do, Compensation & Benefits Review, July–Aug, pp 70–79
Stiles, P (2007) A world of difference?, People Management, 15 Nov, pp 36–41
Tahvanainen, M (2000) Expatriate performance management: the case of Nokia
Telecommunications, Human Resource Management, 39 (2 and 3), pp 267–75
Tayeb, M H (2005) International Human Resource Management: A Multinational
Company Perspective, Oxford University Press, Oxford
18
Managing the performance of
homeworkers
Introduction
The massive increase in the number of people working from
home was one of the most noteworthy effects of Covid-19. The
Office for National Statistics reported that, in April 2020, 46.6 per
cent of those in employment did some work at home and 86
per cent of those did so as a result of the coronavirus pandemic.
After the worst effects of the pandemic were over, many
organizations have continued to use homeworking, although a
‘hybrid’ version is often adopted, combining home and office
working.
Managing a remote workforce is not easy, and working from
home all the time can be one of the most engaging or
disengaging experiences possible for an employee, depending
on how their manager handles it. This presents a huge
challenge to managers. They must aim to help homeworkers
become as strong as possible in the unusual and often difficult
circumstances in which they work. Managing performance is
always hard but in these circumstances even harder.
Traditional approaches to performance management consisting
of annual appraisals, ratings and goal setting are no longer so
appropriate in today’s volatile context that subjects
homeworkers to rapidly changing demands and the
responsibility for shorter-term projects. They need to be
replaced by more frequent ‘check-ins’ and narrative
assessments. As the Institute for Employment Studies (2020: 14)
pointed out:
It is now more important than ever for performance management to be
undertaken in a timely and compassionate manner. Although the way
in which performance management is undertaken will change for
many, the reasons why performance management is undertaken are
the same.
To respond to this situation it is necessary to:
formulate and implement a policy on how the
performance of homeworkers should be managed;
clarify what homeworkers are expected to do;
reconsider the ways in which performance management
should take place;
pay attention to identifying and satisfying learning needs;
provide guidance and, as necessary, training to line
managers on how they should manage the performance
of homeworkers.
Policy
The policy should take account of the fact that people who work
at home do so in conditions of uncertainty. They need the
guidance and support required to adapt their work to their
situation. Account should be taken of the vastly different and
varying circumstances in which homeworkers operate. As
Rebecca Knight (2020: 3) emphasized:
With your team members working from home, your approach calls for
a little more flexibility, a little more heart, and a little more leniency.
Some may be juggling client calls with entertaining their toddlers or
helping their tweens with algebra; others may be overseeing projects
while caring for elderly family members; still others may be trying to
work while struggling with feelings of isolation. You don’t know exactly
how rough it is for your employees. As a manager put it ‘you can’t only
look at the deliverables people are providing while ignoring their home
situations.’ Show compassion. The psychological impact of Covid is
hitting people in different ways. You need to give people a little more
latitude.
Homeworkers should be allowed flexibility to organize their
tasks, and discretion to make decisions about how they manage
their work. Policy guidelines should also refer to the possibility
that homeworkers might not be as productive. They could be
adjusting to fully-remote work, dealing with unexpected life
changes, or juggling caregiving responsibilities decisions about
when they do their work from home.
The policy should also make clear the approach the
organization wants managers to adopt in setting goals,
providing feedback and assessing performance.
Clarifying expectations
It is important for homeworkers to have well-defined outcomes
and performance indicators to provide guidance on their
priorities and a basis for assessing performance (by employees
for themselves as well as by their managers). The ACAS (2020)
guidelines on homeworking policy state that employers should
ensure that employees who work from home are clear about
their hours and the core hours when they should be at work.
And the Institute for Employment Studies, (Bevan et al, 2020:
11) recommended that organizations should: ‘rethink
performance targets and monitoring and involve employees in
decisions about reorganising work and reallocating tasks and
priorities.’
One of the most difficult things that managers have to face
when conducting performance reviews at a time when their
team has gone wholly or partially remote is that, because they
don’t see their team members in person, they don’t have as
much data as they usually do. It is necessary to think very
carefully about what homeworkers can reasonably be expected
to do in the circumstances in which they work and to discuss
those expectations with the people concerned, paying
particular attention to getting agreement on how achievements
in meeting those expectations can be assessed.
It is particularly important to define success factors in
concrete and measurable terms. For example, ‘be innovative’ is
not measurable, but ‘bring together people from different
functions and perspectives in forums that encourage idea
sharing and problem solving’ is.
Performance management processes
The basic performance management processes of objective
setting, performance reviews and performance assessment
need to be reconsidered for homeworkers.
Objective setting
Because of the uncertainties that are more likely to be present if
daily face-to-face contacts with managers and colleagues cannot
take place, it is even more necessary to tailor objective setting
to changing circumstances and work requirements for
homeworkers than for those working in the office. Zoom is an
inadequate substitute.
Performance reviews
People want to be appreciated. They need to be assured that
their immediate and longer-term growth needs have not been
forgotten. People working at home in conditions of uncertainty
want reassurance and should not have to wait until a year-end
review to get it. When managers are able to step up and have
frequent, meaningful conversations about how work is going,
employees are able to capitalize on the advantages of working
from home.
Analysis of surveys by Gallup (2020) found that frequency of
feedback was the key to engaging homeworkers. For those
working remotely, engagement levels as measured by Gallup
increased in relation to the frequency of check-ins by managers
as follows: once a year – 10 per cent, a few times a year – 16 per
cent, a few times a month – 47 per cent, a few times a week – 63
per cent.
Managers should not pay too much attention to performance
on Zoom sessions. ‘Zoom fatigue’ is real. Because people are not
face to face, there are no context cues, and it is easy to have
misunderstandings. It is more difficult to judge on a screen the
subtext of what is happening.
Performance assessment
The assessment of performance by rating is fraught with
difficulties even when people are on the spot. These are
enhanced when dealing with homeworkers. Objectivity is
harder to achieve in the absence of regular face-to-face
contacts, and trying to translate subjective views into some
form of ranked assessment can lead to superficial and
demotivating judgements. Ratings can seem to be arbitrary and
unfair when they are awarded on the spot. They can be worse if
they are delivered remotely. In their place, a flexible process
should be established that recognizes the circumstances in
which remote working takes place. This could involve narrative
assessments that provide employees with specific and helpful
information about what they have done well and where they
could improve.
Learning needs
It is important to create a situation in which either the
individual homeworker and/or their manager can identify any
learning needs required to provide scope to develop
capabilities, meet changing demands or opportunities or
improve their performance. There should be scope for
discussions on how these needs can be satisfied by, for
example, coaching back at base, an e-learning programme,
involvement in virtual learning activities or encouragement
and support to engage in self-directed learning or a formal
training course. Homeworkers need to be assured that they are
not ‘out of sight and out of mind’ – that their long-term growth
needs have not been forgotten.
Guidance to line managers
The onus to manage the performance of homeworkers is very
much on line managers. Gallup (2020) reported that:
Working from home 100% of the time can be one of the most engaging
or disengaging experiences possible for an employee, depending on
how their manager handles it. When managers are able to step up and
have frequent, meaningful conversations, employees are able to
capitalize on the advantages of working from home. However, when
managers fail to communicate, engagement plummets for at-home
workers.
As Parry et al (2021: 22) noted: ‘Training gaps remain around
the new people management skills needed to support employee
well-being, and to sustain performance and productivity among
teams working remotely. This is a skills deficit that needs urgent
attention.’
It is necessary to develop the interpersonal ‘soft’ skills that
are important when managing remote workers, especially
those skills concerned with providing feedback, handling poor
performance, and communications, including the use of Zoom.
Training may be required in different approaches to
performance management, such as frequent check-ins rather
than an annual review, and narrative assessments rather than
rating.
Guiding principles
Organizations should ensure that:
homeworkers know what they are expected to do and
how they will know they have done it;
managers approach their evaluations of remote workers
with more flexibility, leniency, empathy and compassion;
employees who are engaged and working hard are
recognized and appreciated;
poor performers are given some leeway in the shape of a
time-bound grace period to get used to working remotely
and to turn things around;
feedback is provided to homeworkers regularly;
assessments of performance take account of the special
circumstances, demands and stresses associated with
working from home;
managers are equipped with the guidance and skills
needed to deal with the special challenges of managing the
performance of homeworkers.
References
ACAS (2020) Homeworking policy, available at: https://www.acas.org.uk/example-h
omeworking-policy (archived at https://perma.cc/9RPH-KASL)
Bevan, S, Mason, B and Bajorek, Z (2020) Homeworker Wellbeing Survey, Institute for
Employment Studies, Brighton
Gallup (2020) Performance management must evolve to survive COVID-19,
available at: https://www.gallup.com/workplace/318029/performance-manageme
nt-evolve-survive-covid.aspx (archived at https://perma.cc/4FMD-A8CS)
Institute for Employment Studies (2020) Covid-19 – Practical guidance for the HR
professional, available at: https://www.employment-studies.co.uk/system/files/res
ources/files/IES_COVID19_HR_Toolkit.pdf (archived at https://perma.cc/CBT6CQLZ)
Knight, R (2020) How to do performance reviews remotely, Harvard Business
Review, 15 June, pp1–5
Office for National Statistics (2020) Coronavirus and homeworking, available at: htt
ps://www.employment-studies.co.uk/sites/default/files/resources/summarypdfs/IE
S%20Homeworker%20Wellbeing%20Survey%20Headlines%20-%20Interim%20Fi
ndings.pdf (archived at https://perma.cc/4AFF-448H)
Parry, J, Young, Z, Bevan, S, Veliziotis, M, Baruch, Y, Beigi, M, Bajorek, Z, Salter, E
and Tochia, C (2021) Working From Home Under Covid-19: Transitions and
Tensions, Work After Lockdown, Institute for Employment Studies, Brighton
19
Performance management and
learning
Introduction
Performance management has an important role in learning
and development. Lawler et al (2012) noted that a key issue for
any performance management system is how effectively it
identifies the skill needs of individuals and assures that they are
adequate.
This chapter starts with an analysis of how performance
management makes a contribution to learning and then
examines how learning is facilitated through performance and
development reviews and personal development planning.
How learning is facilitated by performance
management
Learning takes place at every point in the performance
management cycle, especially when, first, a framework for
personal development is provided by personal development
plans as part of the overall planning and implementation
activities, and, second, the opportunity to coach is seized upon
whenever possible.
It was pointed out by Reynolds (2004: 6) that: ‘Improvement
and learning are causally related; obtain the will to improve
and the process of learning will follow.’ He also commented
(page 48) that: ‘The experience of work always will provide the
richest learning laboratory.’ This is where performance
management comes in; first by specifically helping people to
appreciate the need for developing their performance and
where and how it should take place, and second by ensuring
that they learn from experience. Performance management
can also help to identify specific learning needs that can be
satisfied by formal courses on or off the job or by e-learning.
But the most important contribution of performance
management is the help it provides to the development of a
climate for learning – a ‘growth culture’. This offers scope for
guiding people through their work challenges, encouraging selfdirected learning, ensuring that they have the time and
resources required to learn, and, crucially, giving them the
feedback and support they need to learn.
Learning opportunities
Performance management provides learning opportunities
through the processes of concluding performance agreements,
managing performance throughout the year, and reviewing
performance.
The performance agreement as a framework for learning
The learning opportunities offered by performance
management are based on the initial activities in the
performance agreement and planning part of the cycle. This
includes a joint analysis of the individual’s role so that a new or
updated role profile can be produced that sets out what results
are to be achieved and what competencies are needed to
deliver those results. Discussions take place on ways in which
the individual’s role could be developed so that it becomes
more challenging from the viewpoint not only of new tasks to
be accomplished but also the need to acquire or extend
knowledge and skills in order to carry out those tasks. The aim
is to provide what Reynolds (2004) calls ‘supported autonomy’;
freedom for employees to manage their work within certain
boundaries (policies and expected behaviours) but with support
available as required. Career opportunities and the learning
required to realize them are also discussed. Areas where
performance needs to be improved are identified and the
learning required to achieve these improvements is agreed. The
outcome is a personal development plan as mentioned at the
end of this chapter.
Learning throughout the year
Learning is inseparable from activity and, like performance
management, is a continuous process. Every task carried out by
someone presents a learning opportunity and it is the duty of
managers to help people become aware of this and to support
the day-to-day learning that takes place. They should enable
people to understand how they should tackle a new task and
what additional knowledge or skills they will need. Guidance
can be provided by asking questions on what individuals need
to know and be able to do to undertake a task, leaving them as
far as possible to think for themselves but helping them when
necessary.
Feedback throughout the year, rather than during an annual
performance review, is also an important means of helping
people to learn. They can be asked to analyse their
performance – the results they achieved in undertaking a task
and the ways in which those results were achieved. Where they
recognize a need for improvement they can discuss with their
manager any additional coaching, training or experience they
require.
Performance reviews as learning events
Performance reviews, whether conducted formally or
informally, can be regarded as learning events. Learning
opportunities are provided before, during and after formal
meetings. Prior to a review individuals can be encouraged to
think about what they feel they want to learn, new skills they
would like to acquire and the direction in which they want to
develop. During the review individuals can present to the
reviewer their views about what they have learned and what
they need to learn. A dialogue can take place in which learning
needs can be analysed and a diagnosis agreed on priority areas.
Individuals should be encouraged to take responsibility for
their own learning and for implementing the outcomes of the
learning process. The outcome of the review could be a
personal development plan. Following the review learners and
their managers can monitor progress against agreed targets.
References
Lawler, E E, Benson, G S and McDermott, M (2012) What makes performance
appraisals effective?, Center for Effective Organizations, Los Angeles
Reynolds, J (2004) Helping People Learn, CIPD, London
20
Performance management and
talent management
Introduction
Talent management is the basis for developing performance
leaders. It relies on performance management to provide a
means of identifying and rewarding (in the broadest sense)
talented people. Performance management ensures that
employees develop their talent by learning from experience
through constructive feedback, coaching and the formulation
and implementation of personal development plans. Michaels
et al (2001) – who coined the phrase ‘the war on talent’ and
initiated the talent management movement – identified one of
the five imperatives that companies need to act on if they are
going to win this war as: ‘using job experience, coaching and
mentoring to cultivate the potential in managers’ – all aspects of
performance management.
Talented people possess special gifts, abilities and aptitudes
that enable them to perform effectively. Talent management is
the process of identifying, developing, recruiting, retaining and
deploying these people. The term may refer simply to
management succession planning and management
development activities, although this notion does not really add
anything to these familiar processes except a new, although
admittedly quite evocative, name. It is better to regard talent
management as a more comprehensive and integrated bundle
of activities, the aim of which is to secure the flow of talent in
an organization, bearing in mind that talent is a major
corporate resource.
Performance management is about the development of talent
and is therefore an integral part of talent management. In this
chapter the process of talent management and its links to
performance management are explored, and the ways in which
these links function are described.
The process of talent management
The process of talent management is based on the proposition
that ‘those with the best people win.’ Since McKinsey and
Company popularized the term in the 1990s it has been
recognized as a major resourcing activity, although its elements
are familiar. The fundamental concept of talent management –
that it is necessary to engage in talent planning to build a talent
pool by means of a talent pipeline – is a key concern of human
resource management.
Talent management was defined by Tansley and Tietze (2013):
‘Talent management contains strategies and protocols for the
systematic attraction, identification, development, retention
and deployment of individuals with high potential who are of
particular value to an organization.’ However, this definition
refers to ‘individuals with high potential’ and, although this
may be the usual approach, some people believe that talent
management covers everybody on the grounds that all people
have talent and talent management activities should not be
restricted to the favoured few.
Talent management starts with the business strategy and
what it signifies in terms of the future demand for talented
people. Ultimately, the aim is to develop and maintain a pool of
talented people through the talent pipeline, which consists of
the processes of resourcing, career planning and talent
development that maintain the flow of talent needed by the
organization.
Talent management and performance management are
linked in three ways. First, as far as possible performance
management can be used to identify talent; second, it provides
a basis for developing talent; and third it helps to increase the
engagement levels of talented people, as explained in Chapter
21. A model of how performance management is the basis for
talent management at Cemex is shown in Figure 20.1. (P&PA
stands for Performance and Potential Assessment scheme.)
Figure 20.1 Performance management as the
foundation of talent management at Cemex
Figure 20.1 details
Identifying talent
Information for talent audits can be generated by a
performance management system that helps to identify those
with abilities and therefore, it is presumed, potential. This could
be a standard system or, in addition, 360-degree feedback could
be used to provide a detailed assessment of talent and
development needs from different perspectives. A performance
management system may also include specific assessments of
potential.
Identifying ability
The purpose of the performance assessment part of a
performance review is to establish the level of ability someone
achieves, preferably in terms of the competencies displayed in
achieving results. This helps with the establishment of talent
pools – the resources of talent available to an organization.
Identifying potential
Relying on assessments of ability to indicate potential is in
accordance with the claim made by Fombrun et al (1984) that
managers should perform well in the present to succeed in the
future. Performance management assessments should provide
reasonable indications of ability levels, if carried out properly,
that is, when reviews focus on comparing evidence of the
results achieved and the behaviour displayed in achieving
those results compared with expectations in the form of
performance goals and competency requirements. However,
pace Fombrun et al, past performance is only a predictor of
future performance when there is a connecting link: there are
elements of the present job that are also important in a higherlevel job.
It can be argued, however, that a more specific assessment of
potential is required. Traditionally this was associated with
management succession planning with which talent
management in its early days was practically synonymous.
Management succession planning attempted to ensure that
managers who left the organization, died, or were promoted or
transferred could be replaced by people with the abilities and
experience needed to perform the vacant job well in the
shortest possible time. It was often a formal process involving
the preparation of schedules covering each manager and listing
performance and potential ratings, indicating the position(s) to
which they might be promoted and when, and naming possible
successors. At different stages in their careers, managers may
be categorized as being ready to do the next job now, or being
ready for a specified higher-grade position in, say, two years’
time, or as a high-flyer on the ‘A list’ who has senior
management potential. Such assessments could generate
development plans such as leadership and development
programmes, special assignments and job rotation.
Performance appraisal forms often had potential boxes for
managers to tick, as in the example in Figure 20.2.
Figure 20.2 Potential assessment
Figure 20.2 details
However, assessing potential is difficult. Managers base their
judgement on what they observe about current performance.
This will not necessarily indicate that the individual will be
capable of carrying greater responsibility in the future when
the demands and competencies required may be quite
different. In an attempt to deal with this problem, some
organizations have required potential assessments to be made
by managers at a higher level than the immediate manager in
consultation with the latter. It is assumed that the higher-level
manager will be more detached and know more about the
requirements for more senior roles. Managers can be given
guidance in a competency framework on what they should
look for in the shape of definitions of competency requirements
at different levels.
Moreover, it is difficult to provide convincing data on
potential or promotability, and the scope for formal succession
planning is limited in today’s more flexible and rapidly
changing organizations where elaborate succession plans may
well be out of date as soon as they are made. As McDonnell and
Collings (2011: 64) emphasized:
Succession planning has evolved from the traditional short-term focus
on replacing senior managers if they happened to leave without prior
warning. There is now a more long-term aim of developing a cadre of
key talent who able to take on higher level roles, potentially roles that
may not currently exist… The utilization of talent pools consisting of
employees with key generic type competencies and skills allows the
organization far greater scope when positions become available.
Management will be able to select the most suitable candidate from a
pool of candidates and train the person into the specific requirements of
that particular role.
This is what Cappelli (2008) called a ‘talent on demand’ policy.
This means that the organization ensures that there are plenty
of talented people around in talent pools to fill vacancies as
they arise, bearing in mind that the most talented or ambitious
individuals may not want to wait very long. Talent-on-demand
arrangements depend on a performance management system
that provides for the degree of competency people displayed to
be assessed to establish whether they are eligible for entry into
a talent pool. Talent pools may be established at different levels,
for example in Standard Chartered, as junior, mid-level and
senior pools. The qualifications for entry to any such pools may
be defined in terms of levels of competency set out for each
heading in a competency framework.
Performance management approaches such as those
described above, coupled with information on present
performance, can provide some indication of potential, but it
will never be perfect. Assessments of potential are forecasts
based on evidence that is not always reliable. They have to be
made, but there is likely to be a wide margin of error.
Performance management will provide some guidance, but not
definitive information.
Developing talent
The development of talent is the most important part that
performance management can play in talent management. The
contribution made by performance management to learning
and development follows the stages in a cycle:
At the planning stage a performance management
agreement can include a role profile that defines
expectations in the form of competency, knowledge and
skills. Developmental plans and targets are set at this stage
which may be set out in a personal development plan that
spells out what an individual, the manager and the
organization intends to do about talent development. This
may include coaching, broadening experience, selfdevelopment and e-learning as well as formal training.
As a continuous process the learning and development
aspects of performance management continue
throughout the year as the personal development plan is
implemented and coaching and formal training takes
place.
At the review and assessment stages of the performance
management cycle the results achieved over the year are
evaluated and new or revised personal development plans
agreed.
References
Cappelli, P (2008) Talent on Demand: Managing talent in an uncertain age, Harvard
Business School Press, Boston MA
Fombrun, C J, Tichy, N M and Devanna, M A (1984) Strategic Human Resource
Management, Wiley, New York
McDonnell, A and Collings, D G (2011) Identification and evaluation of talent in
MNEs, in Global Talent Management, eds H Scullion and D G Collings, Routledge,
London, pp 56–73
Michaels, E G, Handfield-Jones, H and Axelrod, B (2001) The War for Talent, Harvard
Business School Press, Boston MA
Tansley, C and Tietze S (2013) Rites of passage through talent management stages:
an identity work perspective, International Journal of Human Resource
Management, 24 (9), pp 1799–815
21
Performance management and
reward
Introduction
Performance management can play a major role in a total
reward system in which each reward element is linked together
and reward management is treated as an integrated and
coherent whole. These elements comprise base pay,
performance-related pay, employee benefits and non-financial
rewards – intrinsic rewards from the work itself.
It is sometimes assumed that the main purpose of
performance management is to generate ratings to inform
performance-related pay decisions, but, clearly, there is much
more to performance management than that. It can provide for
a whole range of non-financial rewards in order to encourage
job engagement and promote commitment.
Performance management is, or should be, about developing
people and rewarding them in the broadest sense. Approaches
to using performance management to provide non-financial
rewards are discussed below. The rest of the chapter deals with
performance management and pay.
Performance management and non-financial
rewards
Non-financial rewards are provided by performance
management through recognition, the provision of
opportunities to succeed, skills development and the provision
of intrinsic motivation. This corresponds with the AMO model
as developed by Boxall and Purcell (2003), which states that
performance depends on the individual’s ability, motivation
and opportunity. Employees must have the ability to perform
well and the motivation to do so, while organizations must
ensure that they are given the opportunity to perform.
Intrinsic motivation takes place when individuals feel that
their work is important, interesting and challenging and that it
provides them with a reasonable degree of autonomy (freedom
to act), opportunities to achieve and advance, and scope to use
and develop their skills and abilities. It can be described as
motivation by the work itself. As demonstrated by the research
conducted by Deci and Ryan (1985), intrinsic motivation lasts
longer than the extrinsic motivation provided by financial
rewards. Michael Sandel (2012: 122) remarked that: ‘When
people are engaged in an activity they consider intrinsically
worthwhile, offering money may weaken their motivation by
“crowding out” their intrinsic interest or commitment.’
Recognition
Performance management involves recognising people’s
achievements and strengths. They can be informed through
feedback about how well they are performing by reference to
achievements and behaviours. They can be thanked, formally
and informally, for what they have done. They can be helped to
understand how they can do even better by taking action to
make the best use of the opportunities the feedback has
revealed.
The provision of opportunities to achieve
Performance management processes are founded on joint
agreements between managers and their people on what the
roles of the latter are and how they can be developed
(enriched). It is therefore an essential part of job or role design
and development activities.
Skills development
Performance management can provide a basis for motivating
people by enabling them to develop their skills. It provides an
agreed framework for coaching and support to enhance and
focus learning.
Career planning
Performance management reviews provide opportunities to
discuss the direction to which the careers of individuals are
going and what they can do – with the help of the organization
as part of its talent management programme – to ensure that
they follow the best career path for themselves and the
organization.
Performance management and performance pay
Research carried out by Ed Lawler (a prominent US writer on
reward) and his colleagues (Lawler et al 2012: 9) led to the
conclusion that: ‘The results of our study clearly show that
organizations make a mistake when they separate appraising
performance from determining pay changes.’ But performance
management is not inevitably associated with performance pay,
although this is often assumed to be the case, especially in the
United States.
However, those who have performance pay must have a
means of deciding on increases and this has to be based on
some form of assessment or categorization. The most typical
approach is the generation of ratings following performance
reviews to inform performance pay decisions – they were used
for this purpose by 80 per cent of the respondents to the 2014 ereward performance management survey.
Methods used to decide on pay increases
The e-reward respondents showed that the following methods
were used to decide on pay increases:
A pay matrix, relating performance awards etc to ratings
by use of a scale – 40 per cent.
Forced distribution, performance awards distributed
among employees by defining the percentage who should
be rated at each level (a ‘quota’ system) – 8 per cent.
Guidelines, guidance on average awards, with restrictions
on minimum and maximum amounts that can be
awarded – 41 per cent.
Other – 11 per cent.
The respondents to the e-reward survey who did not use ratings
decided on pay increases in the following ways:
An overall approach that takes account of the level of
contribution and market worth (for more details see
below) – 32 per cent.
Reference to assessments of the market worth of the
individual – 3 per cent.
Reference to the outcomes of a pay review where it has
been expressed generally that the level of contribution
merits, for example a high, average or below average
increase – 10 per cent.
Reference to the ranked performance of peers – 7 per cent.
Other – 47 per cent.
The ‘other’ methods often involved hybrids of the categories,
such as guidelines without maxima and minima, or guidance
with a higher degree of discretion.
Doing without ratings
One way of making decisions on performance pay without
ratings was adopted successfully by a publishing company.
Managers conducting the pay review (which was decoupled
from the performance review) were simply asked to place
people in categories consisting of those whose contribution
deserved an above average, average or below average increase
or none at all. Managers had to keep within their pay review
budget, and guidelines were issued on how awards should be
distributed. The guidelines were not mandatory, but any
recommendations in which the distribution was significantly
different from the guidelines had to be justified by the
managers concerned. This process of categorization could
indeed be regarded as proxy rating, but at least it eliminated the
problems of mechanistic rating processes at the time of the
formal performance review.
Ledford et al (2016) in a United States survey asked the 52 per
cent of their sample that used ratingless reviews how they
made performance pay decisions. They found that ‘by far’ the
most common method was to give managers discretion within
budget guidelines. However, 20 per cent of respondents
reported using ‘shadow ratings’ that were not disclosed to
subordinates, even though such ratings may undermine
transparency and the perceived fairness of the system.
A more sophisticated approach to deciding on pay increases
in the absence of ratings can be based on pay policy. This policy
will indicate that employees who are fully contributing at the
expected level will be paid at or around what is often called ‘the
reference point’ for the grade (a reference point represents the
rate of pay appropriate for someone who is fully competent in
the role and is aligned to market rates in accordance with the
organization’s market pay policies). If, in the judgement of the
line manager, individuals are achieving this level of
contribution but are paid below their peers at the reference
point, the pay of such individuals would be brought up to the
level of their peers or towards that level if it is felt that the
increase should be phased. Individuals may be paid above the
reference point if they are making a particularly strong
contribution or if their market worth is higher. The policy
guideline would be that the average pay of those in the grade
should broadly be in line with the reference point unless there
are special market rate considerations that justify a higher rate.
Those at or above the reference point who are contributing well
could be eligible for a cash bonus. A ‘pay pot’ would be made
available for distribution with guidelines on how it should be
used.
This approach depends largely on the judgement of line
managers, although they would be guided and helped in the
exercise of that judgement by HR. Its acceptability to staff as a
fair process depends on precise communications generally on
how it operates and equally precise communications
individually on why decisions have been made. The assessment
of contribution should be a joint one, as part of performance
management and the link between that assessment and the pay
decision should be clear. This is how one finance sector
company described its approach to the writer:
We look at a number of things when making a decision on an
individual’s pay. One will be the size of the role as determined by job
evaluation and we also consider market data and location to determine
the average salary that you would expect to pay for that role. We then
look at how the individual has performed over the last twelve months:
Have they contributed what was expected of them? Have they
contributed above and beyond their peers? Have they under performed
in respect of what was required of them? These are not ratings, they are
just guidelines given to managers as to whether the individual should
be given an average, above average or below average increase. We
have a devolved budget and managers have to make decisions as to
what percentage they should give to different people. We suggest that if,
for example, a manager has six people carrying out the same roles
then, from an equal pay point of view, if they are delivering at the same
level and are all competent, they should be getting similar salaries.
Individuals paid below the market rate who are performing effectively
may get a bigger pay rise to bring them nearer the market rate for the
role.
Reconciling performance management and pay
Focusing on performance management as a means of deciding
on pay awards may conflict with the developmental purposes
of performance management. This is likely to be the case if
ratings are used – the performance review meeting will
concentrate on the ratings that emerge from it and how much
money will be forthcoming. Issues concerning development
and the non-financial reward approaches discussed earlier will
be subordinated to this preoccupation with pay. Many
organizations attempt to get over this problem by holding
development and pay review meetings on separate dates, often
several months apart (decoupling). Some, such as the finance
company described above, do without formulaic approaches
(ratings) altogether, although it is impossible to dissociate
contingent pay completely from some form of assessment even
if this is limited to making decisions on which employees
should have above average, average or below average
increases or no increase at all.
The point is that, if you want to pay for performance, you
have to assess the extent to which that performance should be
rewarded. But this need not involve conventional rating as part
of a performance review. The alternative is to separate –
decouple – performance pay decisions from performance
reviews and categorize people according to the level of reward
they have earned.
If you want, as you should do, the process of assessment to be
fair, equitable, consistent and transparent, then you cannot
make pay decisions, on whatever evidence, behind closed
doors. You must convey to people how the assessment has been
made and how it has been converted into a pay increase. This is
a matter of procedural justice which demands that, where there
is a system for assessing performance and competence, (1) the
assessment should be based on ‘good information and
informed opinion’, (2) the person affected should be able to
contribute to the process of obtaining evidence to support the
assessment, (3) the person should know how and why the
assessment has been made, and (4) the person should be able to
appeal against the assessment.
References
Boxall, P F and Purcell, J (2003) Strategy and Human Resource Management,
Palgrave Macmillan, Basingstoke
Deci, E L and Ryan, R M (1985) Intrinsic Motivation and Self-Determination in Human
Behavior, Springer, New York
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
Lawler, E E, Benson, G S and McDermott, M (2012) What makes performance
appraisals effective?, Center for Effective Organizations, Los Angeles
Ledford, G E, Benson, G S and Lawler E E (2016) Aligning research and the current
practice of performance management, Industrial and Organizational Psychology,
9 (2), pp 253–60
Sandel, M (2012) The Moral Limits of Markets: What money cannot buy, Allen Lane,
London
22
Performance management and
employee engagement
Introduction
Employee engagement takes place when people are committed
to their work and the organization and are motivated to
achieve high levels of performance. It was suggested by Mone
and London (2010: 227) that: ‘Performance management,
effectively applied, will help you to create and sustain high
levels of engagement, which leads to higher levels of
performance.’ Gruman and Saks (2011: 33) observed that:
Modern developments often make it difficult for supervisors to
‘manage’ subordinates’ performance. In such an environment it may be
more effective for supervisors to focus less on managing performance
than on managing the context in which performance occurs, and on
fostering the development of employee engagement as a driver of
enhanced performance.
This is an argument for concentrating on developing managers
who are capable of managing performance, that is, as
performance leaders, rather than hoping that a performance
management ‘system’ will do it for them. Risher (2012) referred
to the solid evidence provided by the Gallup Organization’s
research that effective performance management contributes
to higher levels of engagement – and better performance.
In this chapter the contribution of performance management
to levels of employee engagement is examined by answering
five questions: (1) What is employee engagement? (2) Why is it
important? (3) What are the enablers of engagement? (4) What
part is played by performance management in supporting these
enablers? and (5) How can an organization ensure that
performance management plays its part?
What is employee engagement?
The first reference to employee engagement was made by Kahn
(1990) who defined it as a psychological state experienced by
employees in relation to their work, together with associated
behaviours. Macey et al (2009: 7) stated that engagement was:
‘an individual’s purpose and focused energy, evident to others
in the display of personal initiative, adaptability, effort and
persistence directed towards organizational goals.’
Why is engagement important?
Purcell (2013: 247) contended that: ‘Employee engagement is
worth pursuing, not as an end in itself, but as a means of
improving working lives and company performance.’ Guest
(2009: 1) explained the benefits of engagement:
Employee engagement will be manifested in positive attitudes (for
example job satisfaction, organizational commitment and identification
with the organization) and behaviour (low labour turnover and absence
and high citizenship behaviour) on the part of employees; and evidence
of perceptions of trust, fairness and a positive exchange within a
psychological contract where two-way promises and commitments are
fulfilled.
Alfes et al (2010) observed that engaged employees perform
better, are more innovative than others, are more likely to
want to stay with their employers, enjoy greater levels of
personal well-being and perceive their workload to be more
sustainable than others. Wiley (2008) reported that research
conducted by the Kenexa High Performance Institute in 158
organizations from a wide range of industries showed that both
earnings per share and three-year total shareholder return
were directly linked to employee engagement. Research by
Towers Watson (2012) found that companies with high and
sustainable engagement levels had an average one-year
operating margin that was close to three times higher than
those with lower levels.
What are the enablers of engagement?
It was explained by Daniels (2011) that the main factors
affecting engagement are job autonomy, support and coaching,
feedback, opportunities to learn and develop, task variety and
responsibility. Engage for Success (2014) stated that the four key
enablers of engagement are:
1. Visible, empowering leadership providing a strong
strategic narrative about the organization, where it’s come
from and where it’s going.
2. Engaging managers who focus their people and give them
scope, treat their people as individuals and coach and
stretch their people.
3. Employee voice throughout the organizations, for
reinforcing and challenging views, between functions and
externally, employees are seen as central to the solution.
4. Organizational integrity – the values on the wall are
reflected in day-to-day behaviours. There is no ‘say–do’
gap.
But it was claimed by Macey et al (2009: 11) that the most
important enabler of engagement is the work environment and
the jobs people do. They noted that: ‘Engagement requires a
work environment that does not just demand more but
promotes information sharing, provides learning opportunities
and fosters a balance in people’s lives, thereby creating the
bases for sustained energy and personal initiative.’ They also
commented that: ‘When people have the opportunity to do
work in a way that: (a) effectively uses their skills; (b) fits their
values and (c) provides them the freedom to exercise choice,
they will be fully motivated to engage in their work.’ They
observed that: ‘Engaged employees feel that their jobs are an
important part of who they are’ and that: ‘the feeling of
engagement cannot occur without a specific purpose or
objective.’
What part is played by performance
management?
Performance management can provide general support for all
the Engage for Success enablers by ensuring that employees are
aware of the goals and values of the organization and are given
a voice in discussing their own objectives in relation to those of
the business. Moreover, managers can use performance
management to increase understanding of what the espoused
values are and apply the processes involved to demonstrate
that these are values in use. Above all, performance
management supports the second of the four enablers by
encouraging managers as performance leaders to focus on their
people and give them scope, treat them as individuals and
coach and stretch them. As MacLeod and Clarke (2009) point
out: ‘managers who foster engagement offer clarity for what is
expected from individual members of staff, which involves
some stretch, and much appreciation and feedback/coaching
and training.’
Dilys Robinson (2013: 3) summed up her research findings on
the characteristics of engaging managers as follows:
All were able to quote evidence of team success, in the shape of activity
metrics, team or individual awards, customer satisfaction data, external
recognition, and praise from elsewhere in the organisation. They were
focused on their contribution to organisational goals, and proud of their
teams’ success.
Performance management also has a part to play in achieving
the conditions for engagement specified by Macey et al (2009:
127), namely that: ‘engaged employees feel that their jobs are
an important part of who they are’ and that: ‘the feeling of
engagement cannot occur without a specific purpose or
objective.’ Mone and London (2010) commented that
performance management enhances engagement by giving
greater meaning to the work that employees do. They
explained that engagement can be driven by setting
performance goals and establishing development plans that
support the career success of employees. The ways in which
performance provides specific support are set out below.
Role development
Role development is the continuous process through which
roles are defined or modified as work proceeds and evolves.
The part people play in carrying out their roles can develop
over time as people grow into them and with them, responding
to opportunities and changing demands, acquiring new skills
and developing competencies.
Levels of engagement will increase if the individual’s role is
designed or developed in accordance with the principles set out
by Hackman and Oldham (1974) in their job characteristics
model. They identified five core job characteristics:
1. Skill variety: the degree to which a job requires an
employee to perform activities that challenge his or her
skills and abilities.
2. Task identity: the degree to which the job requires
completion of an identifiable piece of work.
3. Task significance: the degree to which the job outcome has
a substantial impact on others.
4. Autonomy: the degree to which the job gives an employee
freedom and discretion in scheduling work and
determining how it is performed.
5. Feedback: the degree to which an employee gets
information about the effectiveness of his or her efforts –
with particular emphasis on feedback directly related to
the work itself rather than from a third party (for
example, a manager).
Hackman and Oldham explained that, if the design of a job
satisfied the core job characteristics, the employee would
perceive that the work was worthwhile, would feel responsible
for the work and would know if the work had been completed
satisfactorily. The outcome of this would be high-quality work
performance and high job satisfaction as a result of intrinsic
motivation. In current terms, this means higher levels of
engagement.
Role development is a continuous process, but discussions
between the manager and the individual on the latter’s role –
which should take place whenever appropriate throughout the
year – enable more formal agreement to be reached on where
role requirements need to be clarified or amended. This may
include defining or redefining key result areas. In doing this,
attention can be given to the principles of the job characteristics
model, especially those concerned with skill variety, task
identity, task significance and autonomy and how their
application may enhance engagement.
Providing a sense of purpose
Engagement is most likely to be enhanced when people
understand what they and their department or function are
there to do and have a clear sense of purpose in carrying out
tasks that they believe to be worthwhile.
The Watson Wyatt 2008–2009 survey stated that: ‘our data
shows that engaged employees have frequent work-related
discussions with their immediate manager in comparison to
their colleagues with medium to low engagement levels. Fortythree per cent of high engaged employees receive feedback at
least once a week compared to only 18 per cent of employees
with low engagement.’
Feedback
Feedback to people on how they are doing is one of the key
performance management processes. It is best provided by
managers informally during the year, not just formally at an
annual performance review meeting. Research by Kuvaas
(2011) found that performance management is more likely to
result in good performance when employees regularly receive
high levels of feedback.
Positive feedback is a method of reinforcement that can
increase levels of engagement by convincing people that they
are doing well and that therefore the job they are doing is
worthwhile.
Recognition
Performance management provides opportunities for
recognizing achievements through feedback. Macey and
Schneider (2008) argued that when leaders recognize good
performance this will have a positive effect on employee
engagement by engendering a sense of attachment to the job. It
can demonstrate that employees are valued by their manager
and the organization. Recognition is a powerful form of reward
which encourages the behaviour that characterizes engaged
employees, for example exercising discretionary effort.
Learning and development
Engagement is enhanced if employees are provided with
learning opportunities to develop their skills and further their
careers. If performance management is seen as a means of
identifying and meeting learning and development needs, as it
should be, then it will contribute to increasing levels of work or
job engagement. Performance management also provides the
basis for coaching by line managers and others to increase skills
or overcome deficiencies.
Psychological contracts
As noted by Gruman and Saks (2011: 129), employees tend to
have implicit and/or explicit expectations on what they want
from an organization. Such expectations can be the basis of
psychological contracts that involve reciprocal and
interdependent obligations and therefore relationships between
employees and employers. In accordance with social exchange
theory, these relationships evolve over time into trusting, loyal
and mutual commitments as long as the parties abide by
certain ‘rules of exchange’. These rules involve reciprocal
behaviour so that the actions of one party lead to a response or
actions by the other party. Performance management processes
are key factors in the development of psychological contracts.
How can an organization ensure that
performance management plays its part?
As described above, the contribution that performance
management can make to enhancing engagement is potentially
considerable. Clearly, however, that contribution will only be
made if performance management works well. Too often this
does not happen. The issues are formidable. The biggest one is
the all-too-common situation of line managers being compelled
to do something that does not come naturally to them (they are
there to lead their teams not conduct multipurpose
performance reviews as directed by HR). As a result, they do
not have the inclination to carry out their performance
management duties as required or, even if they are ready to try,
do not possess the range of demanding skills required because
the organization has not seen fit to spare them from their duties
for long enough to learn those skills.
The best way to deal with this problem is to abandon the
traditional annual performance review and the ratings
associated with it and focus on encouraging and developing
managers who will act as performance leaders, not just
performance managers, and do this as a natural part of their
managerial duties rather than a duty imposed upon them.
References
Alfes, K, Truss, C, Soane, E C, Rees, C and Gatenby, M (2010) Creating an Engaged
Workforce, CIPD, London
Daniels, K (2011) Employee engagement fact sheet, CIPD, London
Engage for Success (2014) The four enablers of engagement, engageforsuccess.org
Gruman, J A and Saks, A M (2011) Performance management and employee
engagement, Human Resource Management Review, 21 (2), pp 123–36
Guest, D (2009) Review of Employee Engagement: Notes for a discussion (unpublished),
prepared for the MacLeod and Clarke 2009 review of employee engagement
Hackman, J R and Oldham, G R (1974) Motivation through the design of work: test
of a theory, Organizational Behaviour and Human Performance, 16 (2), pp 250–79
Kahn, W A (1990) Psychological conditions of personal engagement and
disengagement at work, Academy of Management Journal, 33 (4), pp 692–724
Kuvaas, B (2011) The interactive role of performance appraisal reactions and
regular feedback, Journal of Managerial Psychology, 26 (2), pp 123–37
Macey, W H and Schneider, B (2008) The meaning of employee engagement,
Industrial and Organizational Psychology: Perspectives on Science and Practice, 1, pp
3–30
Macey, W H, Schneider, B, Barbera, K M and Young, S A (2009) Employee
Engagement, Wiley-Blackwell, Malden MA
MacLeod, D and Clarke, N (2009) Engaging for Success: Enhancing performance
through employee engagement, Department for Business Innovation and Skills,
London
Mone, E M and London, M (2010) Employee Engagement Through Performance
Management: A practical guide for managers, Routledge, New York
Purcell, J (2013) Employee voice and engagement, in Employee Engagement in
Theory and Practice, eds C Truss, R Deldridge, K Alfes, A Shantz and E Soane,
Routledge, London, pp 236–49
Risher, H (2012) Employers need to focus on improving performance management,
Compensation & Benefits Review, 44 (4), pp 188–90
Robinson, D (2013) The Engaging Manager and Sticky Situations, Institute for
Employment Studies, Brighton
Towers Watson (2012) Global Workforce Study, Towers Watson, London
Watson Wyatt (2008–2009) Continuous Engagement: The key to unlocking the value of
your people, Watson Wyatt, London
Wiley, J (2008). Engaging the Employee, Kenexa High Performance Research
Institute, Wayne PA
PART FIVE
Managing performance
management
23
Developing performance
management
Introduction
The development of performance management is more than
just designing formal performance management systems. In
order to enhance individual, team and organizational
performance, priority needs to be given to developing
managers as performance leaders, as explained in the first part
of this chapter. However, performance leadership involves the
performance management activities of defining objectives,
monitoring and reviewing performance, providing feedback,
developing people and improving performance.
To exercise their leadership roles effectively, managers,
especially in the initial stages of their career, will benefit from
guidance and training on how they should carry out these
activities. The basis of this guidance is provided by performance
management processes, although the features of such
processes vary considerably, as does the degree to which they
are formalized or prescribed. This is a matter of choice and the
alternatives are considered in the second part of the chapter.
The approach to developing performance management in the
light of this choice and the process of making the choice and
developing performance management accordingly are
described in the final part of the chapter.
Developing performance leadership
The process of performance leadership focuses on the
motivation, development and well-being of people. As
explained in Chapter 6, managers as performance leaders set
the direction, make available the resources needed to get
results, motivate their team members, help people to develop
their skills (coaching), monitor their progress, provide feedback
by means of constructive conversations and ensure that
corrective action is taken when necessary.
Organizations have to decide on the extent to which they
want to rely upon the performance leadership qualities of their
managers rather than on a formal performance management
system. Even if it is thought that a traditional formal system is
not wanted, organizations will still need to ensure that their
managers understand how they are expected to manage
performance and are equipped with the skills required to do it
well. The skills are, of course, those that are used in any formal
performance management system. Even the most bureaucratic
system will work better if managers have the leadership
qualities required to make good use of it.
Developing performance management systems –
the choices
Choices have to be made about the approach to performance
management within an overall framework of agreeing
objectives, planning performance and development, reviewing
progress and providing feedback. The fundamental choice is the
extent to which the exercise of performance leadership by line
managers should be underpinned by formal requirements.
Clearly, whatever is decided will affect the development
programme. There is a continuum from total reliance on
performance leadership to total reliance on a formal
performance management system, as illustrated in Figure 23.1.
The choices and the considerations to be taken into account in
making them are set out in Tables 23.1 and 23.2.
Figure 23.1 The performance management
continuum
Figure 23.1 details
The development process
A development programme will be governed by a crucial initial
decision on the extent to which a requirement for performance
leadership should be supported by formal performance
management processes. This decision will be affected by the
organizational context, which will also affect the approach to
the development and the form any formal processes may take.
These preliminary decisions provide the basis for the next
stages of the programme – consultation, design and
implementation.
Contextual factors
The contextual or environmental factors of culture,
management style, work systems and structure will strongly
influence the content of performance management procedures,
guidelines and documentation and the processes that make it
work.
Cultural considerations will affect performance management
because it works best when it fits the existing values of the
organization. Ideally, these should support high performance,
quality, involvement, openness, freedom of communication
and mutual trust. These may not have been put into practice in
full, however vigorously they have been espoused. But top
management must genuinely want to move in these directions
and they need to make it clear that everyone else should go
along with them, using performance management as a lever for
change. In performance management, there is too often a gap
between the rhetoric and the reality. The process of developing
and introducing performance management must concentrate
on ensuring that worthy ambitions are translated into effective
action by all concerned.
Table 23.1 Performance management system
choices (part 1)
Skip table
Performance
management
feature
Approach to
managing
performance
Description
The choice
The degree to
which a formal
performance
management
system is used.
Rely completely on
the leadership
qualities of line
managers or support
them with selected
aspects of a
performance
management system
from fairly informal
to highly formal as
described below.
Considerations
affecting the choice
The extent to
which
managers have
the skills and
inclination to
be performance
leaders.
The possibility
of developing
managers with
the required
skills.
The extent to
which it is
believed that
some variety of
formal
guidance and
laid-down
requirements
to carry out
performance
management
are necessary.
Performance
management
feature
Performance and
development
agreement
Description
Defines what
individuals are
expected to do
and achieve and
sets out plans on
how they should
develop their
skills and abilities,
progress their
careers and, as
necessary,
improve their
performance to
ensure that
expectations are
met.
The choice
The minimum
would be
encouragement
to discuss
regularly but
informally
performance
and
development
issues.
A degree of
formality might
be introduced
by advising
managers to
record what
has been
agreed, but not
in a standard
format.
The maximum
would be a
requirement to
produce a
formal
document
setting out the
agreement in
accordance
with specified
format.
Considerations
affecting the choice
The extent to
which it is
believed that,
with
encouragement
and guidance,
line managers
will be
prepared to
make relatively
informal but
effective
agreements.
Performance
management
feature
Description
Objectives
Define what has
to be
accomplished and
provide the
criteria needed to
monitor and
assess
performance.
Feedback
Provides
information to
people on how
they have
performed in
terms of results,
events, critical
incidents and
significant
behaviours.
The choice
The minimum
would be to
recommend
that objectives
should be
agreed and
regularly
updated with
guidance on
what
constitutes a
good objective.
The maximum
would be
insistence that
SMART
objectives
should be used.
No choice in
providing feedback
although there may
be some choice in
how managers are
guided on its use, for
example adopting
the ‘feedforward
interview’ approach.
Considerations
affecting the choice
The major
consideration is the
extent to which
managers can be
trusted to act
responsibly in
accordance with
broad guidelines or
need to be told how
to formulate
quantified objectives
in accordance with a
formula.
Consideration has to
be given on how
detailed the guidance
should be.
It has been argued by commentators such as Deming (1986)
and Coens and Jenkins (2002) that it is the system of work that
fundamentally determines the level of individual performance.
It can be claimed equally strongly that systems are designed by
people or at least evolve through the actions and interactions of
people without being consciously designed. They are certainly
managed and operated by people. People are part of the system
and some of them will work more effectively within it than
others. This fundamental feature of performance management
was commented on by Cascio:
Table 23.2 Performance management system
choices (part 2)
Skip table
Performance
management
feature
Performance
review
Description
Analyse and
assess how well
work and
development
objectives have
been achieved
and the factors
that have led to
those results, and
agree plans for
developing skills
and abilities and,
where necessary,
improving
performance.
The choice
Whether or
not to require
an annual or
bi-annual
review and if
so, the
content of it.
Whether or
not to replace
or support an
annual review
with
periodical less
formal
performance
conversations.
If more
frequent less
formal
performance
conversations
or check-ins
are preferred,
the choices
are: their
content, how
they should be
conducted and
the amount of
choice
managers
have on how
often they are
conducted or
whether they
have to
conform to a
Considerations
affecting the choice
The extent to
which it is
believed that a
formal annual
or bi-annual
review is
required in
order to
function as a
stock-taking
exercise and
generate
assessments
(ratings) for
use in
administrative
decisions
relating to
performance
pay and
inclusion in
talent
management
programmes.
The perceived
advantages of
providing
feedback in
less formal
reviews
(check-ins) as
and when
required
rather than at
fixed and
prolonged
intervals.
Performance
management
feature
Rating
Description
Formal
assessment of the
level of
performance of an
employee
expressed on a
scale.
The choice
prescribed
requirement
for holding
them.
Considerations
affecting the choice
Advantages of
Retain rating.
rating:
Abandon
rating.
It provides a
Replace rating
convenient
with an
means of
alternative
summing up
form of
judgements.
assessment,
It motivates
such as visual
people by
or narrative.
giving them
something to
strive for.
It satisfies a
natural wish
people have to
know precisely
where they
stand.
It is not
possible to
have
performance
pay without an
overall rating
Disadvantages of
rating:
Ratings are
subjective and
it is hard to
achieve
consistency
Performance
management
feature
Description
The choice
Considerations
affecting the choice
between the
ratings given
by different
managers.
Rating is
judgemental
and looks
backward,
while
performance
management
should be
developmental
rather than
judgemental
and forwardlooking rather
than dwelling
on the past.
The
performance
review
meeting may
be dominated
by the fact
that it will end
with a rating,
thus severely
limiting the
crucial
forwardlooking and
developmental
focus of the
meeting.
Performance
management
feature
Record
Description
The choice
Considerations
affecting the choice
Record any
Leave recording
A record of the
aspect of
decisions entirely to conclusions of a
performance
managers or require formal performance
management, eg a them to complete a review provides
performance
report.
valuable information
agreement,
about the
agreed objectives,
employee’s
an assessment.
progress,
performance and
potential. Unless
they are required to
complete a
performance
management report,
managers may fail
to record decisions,
which could make
disciplinary action
more difficult.
The performance management system (Cascio, 2009:
30)
It is an exercise in observation and judgement, it is a feedback process, it is an
organizational intervention. It is a measurement process as well as an intensely
emotional process. Above all, it is an inexact, human process.
It is important to take account of the system in developing
performance management, but this attention should be focused
not only on the nature of the system but also on the impact it
has on people, and vice versa.
Figure 23.2 The performance management
development programme
Structural considerations will also affect the way in which
performance management is introduced. In a highly
decentralized organization, or one in which considerable
authority and power is devolved to some functions or divisions,
it may be appropriate to encourage or permit each unit or
function to develop its own approach to performance
management, as long as they conform to central guidelines on
its basic principles.
The culture, work system and structural factors to be taken
into account will vary considerably between organizations,
which is why there is no one best way to develop and introduce
performance management.
How to approach development
The basic principle affecting the approach to development is
that the foundation for the effective management of
performance is provided by line managers acting as
performance leaders who do, however, benefit from support
and guidance offered as required by the organization. The
approach will also need to take account of the contextual
factors listed earlier.
The following recommendations by Thomas Jones (1995: 431)
were made some time ago but are just as relevant today:
Shift the objective of performance management away
from judgement and toward an emphasis on employee
development.
Focus employee effort on continuously improving
performance.
Simplify goal-setting, with less stringent quantitative
emphasis.
Provide a process that shifts the line manager’s role from
judge to coach.
Clarify roles in employee development, improve
development planning, and incorporate greater feedback.
Overcoming the practical and political difficulties that will get in
the way will present a problem. Following their research,
Strebler et al (2001: 53) wrote:
Personnel management textbooks are full of touching accounts of how
to design and implement performance appraisal and management
schemes in organizations. The models they propose are based on a
rational and linear logic which assumes that an organization’s goals
can be translated into individual goals which, in turn, can be delivered
through feedback, training, development and reward. The reality of
organizational life is somewhat different.
Obviously, the development programme will depend on the
choice of approach. If the emphasis is going to be on
performance leadership, the programme will concentrate on
the development of the skills required, especially those
concerned with agreeing roles and objectives, giving feedback
and coaching (see Chapter 24). Helping people to learn about
performance leadership can be achieved through coaching and
mentoring as well as formal training. In fact, coaching and
mentoring are the best ways to do it. The coaching can be
provided by HR or learning and development specialists.
Mentoring is best done by line managers who have been
trained in what is involved. A good way of identifying potential
mentors is to follow the method used by Dilys Robinson of the
Institute for Employment Studies in her research on ‘engaging
managers’ published in 2013. This was to analyse the results of
engagement surveys to find those managers who, on the basis
of survey data, were best at engaging – indeed managing and
leading – people. Having identified such managers, the next
steps are first to discuss with them the possibility of acting
occasionally as mentors or, possibly, coaches, with the proviso
that this will not make unacceptable demands on their time,
and then provide coaching for those who accept. The aim
would be to build up a cadre of such managers who, availability
permitting, could help with the performance leadership
development and training programme.
Advice on introducing performance
management
The advice set out in Table 23.3 on the dos and don’ts of
introducing performance management or making substantial
changes to an existing scheme was given by the practitioners
who responded to the 2014 e-reward survey. They provide a
realistic guide to the approach that can be adopted when
planning and conducting a development programme.
The development programme
A development programme is likely to be run by HR in
conjunction with learning and development specialists. Advice
and help may be obtained from external consultants. A project
team may usefully be set up, the members of which should
include line managers and employee representatives. But it is
essential that the lead should be taken by top management.
They must demonstrate their belief that this is a vital exercise
and provide continual and visible support for it.
The stages of a development programme are illustrated in
Figure 23.2 and described below.
Table 23.3 Advice from practitioners on developing
performance management
Skip table
Do
Don’t
Work out why the organization wants to
have a performance management system. If
the decision is to introduce or change the
system then make sure that the way
performance management works reflects
the organization culture.
Try to do too much too soon –
evaluate the culture of the
business and ask if it’s ready for the
changes that you want to
implement.
Gain the support of senior people in the
Follow best practice – there is no
organization. Do a lot of prep work including such thing, it has to work for your
consultation with staff and managers to find organization.
out what kind of performance management
system would work in this particular
environment. Once agreed, really invest in
regular training and revision of how the
process works.
Involve line managers in the design phase;
asking what works and doesn’t. Keep it
simple. Explain the process to the whole
workforce. Let line managers own the
process.
Underestimate the role of middle
and line managers – they are the
ones that will make or break your
performance management process.
Keep it simple and easy to understand. If
changing an existing scheme, review what is
wrong with the current system before
designing a new one. Time may be better
spent embedding the existing one than
changing it. Ensure the system is backed up
with regular performance discussions, not
just a discussion once or twice a year.
Over-complicate – it isn’t
necessary. Don’t do it for the sake
of it; don’t force people down an
over-engineered process. If they
set aligned objectives and have the
skills to review these as well as the
skills for challenging conversations
– this is performance management!
Make it (the scheme) about good
conversations, not just a process.
View performance management as
an annual task such as appraisals;
view it as a daily part of operations.
Create a climate where implementing
performance management systems are an
absolutely necessary part of a manager’s
role and a real requirement of the job.
Make the appraisal such a big
‘event’; it should be part of a
continuous process of coaching and
feedback.
Initial analysis and diagnosis
The analysis will cover the features of the current
arrangements and how well they are working. It may be
conducted through interviews of a sample of managers and
employees, by means of focus groups or by special surveys, or
by a combination of these. The diagnosis establishes what the
issues are as the basis for a business case and an outline of how
these issues may be addressed in a new or revised approach to
performance management. Survey questionnaires can be used
for analysis and as a basis for focus group discussions. A
questionnaire covering performance management generally is
illustrated in Figure 23.3, and one dealing with views about the
current arrangements for performance management is shown
in Figure 23.4.
Figure 23.3 General performance management
questionnaire
Figure 23.3 details
Figure 23.4 Current performance management
arrangements questionnaire
Figure 23.4 details
Development
The development of performance management will be strongly
influenced by contextual factors and will be based on the initial
analysis and diagnosis and the outcome of the consultations
with stakeholders. To begin with, it should be emphasized that
the success of performance management depends on the
quality and engagement of line managers. The development
programme should therefore start with an analysis and
description of what is involved in terms of activities and skills,
for example providing feedback and coaching. This will provide
the basis for briefing managers on what is involved and
providing any training required during the implementation
stage.
A crucial decision will then have to be made on the extent to
which a formal performance management system will be
needed to support managers, produce information to inform
decisions on such matters as performance pay and inclusion in
talent management programmes, and record any data on
individual performance required by the organization. If it is
decided that some form of system should be used (a new
system or the development of an existing system), decisions
will have to be made on what is required. The areas to be
covered may be some or all of the following:
Performance and development agreement – the need for a
formal agreement and if so, what it should cover and how
it should be set out.
Objectives – how objectives should be defined, the areas to
be covered (such as development as well as performance),
the degree of quantification, whether or not the SMART
formula should be used, the possibility of focusing on the
analysis of priorities.
Performance review – whether or not a formal annual or
biannual review should be introduced or retained and, if
so, what it should cover; if not, the use of performance
and development conversations (check-ins), the extent to
which they should be mandatory and formalized, and
their content and frequency.
Assessment of performance (rating) – whether or not a
formal assessment of performance is required in the
shape of rating, narrative reporting or visual assessment
and the characteristics of any preferred system, for
example for rating, the number of levels and the
definitions of each level.
Performance pay – how performance pay decisions should
be made with rating or in a ratingless system.
Reporting on performance – whether or not managers
should produce reports on the outcome of performance
reviews and, if so, the format of such reports and the use
to which they will be put.
The considerations that might affect these decisions are set out
in Tables 23.2 and 23.3, earlier.
These decisions should be made by the project team and
communicated to stakeholders for their comments. Any
changes deemed necessary can then be made and the agreed
and developed performance management process can then be
implemented.
Implementation
The implementation programme should cover
communications, training (see Chapter 24) and the provision of
guidance and help. It may be useful to pilot-test any new
procedures. It will also be essential to monitor and evaluate the
implantation (see Chapter 25).
References
Cascio, W F (2009) Managing Human Resources, 8th edition, McGraw Hill, Boston MA
Coens, T and Jenkins, M (2002) Abolishing Performance Appraisals: Why they backfire
and what to do instead, Berrett-Koehler, San Francisco
Deming, W E (1986) Out of the Crisis, Massachusetts Institute of Technology Center
for Advanced Engineering Studies, Cambridge MA
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
Jones, T W (1995) Performance management in a changing context, Human
Resource Management, 34 (3) pp 425–42
Robinson, D (2013) The Engaging Manager and Sticky Situations, Institute for
Employment Studies, Brighton
Strebler, M T, Bevan, S and Robertson, D (2001) Performance Review: Balancing
objectives and content, Institute for Employment Studies, Brighton
24
Learning about performance
management
Introduction
To introduce and maintain performance management
successfully it is essential to ensure that all concerned –
individuals as well as their managers – learn why it is
important, how it functions, what they have to contribute and
the skills they need. To do this, a learning and development
programme as described in this chapter is required. Learning
about performance management includes arrangements for
both formal and informal learning. But, because of the
importance, when implementing new or revised performance
management practices, of getting managers to act as
performance leaders, the emphasis should be on leadership
development with particular reference to the performanceenhancing skills required. This chapter covers first the process
of leadership development and then the planning and provision
of development programmes.
Performance leadership development
Leadership development is generally the process of developing
leadership skills and preparing people for leadership roles and
situations beyond their current experience. Burgoyne (2010: 42)
observed that: ‘Leadership development in the widest sense
involves the acquisition, development and utilization of
leadership capability or the potential for it.’ Yukl (2006)
proposed the following conditions for successful leadership
development:
clear learning objectives;
clear, meaningful content;
appropriate sequencing of content;
appropriate mix of training methods;
opportunity for active practice;
relevant, timely feedback;
high trainee confidence;
appropriate follow-up activities.
Performance leadership development
programmes
Performance leadership development programmes focus on
the acquisition and use of the ‘soft skills’ needed to manage
performance people successfully. These comprise: job design,
defining objectives, analysing and assessing performance,
providing feedback, conducting performance conversations,
coaching, dealing with underperformers and handling difficult
conversations.
Soft skills are developed in the flow of work, but they are too
important to allow this process to happen by chance. They can
be taught in formal training courses and these provide the
opportunity to practice skills in role-playing exercises and to
analyse how they are applied in case studies. However, where
possible – and affordable – individual coaching is desirable.
The learning needs for performance leaders can be based on
a competency profile such as the one illustrated in Chapter 6
(Figure 6.1). It would be useful to consult line managers on the
development of the profile to obtain their views and
contributions. Other staff members could be included in
competency workshops to provide a multidimensional view.
The members of the workshop begin by discussing generally
the role of a performance leader and the skills required. They
then reach agreement on an overall definition of the
competency and on the specific competency requirements.
Finally, they illustrate the meaning and application of the
competency by developing examples of effective and less
effective behaviours for each area (positive and negative
indicators).
Learning methods
Digital learning techniques, especially e-learning, can be used as
an alternative to formal courses or to supplement them. The
advantages of e-learning are:
It makes learning available both at the point of need (in
the workplace) and elsewhere to a dispersed workforce.
It can be made readily accessible through the use of apps
on smartphones.
People can learn at their own pace when and where they
want to (learning on the move).
They can tailor the learning to their own needs, for
example by fast-forwarding through content that is
already familiar to them.
The focus of learning can readily be directed to meeting
immediate learning needs.
The scope for providing the learning in small ‘bites’ can
make it easily digestible.
Self-directed learning can be encouraged. People can seek
the information they want for themselves but help can be
given by the organization (HR or learning and
development professionals acting as performance
consultants), including the curation of available material
as well as the provision of new material.
Formal learning
Performance leadership skills as defined in a competency
profile can be taught in formal courses. In these, training could
also be given in the procedures used in a formal performance
management system, such as making performance
agreements, setting objectives, conducting performance
reviews, assessing performance and completing performance
management reports. Such training can be face to face but
there is much to be said for the use of e-learning, although this
means that there is no opportunity to practise skills. E-learning
can be provided on a modular basis more easily and
comprehensively than through formal courses. The 2014 ereward survey of performance management found that in the
two-thirds of organizations conducting performance
management training, 52 per cent provided half-day courses,
while in 33 per cent of the organizations, the training lasted one
day. This amount of time is only sufficient to cover the basic
procedures and a superficial look at the basic skills.
Less formal learning
Formal training programmes are useful, but not enough.
Performance management skills are best developed through
coaching and mentoring that can be supplemented by elearning programmes. The HR department can play an
important role in organizing these learning activities, but it is
best to use experienced line managers as coaches and mentors.
References
Burgoyne, J (2010) Crafting a leadership and management development strategy, in
Gower Handbook of Leadership and Management Development, eds J Gold, R
Thorpe and A Mumford, Gower, Farnham, pp 42–55
e-reward (2014) Survey of Performance Management Practice, e-reward, Stockport
Yukl, G (1999) An evaluation of conceptual weaknesses in transformational and
charismatic leadership theories, Leadership Quarterly, 10, pp 285–305
25
Evaluating performance
management
Introduction
It is difficult to ensure that performance management functions
effectively, however carefully it has been developed and
introduced. Its operation must be monitored continuously and
evaluated regularly, which will indicate how well it is working
and identify any remedial actions required. This is evidencebased performance management.
The criteria, the contents of an audit and the methods used to
conduct evaluation surveys are dealt with in this chapter,
which concludes with a summary of what can be done to
improve performance management effectiveness in the form
of an eight-point plan.
Criteria for evaluation
The criteria for evaluating performance management should be
defined when the system is introduced or amended. They will
be based on how well its objectives have been achieved. If, for
example, performance development is a major aim, how the
impact of the system on performance can be measured should
be described. The system design should specify how it is
intended to operate and the evaluation will aim to determine
the extent to which these operational requirements are being
met.
The overriding criterion was specified by Lee (2005: 60): ‘All
performance management systems should be judged by one
standard – how well they create the climate necessary for
performance conversations to occur so that the employee and
supervisor can diagnose problems and work together to
overcome them.’ The organization’s competency framework
should include performance leadership as one of its categories.
Meeting the requirements of such a criterion would be a key
factor in assessing the performance of managers.
More detailed success criteria for the operation of
performance management generally, such as those set out
below, should be defined in advance and used as the basis for
evaluation:
Measures of improved performance by reference to key
performance indicators in such terms as output,
productivity, sales, quality, customer satisfaction, return
on investment.
Achievement of defined and agreed goals.
Measures of employee engagement before and after the
introduction of performance management and then at
regular intervals.
Assessments of reactions of managers and employees to
performance management.
Personal development plans agreed and implemented.
Performance improvement plans agreed and
implemented.
Assessment of the extent to which managers and
employees have reached agreement on goals and
performance improvement plans.
The effectiveness of managers as performance leaders should
be assessed by reference to the following requirements (based
on the performance management behaviour questionnaire
produced by Kinicki et al, 2013).
Links performance goals to the strategic goals of the
organization.
Clarifies what team members are expected to achieve.
Participatively sets objectives.
Prioritizes tasks and goals.
Monitors performance.
Is approachable and available to talk with others.
Gives people timely and positive feedback about their
performance.
Shows others how to complete difficult assignments and
tasks.
Helps people to develop their skills.
Rewards good performance.
There are two perspectives in evaluating a performance
management system: (1) the effectiveness of the system as
judged by management and (2) the effectiveness of the system
as judged by employees. Performance management should
meet both these needs. If it is to meet the needs of
management, it must help the organization to use the skills of
employees and motivate and develop them to perform
effectively. To meet the needs of employees, it must help them
to know what is expected of them, how well they are doing,
how they can develop their skills and potential and how they
can improve their performance.
Performance management audit
A performance audit should include:
1. Surveys of managers and employees to obtain reactions to
performance management processes.
2. Focus groups to discuss survey results.
3. Assessment of a leadership development programme and
any training programmes (courses or the use of digital
learning).
4. If rating is used, analysis of ratings by job level, occupation
and organizational unit, distribution, indications of any
inflation, evidence of discrimination by gender or race.
Methodology
The best method of monitoring and evaluation is to ask those
involved – managers and individuals – how it worked. As many
as possible should be seen, individually and in focus groups, by
members of a project team and/or the HR function. The main
points to examine are set out in Figure 25.1.
Figure 25.1 Areas for performance management
evaluation
Figure 25.1 details
Individual interviews and focus group discussions can be
supplemented by a special survey of reactions to performance
management, which could be completed anonymously by all
managers and staff. The results should be fed back to all
concerned and analysed to assess the need for further training
and/or any amendments to the process. An example of a survey
questionnaire is given in Figure 25.2.
Figure 25.2 A performance management
questionnaire.
Figure 25.2 details
The ultimate test, of course, is analysing organizational
performance to establish the extent to which improvements
can be attributed to performance management. It may be
impossible to establish a direct connection, but detailed
assessments with managers and staff on the impact of the
process may reveal specific areas in which performance has
been improved that could be assumed to impact on overall
performance
Improving the performance of performance
management – an eight-point plan
This plan is designed to make use of the evidence from a
performance management audit.
1. Analyse the results of the audit, including any surveys,
and distribute a summary to all employees affected by
performance management.
2. Consult senior management to obtain their views on any
actions that need to be taken in the light of the audit
outcomes.
3. Convene focus groups to analyse the audit results and
consider what actions are required.
4. Summarize the results of the consultations in steps 2 and 3
and draw up an action plan. Depending on the findings of
the audit, the actions could include any of the following:
Revisions to performance management procedures.
Focused training for both managers and individuals
in the form of modules dealing with issues such as
performance planning (defining role profiles,
objective setting and preparing and implementing
performance improvement and personal
development plans), providing and acting on
feedback, conducting performance review
conversations, assessing performance and coaching.
The provision of coaching and mentoring to
overcome weaknesses displayed by any individual
managers as revealed by the upward assessments
contained in the survey.
5. Inform everyone concerned of the proposed actions.
6. Design the training modules, brief and train the trainers
and brief and train anyone involved in coaching or
mentoring.
7. Implement the action plan.
8. Monitor the implementation and evaluate the
effectiveness of the action. This may take the form of a
follow-up audit.
References
Kinicki, A J, Jacobson, K J, Peterson, S J and Prussia, G E (2013) Development and
validation of the performance management behavior questionnaire, Personnel
Psychology, 66 (1), pp 1–45
Lee, C D (2005) Rethinking the goals of your performance management system,
Employment Relations Today, 32 (3), pp 53–60
PART SIX
Conclusions
26
Where is performance
management today?
Introduction
Performance management today is at last responding to the
chorus of disapproval that started with Douglas McGregor’s
seminal 1957 Harvard Business Review article ‘An uneasy look
at performance appraisal’ and has continued ever since,
notably Deming, (1986), Grint (1993), Coens and Jenkins (2002),
Pulakos and O’Leary (2011), Buckingham and Goodhall (2015)
and, most recently, Kevin Murphy of the University of Limerick
in a Human Resource Management Journal 2020 article
‘Performance evaluation will not die but it should’, The CIPD
(2020) has joined in with its statement that: ‘The process is
excessively bureaucratic, time consuming and demotivating.’
The traditional performance management system has been
exposed as unloved, cumbersome and ineffective. The
emphasis has shifted from the judgemental, evaluative aspect
of performance management to its developmental purpose.
Myths have been exploded, such as:
An annual performance review session is essential.
SMART objectives are an obligatory element of
performance management.
Performance is normally distributed.
People love feedback.
Performance pay cannot happen unless there is a formal
performance rating system.
The notion of performance leadership has emerged – line
managers as performance leaders. It was first stated long ago
by McGregor (1957: 90), who described the manager as: ‘a
leader who tries to help his [sic] subordinates accomplish both
their own and the company’s objectives’ (italic in original).
The writer (Armstrong, 2017: 194) highlighted the importance
of managers behaving as managers rather than bureaucrats as
follows:
Here is what three successful managers told Dilys Robinson of the
Institute for Employment Studies (2013) about how they managed
performance:
So, the key for me is just one-to-one time, and they know
what they’re aiming for, and we talk about it regularly.
I think it’s regular dialogue... at least once a fortnight for
an extended period of time, just one to one and just about
them and the work they’re doing and what’s going on...
just so that I understand what they’re doing and so I can
give a bit of a steer or give them a bit of coaching if they
need some coaching; help them if they want some help
and support.
Every week I have a one-to-one session with people who
work for me. And it’s half an hour; it’s the opportunity to
talk things over with people. I say to people it’s your time
with me. But, to be honest, it’s not just that; it’s me getting
to talk to them.
The best way to deal with the problem of making performance
management work is to have managers who act like this rather
than compel them to conform to the bureaucratic
requirements of a typical performance management system.
These managers are managing performance, not operating a
system. The way ahead is therefore to select, develop,
encourage and support managers to do just that.
But perhaps the most significant contribution to this debate
was the emphasis on performance leadership made by Kevin
Murphy (2020: 26), who wrote:
A performance management system built round coaching and
incorporating the two behaviours leaders need to exhibit – that is,
consideration and structure – holds real promise for organizations. Stop
evaluating and start leading!’
References
Armstrong, M (2017) Reinventing Performance Management, Kogan Page, London
Buckingham, M and Goodall, A (2015) Reinventing Performance Management,
Harvard Business Review, April, pp 40–50
Chartered Institute of Personnel and Development (2020) Performance Reviews,
CIPD, London
Coens, T and Jenkins, M (2002) Abolishing Performance Appraisals: Why they backfire
and what to do instead, Berrett-Koehler, San Francisco
Deming, W E (1986) Out of the Crisis, Massachusetts Institute of Technology Center
for Advanced Engineering Studies, Cambridge MA
Grint, K (1993) What’s wrong with performance appraisal? A critique and a
suggestion, Human Resource Management Journal, Spring, pp 61–77
McGregor, D (1957) An uneasy look at performance appraisal, Harvard Business
Review, May–June, pp 89–94
Murphy, K R (2020) Performance management will not die but it should, Human
Resource Management Journal, 30 (1), pp 13–31
Pulakos, E D and O’Leary, R S (2011) Why is performance management broken?,
Industrial and Organizational Psychology, 4 (2), pp 146–64
Robinson, D (2013) The Engaging Manager and Sticky Situations, Institute for
Employment Studies, Brighton
AUTHOR INDEX
Aguinis, H 8, 13, 23, 24, 25, 99, 109, 182
Alfes, K 218
Ariyachandra, T R 167–68
Armstrong, K 165
Armstrong, M 108, 256
Atkinson, A A 166
Bandura, A 33–34
Bartol, K M 89
Bartlett, C J 87–88, 94
Bass, B 74
Bates, R A 21
Beatty, R W 121
Beer, M 171
Benson, G S 2, 63
Bernadin, H K 22, 94, 95
Bevan, S 197
Bolitzar, S 165
Borman, W C 22
Boselie, P 13
Bourne, M 163
Bouskila-Yam, O 63, 117
Bowen, D E 27
Boxall, P F 26, 165, 210
Bradley, K J 24
Briscoe, D R 8, 185, 189
Brown, D 44, 46, 49–50
Brumbach, G B 23
Brutus, S 52
Buckingham, M 44, 76
Budworth, M 143
Burgoyne, J 75
Campbell, J P 22
Campion, M A 56
Cappelli, P 45, 56, 61, 64, 114, 208
Cardy, R L 26
Cascio, W F 234
Chamberlin, J 132–33
Chambers, T 191
Clarke, N 220
Claus, L M 8
Cleveland, J 87, 94
Clutterbuck, D 149
Coens, T 17, 234, 255
Colbert, S A 44
Coleman, T 191
Coley-Smith, H 174
Collings, D G 208
Cropanzano, R S 16–17
Cummins, T G 171
Dagan, B 178
Daniels, K 218–219
Deci, E L 211
Deming, W E 17, 41, 234, 255
den Hartog, D N 12–13
DeNisi, A S 7, 8–9, 10, 13, 15, 32, 87, 141, 182
Dobbins, G H 26
Donahue, R 192
Drucker, P 131
Dweck, C 141
Ebert, R J 1
Eidems, J 186
Elliott, S 174
Evered, R D 147
Festing, M 186
Flaherty, J 170
Fletcher, C 22, 42, 51
Folger, R 16–17
Frisch, M H 123
Frolick, M 167–68
Garland, J 188
Georghe, C 161–62
Gerringer, J 187
Gjerde, K A 175
Goodhall, A 44, 76, 255
Gorman, C A 119
Goshal, S 112
Gratton, L 112
Gray, A 141
Griffin, R 1
Grint, K 76, 123, 255
Gruman, J A 217, 222
Guest, D E 218
Hack, J 161–62, 175
Hackman, J R 221
Haines, V Y 13
Halborn, T 148
Halpin, A W 74
Handy, C 151
Harrison, R 25–26
Harzing, A-W K 186
Hirsh, W 112–13
Hofherr, J 88
Holton, E F 21
Hughes, S B 175
Hull, C 33
Hunter, J E 15
Ivancevich, J M 139
Jawaha, I M 52
Jenkins, M 17, 255
Jones, T W 17, 235
Kahn, W A 218
Kane, J S 22, 94
Kaplan, R S 135, 136, 163
Kendall, L M 93
Kinicki, A J 8, 146, 247
Kluger, A N 63, 117, 118, 141
Knight, R 196
Kochanski, J 15
Krames, J A 175
Kuvaas, B 222
Latham, G P 21, 31, 54, 93, 131
Lawler, E E 83, 132, 171, 201, 212
Ledford, G E 2, 62, 63, 112, 125, 216
Lee, C D 52, 140, 141, 147, 192, 248
Linna, A 50
Locke, E A 31, 54, 131
London, M 120, 140, 217, 220
Macey, W H 218, 219, 220, 222
MacLeod, D 220
Mani, B 49
Maurer, T 123
McDermott, M 171
McDonald, D 13
McDonnell, A 208
McGregor, D 2, 61, 85–86, 131, 140–41, 255, 256
Megginson, D 149
Meisler, A 98, 99
Merton, R K 24
Michaels, E G 204
Mone, E M 217, 220
Motowideo, S J 22
Moulin, N 167
Murlis, H 108
Murphy, K R 1, 14 25, 53, 61, 74, 77, 87, 94, 142, 255, 256
Nadler, D A 27
Neely, A 166–67, 176
Nir, D 117
Norton, D P 135, 136, 163
O’Leary, R S 13, 44, 76
Oldham, G R 221
O’Malley, M 99
Ordonez, L D 54
Ostroff, C 27
Pinto, L H 191
Pfeffer, J 53
Postuma, R A 56
Pritchard, A 169
Pritchard, R D 7, 8–9, 32, 87
Pudelko, M 186
Pulakos, E D 8, 13, 44, 52, 71, 76, 255
Purcell, J 14, 26, 182, 210, 218
Purse, N 112
Quinn, F J 174
Reilly, P 51, 186
Reynolds, J 201, 202
Risher, H 151, 217
Roberts, E R 94
Robinson, D 71, 81, 86, 155, 220, 236
Rock, D 53, 88
Rodgers, R 15
Rowe, K 100
Ryan, R M 211
Saffie-Roberson, M C 52
Saks, A M 217, 222
Sandel, M 211
Schaffer, R H 150
Schiff, C 176
Schneider, B 222
Schneiderman, A M 177
Selman, J C 147
Shields, J 8, 10
Shih, H A 172
Silverman, M 51
Sink, D S 162
Smith A 14, 15
Smith, C E 10, 182
Smith, P C 93
Stiles, P 189
Stogdill, R M 73
St-Onge, S 13
Stoskopf, G A 42
Strebler, M T 49, 51, 235
Stuart-Smith, K 15
Sullivan, J 49–50
Sutton, R I 53
Tahvanainen, M 193
Tavis, A 45, 56, 61, 64, 114
Tayeb, M H 186
Taylor, M S 13, 16
Tieze, S 205
Turnow, W W 120
Tushman, M 27
Tuttle, T C 162
Viswasveran, C 51
Vroom, V 26, 32
Ward, A 165
Warrenton-Smith, A 148
West, M A 15
Wexley, K N 93
Wherry, R J 87, 94
Wiley, J 218
Williams, C R 52
Williams, T 53, 186
Winer, B J 74
Winstanley, D 15
Wolff, C 150, 151
Woodruffe, C 147
Worley, C G 171
Wortzell-Hoffman, N 165
SUBJECT INDEX
ACAS 197
Accenture 63
Adobe 63, 114
agreeing objectives, see objectives
alignment of individual and organizational goals
and cascading goals 135
and objective setting 40
problems with 55–56
strategic alignment 135–36
AMO model 26, 210
analytical performance narratives 100–01
appraisal, see performance appraisal
appreciative enquiry 117
assessing performance, see performance assessment
assessment, see performance assessment
Association for Management Information in Financial Services 173
Astra Zeneca 39
autonomy 17
balanced scorecard 135–36, 177
behaviourally anchored rating scales 93
behavioural observation scales 93–94
bundling 10–11, 15
business performance management systems 167–69
calibration of ratings 95
capability procedure 156–57
cascading goals
and aligning objectives 40
and leadership 74
problems with 42, 55–56
process of 10
and strategic alignment 10, 135
causal ambiguity 13
causation 13
CEMEX 205
Center for Effective Organizations 62
challenging conversations, handling of 154–55
Chartered Institute of Personnel and Development 45, 50, 116, 255
check-ins
and developments in performance management 65
defined 61–62
and homeworkers 198
and performance reviews 41, 108
coaching
culture of 149
defined 146–47
process of 147–48
skills 148
competency profile, performance leader 75–76
computerized performance monitoring 29–30
consideration 74
context
features of 17
impact on performance management 42
management of 17
and systems theory 17
contextual performance 22
contextual factors affecting performance 27
continuous improvement 41
control theory 132
convergence 180
conversations
challenging, handling of 154–55
performance conversations 111–12
correlation 13
COVID-19 3, 195
critical success factors 82
crowdsourced feedback 124–25
cumulative advantage 25
dashboards 177–78
dead man’s curve 98
declaration of intent 56
decoupling pay reviews 54, 65, 105, 215
defining objectives, see objectives
Deloitte 114
development of performance management, see performance management,
development of
development planning 83–84
distribution of performance 23–25
divergence 180
due process in performance management 16
employee engagement
defined 217–18
enablers of 218–19
importance of 218
and performance management 223
and the psychological contract 222–23
and ratings 53
employee relations climate 28–29
employment relationship 34
engaging managers 71–73
engagement, see employee engagement
enterprise resource planning 168
e-reward 11, 49, 62, 87, 91, 98, 100, 189, 212
the ethical dimension of performance management 15–17
European Foundation for Quality Management Model 175–76
evaluating performance management 246–51
evidence-based performance management
defined 86
and feedback 139
expatriates, performance management 191–93
expectancy theory 32
external environment 31
factors affecting performance
contextual 27
individual 26
systems 26–27
feedback
constructive 142–43
continuous 142
defined 138–39
effectiveness of 141–42
feedforward 143
frequency of 50
giving feedback, guidelines 143–44
and homeworkers 204
inadequacy of 49
nature of 139
negative 142
and performance conversations 142
and performance management 221–22
in performance reviews 11
360-degree 119–24
timing of 141
use of 140–41
feedforward interview 143
forced distribution
criticism of 98–99
defined 41, 97
described 97–98
and the distribution of performance 23
forced ranking
defined 53
described 98
problems with 53–54
frame of reference training 95
Gallup 198, 199
Gap 63, 114
Gaussian curve 23
goal theory 31–32
goals
cascading of 10
defined 32, 129
and objectives 129
see also objectives
guided distribution 97
Halifax Bank 39
high performance culture
contribution of performance management to 173
development of 171–72
features of 18
high performance work systems 172
high performance working 172
Hitachi Europe 12
homeworkers, performance management of
clarifying expectations 197
guiding principles 199–200
incidence of homework 195
and line managers 199
management of 3
management of performance 195
performance management processes 197–99
policy on performance management 196
Zoom, impact of 198
human capital management 171
hybrid working 195
IBM 114
individual performance, factors affecting 25–26
initiating structure 74
individual goals 129
individual objectives 129
initiating structure 74
input-process-output-outcome model of managing performance 27
inputs 27
Institute for Employment Studies 46, 56–57, 60–61, 71, 195, 197
international performance management
approaches to 187–89
convergence and divergence 185–86
practice of 189–91
intrinsic motivation 32, 211
job characteristics model 220–21
job description 79
key performance indicators (KPIs)
defined 79
and definition of objectives 134
organizational 176–77
key result areas (KRAs)
defined 78, 134
definition of 80–81
and objectives 130, 134–35
in a role profile 78, 79
for a team leader 130
leadership
defined 73
need for in performance management 75
leadership behaviour 74
leading indicators 175
learning and performance management 201–03
line managers
engaging managers 71–73
as performance leaders 9
and managing performance 9, 71
role of in managing performance 56–57
Lloyds Banking Group 12, 136
Machine Design 98
management 74
management-by-objectives (MBO) 131
managers, see line managers
managers and managing performance 71
managing individual performance
factors affecting 25–26
the input-process-output-outcome model of managing performance 27
and line managers 9
managing under-performance 151–52
systems factors 26–27
what individuals can gain from performance management 11
managing organizational performance
process of 161–62
stakeholder approach 166–67
strategic 162–66
Matthew effect 24
McKinsey and Company 205
measures
development of 178–80
types of 175–76
measuring performance 173–80
measurement
approach to 174–75
significance of 173
metrics 173, 174–75, 176, 179
Microsoft 62, 65
mindset 141
models of performance management 39
multiple causation 13
multi-source feedback 119
see also 360-degree feedback
narrative assessment
analytical method 100–01
defined 99
guidelines on completion 99–100
non-financial rewards and performance management 210–12
normal curve of distribution
and forced distribution 23
illustration of 24
and managing performance 97
objectives
characteristics of an effective objective 132
conceptual background to use 131–32
defined 82–83, 129
definition of 82–83,132–35
and goals 129
meaning of 129
performance objectives 130
and performance reviews 40
personal objectives 131
SMART objectives 1, 9, 55
types of 129
use in performance management 64–65
objective setting issues 54–56
objective setting developments, advantages and disadvantages of 67
180 degree feedback 119
organizational capability 170
organizational culture 28
organizational development 170
organizational performance 161–67
see also managing organizational performance
organization structure and performance management 29
outcomes 21, 27, 134
outputs 27, 134
Pareto principle 24–25
pay awards and performance management 214–15
performance
and the AMO formula 26
as behaviour 22
as both outcomes and behaviour 23
components of 22
contextual performance 22
distribution 23–25
factors affecting 25–26
as a function of ability and motivation 26
improvement of 32–33
meaning of 21
measurement of 22
as outcomes 21
as outputs 27
theory 21–22
performance agreement
defined 39–40
as a framework for learning 202
performance analysis 85–86, 104–06
performance anchor 88
performance appraisal
defined 8–9
negative results of 48–49
and performance assessment 85
and performance management 8–9
performance assessment
conclusions on 104–05
defined 85
methods of 85–04
narrative assessment 99–101
and rating 87–97
visual assessment 102–04
see also rating
performance conversations
case for 112
conducting 112–16
defined 108
described 111–12
and feedback 140
features of 61, 112
need for 61
replacing formal reviews 61–62
use of 240
performance culture 13
performance and development agreements 38, 39, 78, 240
performance and development planning
defined 39–40, 78
purpose of 40
the traditional approach 78–79
performance evaluation 41
performance improvement plans 62, 79
performance indicators 79
performance leaders
characteristics of 74
competency profile 75–76
development of 75
line managers as 9
need for 56
process of 74
role of 74
performance leadership
concept of 1, 73–75
defined 9, 74
development of 227–28, 242–44
as the future of performance management 256
leadership behaviour 74
need for 77
and performance conversations 113
and performance management systems 37
role in performance management 74
significance of 256
skills 74
what it involves 227
performance management
aims of 11
as an all-the-year-round process 60
audit 248
choice of approach 18–19
concerns of 32
context of 17
criticisms of 2, 41–43
cycle 38
defined 7–8, 74
development of 227–41
developmental role of 83
developments, advantages and disadvantages 65–67
and employee engagement 223
the ethical dimension 15–17
evaluation of 246–51
evidence-based 86, 139
for expatriates 191–93
and feedback 221–22
form 110–11
gains from 11
and the development of a high performance culture 173
and human capital management 171
impact of 13–15
issues 44–57
and leadership 74
learning about 242–45
and learning and development 201–03
models 39
myths 255
nature of 8–9, 60–61
need for reform 61
and non-financial rewards 210–11
objective of 11
and organizational capability 171
and organizational performance 13
and pay awards 214–15
and performance appraisal 8–9
as a positive process 150
problems of 48–57, 60–61
and the psychological contract 34
purpose of 1, 10–11
reality of 41–43
and recognition 211
and reward 210–15
skills 3, 9
and stakeholders 166
strategic role of 165
system 1, 9, 37–38, 240–41
and talent management 204–09
training in 241, 244
underpinning theories 31–34
values 15
where it is today 255–56
performance management cycle 37, 38
performance management data, use of 171
performance management, development of
advice on development 236, 237
approach to 235–36
choices 228, 230–33
contextual factors 228–29
implementation 241
initial analysis and diagnosis 238–39
and system of work factors 234
development programme 236–41
performance leaders 228
process of 228
performance management, evaluation of
audit 248–50
criteria 246–48
need for 246
performance management form 110–11
performance management models 39
performance management skills
defined 3, 9
training in 243
performance management system
aims 37
business 167–68
choice of 230, 240–41
as a cycle 38
defined 1, 9, 37–38
described 234
development of 228
features of 37–38
models of 38–39
nature of 60–61
and performance leadership 37, 56
performance management training
formal training 244
inadequate nature of 110–11
leadership development 242–43
less formal training 244
learning methods 243–44
skills development 244
performance management underpinning theories
control 33
expectancy 32–33
goal 31–32
reinforcement 33
self-efficacy 34
social learning 33–34
systems 17, 26–27
performance monitoring
computerized 29–30
described 40
performance narratives 99–101
performance objectives
defined 130
as key result areas 134
performance pay
decoupling 54, 65, 105, 215
and performance management 54, 212–15
priority of 11
and ratings 54
and ratingless reviews 213
performance prism 166–67
performance rating, see rating
performance rating scales, see rating scales
performance reviews
as conversations 111–12
defined 41, 107
and feedback 11
nature of 41
for homeworkers 198
as learning events 203
method 107
performance analysis 86
performance conversations 111–16
in a performance management system 40–41
performance review form 110–11
problems of 48–51, 61
purposes of 41, 107
replaced by performance conversations 61–62
team performance reviews 184
traditional approach 109
performance standards 130
personal development plans 79, 83–84, 202, 203
personal objectives 131
Pfizer 39
potential, identification of 206–08
power law distribution of performance 24, 25
process 27
productivity 169
profitability 164
projects 130
PROMES – Productivity Measurement and Enhancement System 169
psychological contract
defined 34
and engagement 222–23
and performance management 34
rank and yank 53
rating
abolition of 64, 67
accuracy, achievement of 94–95
arguments against 96
arguments for 96
calibration 95
conclusions on 101
consistency, achievement of 95
defined 91
frame of reference training 95
moderation 95
and performance pay 54
in performance reviews 41
problems with 51–53
scales 92, 97–98
theory of 87–88
rating scales
behaviourally anchored rating scales 93
behavioural observation scales 93–94
defined 88
graphic rating scales 92–94
rating levels, number of 88–89
rating scale definitions 90–92
ratingless reviews 65, 213–14
recency effect 50
recognition 211, 222
resource-based view 171
reinforcement theory 33
reversed causality 13, 14
reward and performance management 210–15
roles
defining 79–82
nature of 79
role profile
defined 78, 80
example of 82
key result areas 78, 80–81, 133–34
and performance agreements 40
preparation of 80–81
scorecards 177
self-appraisal 86
self-directed learning 244
self-efficacy theory 34
Serono, SA 191
SMART objectives
defined 9
and objective setting 133
and performance and development planning 79
and performance management systems 1, 9
problems with 55
replacement of 67
use of 65
social learning theory 33–34
Society for Human Resource Management 46–47
stack ranking 53
stakeholders and managing organizational performance 166–67
Standard Chartered Bank 61, 190
standards 130
star performer 24
strategic alignment 135–36, see also alignment of individual and organizational
goals
strategic goals
for a business 129
integration of 135
nature of 129
strategic human resource management 10
strategic performance management 165
strategy maps 163–64
strategic organizational performance management 162–66
strength-based assessment 63, 116–17
strong HRM system 27
systems factors affecting performance 26–27
systems theory 17, 26–27
talent development 209
talent management and performance management 204–09
targets 130, 134
team performance management
performance objectives 183
performance reviews 184
process of 182
process objectives 183
teams 182
technology and performance management 28–29
360-degree feedback
advantages and disadvantages 122–23
defined 119
incidence of 120
introducing 123–24
methodology 121–22
rationale for 120
total reward and performance management 210
Towers Watson 47
training in performance management, see performance management training
trust 17
under-performance, management of
approaches to 151–52
basic steps 152–54
capability procedure, use of 156–57
challenging conversations, handling of 154–55
the problem 150–51
upward feedback 119
values of performance management 16
visual assessment 102–04
VUCA 133
Zoom 198
Publisher’s note
Every possible effort has been made to ensure that the information contained in this
book is accurate at the time of going to press, and the publishers and authors cannot
accept responsibility for any errors or omissions, however caused. No responsibility for
loss or damage occasioned to any person acting, or refraining from action, as a result of
the material in this publication can be accepted by the editor, the publisher or the
author.
First published in Great Britain and the United States in 1994 by Kogan Page Limited as
Performance Management
Fourth edition published in 2009 as Armstrong’s Handbook of Performance Management
Seventh edition published in 2022
Apart from any fair dealing for the purposes of research or private study, or criticism or
review, as permitted under the Copyright, Designs and Patents Act 1988, this publication
may only be reproduced, stored or transmitted, in any form or by any means, with the prior
permission in writing of the publishers, or in the case of reprographic reproduction in
accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction
outside these terms should be sent to the publishers at the undermentioned addresses:
2nd Floor, 45 Gee Street
London
EC1V 3RS
United Kingdom
www.koganpage.com
8 W 38th Street, Suite 902
New York, NY 10018
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Kogan Page books are printed on paper from sustainable forests.
© Michael Armstrong, 2022
The right of Michael Armstrong to be identified as the author of this work has been asserted
by him in accordance with the Copyright, Designs and Patents Act 1988.
ISBNs
Hardback 978 1 3986 0304 2
Paperback 978 1 3986 0302 8
Ebook 978 1 3986 0303 5
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Names: Armstrong, Michael, 1928- author.
Title: Armstrong’s handbook of performance management: an evidence-based guide to
performance leadership / Michael Armstrong.
Description: Seventh edition. | New York, NY: Kogan Page Inc, 2022. | Revised edition of
Armstrong’s handbook of performance management, 2018. | Includes bibliographical
references and index.
Identifiers: LCCN 2021047188 (print) | LCCN 2021047189 (ebook) | ISBN
9781398603028 (paperback) | ISBN 9781398603042 (hardback) | ISBN 9781398603035
(ebook)
Subjects: LCSH: Employees–Rating of. | Performance standards. | Performance.
Classification: LCC HF5549.5.R3 A758 2022 (print) | LCC HF5549.5.R3 (ebook) | DDC
658.3/125–dc23/eng/20211105
LC record available at https://lccn.loc.gov/2021047188
LC ebook record available at https://lccn.loc.gov/2021047189