PART ONE

The basis of
performance
management
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The concept of 01
performance
management
The purpose of this chapter is to define the conceptual framework of perfor-
mance management, its aims, the principles that influence how it is supposed
to work and the requirements for success.
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Performance management defined

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Performance management is the continuous process of improving perfor-

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mance by setting individual and team goals which are aligned to the strategic
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goals of the organization, planning performance to achieve the goals, review-

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ing and assessing progress, and developing the knowledge, skills and abilities
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of people.
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Here are some other definitions:

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‘Performance management is a continuous process of identifying, measur-

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ing and developing the performance of individuals and teams and aligning
performance with the strategic goals of the organization.’ (Aguinis, 2005)
●● ‘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)
●● ‘Performance management is a broad set of activities aimed at improving
employee performance.’ (DeNisi, and Pritchard, 2006)
●● ‘Performance management is the key process through which work gets
done. It’s how organizations communicate expectations and drive behav-
iour to achieve important goals; it’s also about how organizations identify
8 The Basis of Performance Management

ineffective performers for development programmes or other personnel

actions.’ (Pulakos, 2009)
●● ‘Performance management is regarded as a continuous, future-orientated
and participative system; as an ongoing cycle of criteria setting, monitor-
ing, informal feedback from supervisors and peers, formal multi-source
assessment, diagnosis and review, action-planning and developmental
resourcing.’ (Shields, 2007)

Managing performance is what line managers do and performance manage-

ment is supposed to help them do it. Performance management is managing
the business. It should be a powerful means of ensuring that the organiza-
tion’s strategic goals are achieved. It should contribute to the achievement
of culture change and be integrated with other key HR activities, especially
human capital management, talent management, learning and development
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and reward management. Thus performance management helps to achieve

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horizontal integration and the ‘bundling’ of HR practices so that they are

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interrelated and therefore complement and reinforce each other. An effective

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system of performance management can play an important part in increasing

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levels of employee engagement.

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The conceptual framework

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The theoretical basis of performance management is discussed below under

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the following headings:

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●● the meaning of performance;

●● the factors affecting performance;
●● underpinning theories;
●● performance management and the psychological contract.

The meaning of performance

It can be said that if you can’t define performance you can’t measure or
manage it. Bates and Holton (1995) pointed out that: ‘Performance is a
multi-dimensional 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 or both.
 The Concept of Performance Management 9

Latham et al (2007) emphasized that an appropriate definition of perfor-

mance is a prerequisite for feedback and goal setting processes. They stated
that a performance theory is needed which 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 compara-
tive standards.

There are different views on what performance is. It could just mean
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outputs – the results obtained. Or it could mean behaviour – how the results
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were obtained. Or it could be both results and behaviour.

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Performance as outputs
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Kane (1996) argued that performance ‘is something that the person leaves
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behind and that exists apart from the purpose’. Bernadin et al (1995) were
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concerned that:
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Performance should be defined as the outcomes of work because they provide

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the strongest linkage to the strategic goals of the organisation, customer satisfac-
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tion, and economic contributions.

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Performance as behaviour
Campbell (1990) explained that: ‘Performance is behaviour and should
be distinguished from the outcomes because they can be contaminated by
systems factors.’ Aguinis (2005) was positive that: ‘performance is about
behaviour or what employees do, and not about what employees produce or
the outcomes of their work.’
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 character-
ized by a category of similar behaviour or actions. The components consist
of: (1) job-specific task proficiency, (2) non-job specific proficiency (eg
organizational citizenship behaviour), (3) written and oral communication
10 The Basis of Performance Management

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) suggested the notion of contextual perfor-
mance, which 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 which foster behav-
iours 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
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said to be performing well it does not solely refer to what results they deliver
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it is also concerned with how they deliver them. As Brumbach (1988) put it:
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Performance means both behaviours and results. Behaviours emanate from the
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performer and transform performance from abstraction to action. Not just the
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instruments for results, behaviours are also outcomes in their own right – the
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product of mental and physical effort applied to tasks – and can be judged apart
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from results.
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Defining performance like this leads to the conclusion that when managing
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the performance of individuals and teams both outputs (results) and inputs
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(behaviour) need to be considered. This is the generally accepted ‘mixed

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model’ of performance management, which is concerned with both the

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‘what’ and the ‘how.’

Levels of individual performance are affected by a number of influences
and factors as discussed below.

Factors affecting 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 Concept of Performance Management 11

●● 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 inappro-
priate leadership and management style.

These can be analysed into individual, systems and contextual factors.

Individual factors
Vroom (1964) suggested that performance is a function of ability and moti-
vation as shown in the formula: Performance = ƒ (Ability × Motivation).
The effects of ability and motivation on performance are not additive but
multiplicative. People need both ability and motivation to perform well and
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if either ability or motivation is zero there will be no effective performance.

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A formula for performance was produced by Blumberg and Pringle (1982)

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that emphasized the importance of the organizational context. Their equa-

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tion was:
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Performance = Individual Attributes × Work Effort

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× Organizational Support
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A variation on the above was offered by McCloy et al (1994). They proposed

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that a combination of three factors enables some people to perform at higher

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levels than others:

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1 Declarative knowledge (about facts concerning task requirements and

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goals).
2 Procedural knowledge (a combination of knowing what to do and how to
do it).
3 Motivation (level and persistence of effort).

Research carried out by Bailey et al (2001) focused on another factor affecting

performance – participation. They noted that ‘organizing the work process
so that non-managerial employees have the opportunity to contribute discre-
tionary effort is the central feature of a high performance work system.’
(This was one of the earlier uses of the term discretionary effort). The ‘AMO’
formula put forward by Boxall and Purcell (2003) is a combination of the
Vroom and the Bailey et al ideas. This model states that performance is a
12 The Basis of Performance Management

function of Ability + Motivation + Opportunity to Participate (note that the

relationship is additive not multiplicative).
These formulas focus mainly on individual performance but systems
factors are also important.

Systems factors
Individual performance is influenced by systems factors as well as person
factors (Cardy and Dobbins, 1994). Systems theory as formulated by Miller
and Rice (1967) 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
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in carrying out his or her allotted tasks. Inputs are the skills and knowledge
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that an individual brings to a job. Process is how people actually perform

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their jobs. Outputs are the results of performance expressed in quantified

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terms such as sales volume, income generated or units of production, and

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outcomes are a visible effect which is the result of effort but cannot neces-
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sarily be measured in quantified terms. The input-process-output-outcome

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model of managing performance is important first, because it provides the

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basis for measuring performance and second, because all the factors that
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influence performance, including the system and the context, can be taken
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into account when assessing it.

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It was claimed by Deming (1986) that differences in performance were

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largely due to systems variations. Gladwell (2008) also argued that success
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isn’t primarily down to the individual, but to his or her context. Coens and
Jenkins (2002) made the following comments on the impact of systems.

An organizational system is composed of the people who do the work but far
more than that. It also includes the organization’s methods, structure, support,
materials, equipment, customers, work culture, internal and external environ-
ments (such as markets, the community, governments), and the interaction of
these components. Each part of the system has its own purpose but at the same
time is dependent on the other parts…
Because of the interdependency of the parts, improvement strategies aimed
at the parts, such as appraisal, do little or nothing to improve the system…
Individual performance is mostly determined by the system in which the work is
done rather than by the individual’s initiative, abilities and efforts…
 The Concept of Performance Management 13

Because of these effects and the low yield benefit of improving the parts,
it makes little sense to design organizational improvement systems around
appraisal while the leveraging power of improving the system is ignored… The
myopic focus on individual improvement equates to a religious dogma that is
manifested through the rituals and rites of ranking and rating.

However, Coens and Jenkins also stated that: ‘We do not advocate abandon-
ing all strategies aimed at individual improvement, personal development
and goal attainment. When combined with serious efforts toward improving
the system and work environment, such initiatives can significantly bolster
organizational transformation.’
Systems factors include the support people get from the organization and
other factors outside the control of individuals. Jones (1995) proposed that
the aim should be to ‘manage context not performance’ and went on to
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explain that:
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In this equation, the role of management focuses on clear, coherent support

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for employees by providing information about organization goals, resources,

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technology, structure, and policy, thus creating a context that has multipli-
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cative impact on the employees, their individual attributes (competency to

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perform), and their work effort (willingness to perform). In short, managing

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context is entirely about helping people understand; it is about turning on the

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lights.
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Contextual factors
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Systems operate within the context of the organization. Nadler and Tushman
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(1980) commented that:

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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 work-
ing 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
14 The Basis of Performance Management

employee relations climate, the people involved and the internal environment
in terms of the organization’s structure, its size and its technology and work-
ing practices.

Organizational culture
Organizational culture is the pattern of shared beliefs, norms and values
in an organization that shape the way people act and interact and strongly
influence the ways in which things get done. From the performance manage-
ment 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, then a
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‘caring and sharing’ philosophy of performance management is not likely to

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work, even if it were felt to be desirable, which is unlikely. Alternatively, a

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non-directive, participative and considerate style is more likely to support a

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‘partnership’ approach to performance management, with an emphasis on

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involvement, empowerment and ownership.

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It is vital to take account of cultural considerations when developing

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and implementing performance management. The aim must be to achieve a

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high degree of fit between the performance management processes and the
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corporate culture when the latter is embedded and appropriate. However,

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performance management is one of the instruments that could possibly be

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used in a cultural change programme where the focus is on high performance,

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engagement, commitment and involvement. But it needs to be effective

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performance management and many commentators (see Chapter 16) believe

that there is not very much of that about.

Employee relations climate

The employee relations climate of an organization represents the perceptions
of employees and their representatives about the ways in which 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;
 The Concept of Performance Management 15

●● 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 design and operation of

effective performance management processes as long as these are developed
jointly by the stakeholders and take account of the interests of all involved.
An improved employee relations climate may also result from pursuing the
development and implementation of performance management in accord-
ance with the ethical principles set out later in this chapter.
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People
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Performance management processes will vary in accordance with the compo-

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sition of the workforce. For example, a firm employing mainly knowledge

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workers is likely to adopt a different approach than a manufacturing firm.

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Within the organization, approaches may vary between different groups of

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employees. In the Victoria and Albert Museum, for example, it is recognized

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that the way in which objectives are agreed by a curator will be different
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from how the standards of performance are agreed for security guards.
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Structure
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A hierarchical or functional structure with well-defined layers of authority is

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more likely to support a directive, top-down approach to setting objectives

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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 will probably 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 prac-
tices are associated with advanced 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
16 The Basis of Performance Management

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 that 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.
But research conducted by Earley (1986) found that employees trusted
feedback from a computer more than feedback from a supervisor. He
claimed that CPM could have a greater impact on performance because of
higher self-efficacy (ie the individual’s self-belief that he or she 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 perfor-
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mance management system. The system may be centrally controlled by HR

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and the emphasis will be on the annual appraisal carried out in accordance
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with strictly defined rules. The appraisal may be a top-down judgemental

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affair referring to personality traits. Performance and potential will be rated.

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Organizations which work flexibly with an emphasis on horizontal

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processes and teamwork are more likely to have a less formal process of
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performance management, leaving more scope for managers and teams to

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manage their own processes in accordance with agreed principles.

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Size
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Research carried out by Beaver and Harris (1995) into performance manage-
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ment 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 charac-

terized 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
 The Concept of Performance Management 17

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 that operates in a fairly steady state as far as its external environ-
ment is concerned (rare, but they do exist) can adopt more structured and
orderly performance management systems.

Underpinning theories
Performance management practice is underpinned and explained by the
theories summarized below. Goal theory has perhaps been the most influen-
tial because setting goals and assessing performance against the goals is such
a significant part of a conventional performance management system. But
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other theories are relevant such as those relating to control and reinforce-
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ment that explain the fundamental mechanism of feedback, and expectancy

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theory that indicates how performance management can help to motivate

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people. Social learning theory links reinforcement and expectancy theory,

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and self-efficacy theory highlights the importance of helping people to believe

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in themselves and their ability to improve.

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Goal theory
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Goal theory as developed by Latham and Locke (1979) highlights four mech-
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anisms that connect goals to performance outcomes: (1) they direct attention
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to priorities; (2) they stimulate effort; (3) they challenge people to bring their
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knowledge and skills to bear to increase their chances of success and (4) the
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more challenging the goal, the more people will draw on their full repertoire
of skills. This theory underpins the emphasis in performance management on
setting and agreeing goals against which performance can be measured and
managed.

Robertson et al (1992) on goal theory

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.
18 The Basis of Performance Management

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 motivat-
ing people and providing them with a sense of direction. Positive feedback
provides a reward in the shape of the recognition of work well done. This
is intrinsic motivation provided 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
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improvement was devised by DeNisi and Pritchard (2006). It is based on the

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belief that people allocate energy to actions in a way that will maximize their
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anticipated need satisfaction. The sequence is illustrated in Figure 1.1.

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The key for performance management is to ensure that evaluations and

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outcomes are structured so that employees will focus their actions in the
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ways desired by the organization, resulting in the kind of performance that is

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needed and appropriate rewards. The stronger the links between each element
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in the motivation process, the greater will be the motivation of employees

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to improve their performance. The process should aim to strengthen the

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perceived connection between actions and outcomes.

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Control theory
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Control theory focuses attention on feedback as a means of shaping behav-

iour. 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 processes.
Control theory provides the basis for feedback intervention theory as
formulated by Kluger and DeNisi (1996) – this theory focuses attention on
feedback as a means of shaping behaviour.

Figure 1.1  Expectancy-based motivational model for performance

Need
Actions Results Evaluation Outcomes Performance
satisfaction
 The Concept of Performance Management 19

Reinforcement theory
Reinforcement theory (Hull, 1951) states that successes in achieving goals
and rewards act as positive incentives and reinforce the successful behaviour
that is repeated the next time a similar need arises. Positive feedback there-
fore provides for positive reinforcement. Constructive feedback can also
reinforce behaviours, which 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 recognises the significance of the basic
concept of reinforcement as a determinant of future behaviour but also empha-
sizes the importance of internal psychological factors, especially expectations
about the values of goals and the ability of individuals to reach them.
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Self-efficacy theory
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Self-efficacy theory as also developed by Bandura (1982) indicates that self-

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motivation will be directly linked to the self-belief of individuals that they will
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be able to accomplish certain tasks, achieve certain goals or learn certain things.
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An important aim of performance management is to increase self-efficacy by

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giving individuals the opportunity to consider and discuss with their managers
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how they can do more. But the onus is on managers to encourage self-belief in
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the minds of those with whom they discuss performance and development.
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Performance management and the psychological contract

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The psychological contract is the set of reciprocal but unwritten expectations,

which exist between individual employees and their employers. A psychologi-
cal 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.

Aims of performance management

Ideally, the overall objective of performance management is to develop and
improve the performance of individuals and teams and therefore organiza-
tions. When done well, it ensures that people are clear about what success
20 The Basis of Performance Management

looks like and the part they play in delivering this success. A strategic approach
means that performance management processes such as setting objectives are
explicitly designed to align individual objectives with the organization’s stra-
tegic objectives.
As noted by VerWeir and Van Den Berghe (2004) performance manage-
ment involves creating motivation and commitment to achieve objectives.
Shields (2007) pointed out that ‘it provides performance direction and
recognition without which employees will be at a loss as to the nature and
level of work effort required.’ Performance management aims to develop
the capacity of people to meet and exceed expectations and to achieve their
full potential to the benefit of themselves and the organization. It is about
ensuring that the support and guidance people need to develop and improve
is readily available.
A definition of what performance management systems are there to do
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was provided by Lee (2005):

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The real goals of any performance management system are threefold – to correct
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poor performance, to sustain good performance and to improve performance…

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All performance management systems should be designed to generate informa-

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tion and data exchange so that the individuals involved can properly dissect
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performance, discuss it, understand it, and agree on its character and quality.
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As explained by Shields (2007) effective performance management has two

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other important purposes. First, it can communicate to employees the stra-

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tegic goals of the enterprise and specify what the organization expects from
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them in terms of behaviour and results in order to achieve those goals. This
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means defining what doing a good job entails. Second, it can help with rela-
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tionship building between employees and their managers. Involving both

managers and their staff in performance planning and review can widen the
dialogue between them and enhance inter-personal trust.
A summary of what management and individuals can gain from effective
performance management is given in Table 1.1.
Respondents to the e-reward 2014 survey of performance management
reported that their most important performance management objective was:

●● to improve organizational performance – 33 per cent

●● to align individual and organizational objectives – 22 per cent
●● to develop a performance culture – 17 per cent
●● to improve individual performance – 14 per cent
 The Concept of Performance Management 21

Table 1.1  What management and individuals can gain from performance management
What management can gain What individuals can gain
The opportunity to: They will:

•  integrate individual, team and corporate •  know what is expected of them;

objectives; •  know how they stand;
•  guide individual and team effort to meet- •  know what they need to do to reach
ing overall business needs; their goals;
•  motivate and engage employees; •  be able to discuss with their manager
•  recognize individual contribution; their present job, their development and
•  plan individual careers (talent training needs and their future.
management);
•  introduce relevant and effective learning
and development programmes to meet
identified needs.
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●● to align individual behaviour to organizational values – 6 per cent

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to provide the basis for personal development – 3 per cent

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●● to inform performance pay decisions – 3 per cent

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Note the low priority given to informing performance pay decisions.

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Here is a typical statement of objectives from one respondent to the e-reward

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2005 survey:
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IA

To support culture change by creating a performance culture and reinforcing

D

the values of the organization with an emphasis on the importance of these in

U
C

getting a balance between ‘what’ is delivered and ‘how’ it is delivered.

TI
O

The Lloyds Banking Group produced the following definition of the purpose
N

of its performance management system.

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:
22 The Basis of Performance Management

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
C

is effective because it focuses people’s intentions and produces new thinking on

O

the way they work rather then simply continuing to perform at the same level
PY
N

day-in-day-out.
O

R
IG
T
FO

H
T
R

Principles of performance management

M
R

AT
EP

ER

The overarching principles governing the ideal approach to performance

R
O

IA

management were defined well by Egan (1995):

D

L
U

Most employees want direction, freedom to get their work done, and encour-
C
TI

agement not control. The performance management system should be a control

O

system only by exception. The solution is to make it a collaborative development

N

system, in two ways. First, the entire performance management process –

coaching, counselling, feedback, tracking, recognition, and so forth – should
encourage development. Ideally, team members grow and develop through these
interactions. Second, when managers and team members ask what they need to
be able to do to do bigger and better things, they move to strategic development.

The views of practitioners on the principles of performance management as

identified in the research conducted by Armstrong and Baron (1998, 2005)
were as follows.

●● ‘Performance management is what managers do: a natural process of

management.’
●● ‘A management tool which helps managers to manage.’
●● ‘It’s about how we manage people – it’s not a system.’
 The Concept of Performance Management 23

●● ‘Driven by corporate purpose and values.’

●● ‘To obtain solutions that work.’
●● ‘Only interested in things you can do something about and get a visible
improvement.’
●● ‘Focus on changing behaviour rather than paperwork.’
●● ‘Based on accepted principles but operates flexibly.’
●● ‘Focus on development not pay.’
●● ‘Success depends on what the organization is and needs to be in its perfor-
mance culture.’

Two further important principles were suggested by Sparrow and Hiltrop

(1994): first, that top management must support and be committed to the
system, and second, that it should be owned and driven by line management.
C
O

It is evident that managers down the line will only take performance manage-
PY
N

ment seriously if it is clear to them that top managers believe in it and act
O

accordingly. And performance management will only work if line managers

IG
T
FO

want it to work and are capable of doing so. Both these principles emphasize
H
T

that the bad old days of performance appraisal as the property of the person-
R

M
R

nel or HR department should be over although they often aren’t.

AT
EP

ER
R

Ethical principles
O

IA
D

L
U

Performance management should also operate in accordance with agreed

C

and understood ethical principles. These have been defined by Winstanley

TI
O

and Stuart-Smith (1996) as follows:

N

1 Respect for the individual – people should be treated as ‘ends in them-

selves’ and not merely as ‘means to other ends’.
2 Mutual respect – the parties involved in performance management should
respect each other’s needs and preoccupations.
3 Procedural fairness – the procedures incorporated in performance
management should be operated fairly in accordance with the principles
of procedural justice.
4 Transparency – people affected by decisions emerging from performance
management processes should be given the opportunity to scrutinize the
basis upon which decisions were made.

Procedural justice requires that performance management decisions are

made in accordance with principles which safeguard fairness, accuracy,
24 The Basis of Performance Management

consistency, transparency and freedom from bias, and properly consider the
views and needs of employees. Folger et al (1992) set out the benefits of
procedurally just performance management based on the components of due
process. They labelled such systems ‘due process performance management’
and argued that they do not bring about gross reallocations of power between
managers and employees, but rather require only that managers be open to
employees’ input and responsive to justifiable questions and concerns about
performance standards and judgments.
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 evidence has found that the more just
or fair employees consider such systems to be, the more satisfied and accept-
ing they are of the resultant outcomes, even when those outcomes are less than
desirable. They found that procedurally just performance systems may also
C
O

increase managers’ own positive outcomes. The strength of these findings has
PY
N

led some researchers such as Folger and Cropanzano (1998) to propose that the
O

provision of fair procedures is a more powerful foundation for the management

IG
T
FO

of employees than is the provision of financial rewards.

H
T
R

M
R

AT
EP

Examples of approaches to performance

ER
R

management
O

IA
D

L
U

Performance management stages in Astra Zeneca

C
TI
O

1 Business role clarification – clear statement of agreed role and objectives.

N

2 Performance planning – agreement of targets to achieve the ‘plan-do-eval-

uate’ elements of managing performance.
3 Performance development – agree skills required and prepare individual
development plan.
4 Performance measurement – provide ongoing feedback and an annual
summary of an employee’s performance (no overall ratings).

Civil Service basic design principles

●● Stretching objectives agreed at the beginning of the year.
●● Individuals know the competencies and behaviours they are expected to
demonstrate.
 The Concept of Performance Management 25

●● Regular discussions during year between individuals and their managers

to discuss progress.
●● Formal meeting at the end of the year to record whether objectives have
been achieved and levels of competence demonstrated.

What makes good performance management – Scottish

Parliament
●● New staff know what is expected of them from the outset.
●● Everyone is clear about corporate goals and works towards them.
●● Objectives are SMART.
●● A system exists to accommodate day-to-day performance feedback.
C

●● Evidence is available to support assessments.

O
PY

●● The personal development plan is used to help self-developmental activi-

N

ties or improve performance.

O

R
IG
T

The line manager provides and the jobholder undertakes the training
FO

●●
T

needed to support the individual and the organization.

R

M
R

AT
EP

Thames Valley Police performance and development

ER
R

review process
O

IA
D

L
U

●● Key to the performance management strategy.

C
TI

●● Establishes strong employment relationships.

O
N

●● Provides a route to individual, team and organizational performance

planning.
●● Secures future training and development.

Arguments for formal performanace

management systems
The arguments for having a formal system of performance management are
that it provides the means for management to:

●● improve individual, team and therefore business performance;

●● develop a performance culture;
26 The Basis of Performance Management

●● integrate individual and corporate objectives;

●● guide individual and team effort to meeting overall business needs;
●● motivate and engage employees;
●● recognize individual contribution;
●● plan individual careers (talent management);
●● introduce relevant and effective learning and development programmes to
meet identified needs.

But, there is a lot of evidence that traditional formal performance management

systems with their elaborate processes for setting objectives, once-a year perfor-
mance reviews, ratings and box-ticking procedures often fail because they are
too complex and too bureaucratic and are irrelevant (they cannot do for a
manager what he or she is expected to do, ie manage performance continually).
C
O
PY
N

Requirements for success

O

R
IG
T
FO

H
T

Strebler et al (2001) suggested that for performance management to work

R

well it should:
R

AT
EP

ER

●● have clear aims and measurable success criteria;

R
O

IA

●● be designed and implemented with appropriate employee involvement;

D

L
U

●● be simple to understand and operate;

C
TI

●● play a major part in the achievement of management goals;

O
N

●● allow employees a clear ‘line of sight’ between their performance goals

and those of the organization;
●● focus on role clarity and performance improvement;
●● be closely allied to a clear and adequately resourced training and develop-
ment infrastructure;
●● make crystal clear the purpose of any direct link to reward and build in
proper equity and transparency safeguards;
●● be regularly and openly reviewed against its success criteria.

Performance management also needs to be evidence-based. Assessments of

performance and feedback should be based on facts not opinions. Evidence-
based performance management refers to results, events, critical incidents
and significant behaviours that have affected performance in specific ways.
 The Concept of Performance Management 27

It compares what has actually happened with what was supposed to have
happened. It refers to agreed objectives, goals, success criteria and perfor-
mance measures, and uses the latter to establish outcomes.

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R

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O

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D

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