Performance Management

The concept of performance management has been one of the most important
and positie deielopments in the sphere of human resource management in
recent years.
The phrase was frst coined by Beer and Ruh in 1976. But it did not become
recognized as a distnctie approach untl the mid-1980s, growing out of the
realizaton that a more contnuous and integrated approach was needed to
manage and reward performance.
For inaccurately deieloped and hastly implemented performance-related pay
and appraisal systems were all too ofen failing to deliier the results that,
somewhat trustngly, people were expectng from them.
Performance management rose like a phoenix from the old-established but
somewhat discredited systems of merit ratng and management by objecties.
 Defnition of Performance management

Performance management is a strategic and integrated process that

deliiers sustained success to organizatons by improiing the
performance of the people who work in them and by deieloping the
capabilites of indiiidual contributors and teams.
A systematc process for improiing organizatonal performance by
deieloping the performance of indiiiduals and teams.
performance management is a means of getng beter results from
the organizaton, teams and indiiiduals by under-standing and
managing performance within an agreed framework of planned goals,
standards and competence requirements
The meaning of performance management is, of course, about performance.
But what is meant by that word? It is important to clarify what it means,
because if performance cannot be defned, it can t be measured or
managed.
Bates and Holton (1995) haie pointed out that performance is a mult
dimensional construct, the measurement of which iaries depending on a
iariety of factors .
They also state that it is important to determine whether the measurement
objectie is to assess performance outcomes or behaiiour.
There are diferent iiews on what performance is. It can be regarded
as simply the record of outcomes achieied. On an indiiidual basis, it is a
record of a person s accomplishments.
 Kane (1996) argues that performance is something that the person leaies
behind and that exists apart from the purpose .
Bernadin et al (1995) are concerned that performance should be defned as the
outcomes of work because they proiide the strongest linkage to the strategic
goals of the organizaton, customer satsfacton, and economic contributons .
The Oxford English Dictonary defnes performance as the accomplishment,
executon, carrying out, working out of anything ordered or undertaken . This
refers to outputs/outcomes (accomplishment) but also states that performance
is about doing the work as well as being about the results achieied.
Performance could therefore be regarded as behaiiour the way in which
organizatons, teams and indiiiduals get work done. Campbell (1990) belieies
that performance is behaiiour and should be distnguished from the outcomes
because they can be contaminated by systems factors .
A more comprehensiie iiew of performance is achieied if it is defned as
embracing both behaiiour and outcomes. This is well put by Brumbrach (1988):
Performance means both behaviours and results. Behaviours emanate from the
performer and transform performance from abstracton to acton. Not just the
instruments for results, behaviours are also outcomes in their own right the
product of mental and physical efort applied to tasks and can be judged apart
from results.
This defniton of performance leads to the conclusion that, when managing
the performance of teams and indiiiduals, both inputs (behaiiour) and outputs
(results) need to be considered. This is the so-called mixed model (Hartle, 1995)
of performance management, which coiers competence or capability leiels and
achieiements as well as objectie-setng and reiiew.
The essence of performance management
In essence, performance management is a shared process between managers
and the indiiiduals and teams they manage. It is based on the principle of
management by contract rather than command, although this does not exclude
the need to incorporate high performance expectatons in such contracts.

Performance management is based on the agreement of objecties, knowledge,

skill and capability (competence) requirements, performance improiement, and
personal deielopment plans.

It iniolies the joint and contnuing reiiew of performance against these

objecties, requirements and plans and the agreement and implementaton of
improiement and further deielopment plans..
The scope of performance management
Performance management is about managing an organizaton. It is a natural process of
management, not a system or a technique (Fowler, 1990). It is also about managing within the
context of the business, namely its internal and external eniironment.
This will afect how it is deieloped, what it sets out to do and how it operates. The context is
iery important, and Jones (1995) goes as far as to say manage context, not performance .
Performance management concerns eieryone in the business not just managers. It rejects the
cultural assumpton that only managers are accountable for the performance of their teams
and replaces it with the belief that responsibility is shared between managers and team
members.
In a sense, managers should regard the people who report to them as customers for the
managerial contributon and seriices they can proiide. Managers and their teams are jointly
accountable for results and are jointly iniolied in agreeing what they need to do and how they
need to do it, in monitoring performance and in taking acton.
Performance management processes are part of a holistc approach to managing for
performance, which is the concern of eieryone in the organizaton.
A holistc approach to performance management
Holistc means being all-embracing, coiering eiery aspect of a subject. In the case of performance
management, this concerns the whole organizaton. It takes a comprehensiie iiew of the
consttuents of performance, how these contribute to desired outcomes at the organizatonal,
departmental, team and indiiidual leiels, and what needs to be done to improie these outcomes.
Performance management in its fullest sense is based on the belief that eierything that people do at
work at any leiel contributes to achieiing the oierall purpose of the organizaton.
It is therefore concerned with what people do (their work), how they do it (their behaiiour) and
what they achieie (their results). It embraces all formal and informal measures adopted by an
organizaton to increase corporate, team and indiiidual efectieness and contnuously to deielop
knowledge, skill and competence. It is certainly not an isolated system, run by the
HR department, that functons once a year (iia the annual appraisal) and is then forgoten.
The combined impact of a number of related aspects of performance management may be expected
to achieie more to improie organizatonal efectieness than the iarious parts if they functon
separately.
When designing and operatng performance management, it is necessary to consider the
interrelatonships of each process.
The purpose of performance management
Performance management is a means of getng beter results from a whole
organizaton, or teams and indiiiduals within it, by understanding and managing
performance within an agreed framework of planned goals, standards and
competence requirements.
It is a process for establishing shared understanding about what is to be
achieied, and an approach to managing and deieloping people in a way that
increases the probability that it will be achieied in the short and longer
term. It is owned and driien by line management.
As defned by Philpot and Sheppard (1992): The fundamental goal of
performance management is to establish a culture in which indiiiduals and
groups take responsibility for the contnuous improiement of business processes
and for their own skills and contributons.
Principles of performance management
The principles of performance management haie been well summarized
by IRS (1996) as follows:
• it translates corporate goals into indiiidual, team, department and diiisional goals;
• it helps to clarify corporate goals;
• it is a contnuous and eiolutonary process, in which performance improies oier tme;
• it relies on consensus and co-operaton rather than control or coercion;
• it creates a shared understanding of what is required to improie performance and how
this will be achieied;
• it encourages self-management of indiiidual performance;
• it requires a management style that is open and honest and encourages two-way
communicaton between superiors and subordinates;
• it requires contnuous feedback;
• feedback loops enable the experiences and knowledge gained on the job by indiiiduals to
modify corporate objecties;
• it measures and assesses all performance against jointly agreed goals;
• it should apply to all staf; and it is not primarily concerned with linking performance to fnancial
reward.
Performance management is primarily concerned with performance improiement in order to achieie
organizatonal, team and indiiidual efectieness. Organizatons, as stated by Lawson (1995) haie to get
the right things done successfully .
Secondly, performance management is concerned with employee deielopment. Performance
improiement is not achieiable unless there are efectie processes of contnuous deielopment. This
addresses the core capabilites of the organizaton and the specifc capabilites of indiiiduals and
teams.
Thirdly, performance management is concerned with satsfying the needs and expectatons of all of an
organizaton s stakeholders owners, management, employees, customers, suppliers and the general
public. In partcular, employees are treated as partners in the enterprise whose interests are respected,
who haie a ioice on maters that concern them, and whose opinions are sought and listened to.
Finally, performance management is concerned with communicaton and inioliement. It creates a
climate in which a contnuing dialogue between managers and the members of their teams takes place
in order to defne expectatons and share informaton on the organizaton mission, ialues and
objecties.
Ethical consideratons
Performance management should operate in accordance with the following
ethical principles defned by Winstanley and Stuart-Smith (1996):
• Respect for the individual people should be treated as ends in themselies and
not merely as means to other ends ;
• Mutual respect the partes iniolied in performance management processes
should respect each other s needs and preoccupatons;
• procedural fairness: the procedures incorporated in performance
management should be operated fairly so as to limit the adierse efect on
indiiiduals;
• Transparency: people afected by decisions emerging from the performance
management process should haie the opportunity to Scrutnize the basis upon
which decisions were made.
Performance management as an integratve process
Performance management is a force for both iertcal and horizontal integraton. As stated by Hartle (1995),
performance management should be integrated into the way the performance of the business is managed
and it should link with other key processes such as business strategy, employee deielopment, and total
quality management .
Vertical integrcaton
Integraton is achieied iertcally in two ways.
First, it facilitates the integraton or alignment of business strategic plans and goals with indiiidual and
team objecties. The agreed objecties are those that support the achieiement of corporate goals. They
take the form of interlocking
objecties from the corporate leiel to the functonal or business-unit leiel and down to teams and the
indiiidual leiel. Steps need to be taken to ensure that these goals are in alignment.
This can be a cascading process so that objecties fow down from the top and, at each leiel, team or
indiiidual objecties are defned in the light of higher leiel goals.
But it should also be a botom-up process, indiiiduals and teams being giien the opportunity to formulate
their own goals within the framework proiided by the oierall purpose and ialues of the organizaton.
Objecties should be agreed, not set, and this agreement should be reached through the open dialogues
that should take place between managers and indiiiduals contnually
Secondly, iertcal integraton takes place between the core ialues and
capabilites of the organizaton and the ialues adopted and leiel of capability
achieied by indiiiduals.
Chris Bones, Human Resource Director of United Distllers, explains (1996) his
company s approach to integraton thus:
Setng up appraisal systems in a vacuum adds no value. They are merely a
record of a conventon that must take place in the context of the business
strategy and annual plans. Creatng the right context for the conversaton is an
essental part of successful performance management. In HR we have to develop
and implement a range of strategies across the organizaton which enable
excellent performance from all our employees.
Horizontcal integrcaton
Horizontal integraton means aligning performance management strategies
with other HR strategies concerned with ialuing, paying, inioliing and deieloping people, as
modelled in Figure (next slide).
It can act as a powerful force in integratng these actiites. The impact of performance management
on organizatonal efectieness is enhanced because, along with the deielopment of competence
frameworks, it is the most important means of helping to integrate the iarious approaches that
organizatons can adopt to improiing efectieness through their processes for managing, motiatng
The approach is related to the concept of bundling , which is the deielopment and implementaton
of seieral HR practces together so that they are interrelated and therefore complement and
reinforce each other.
This approach is accepted by many commentators, such as Daiid Guest (1998), who commented that
One thing is clear from all the research: there is no point in iniestng in specifc practces.
Performance- related pay, psychometric tests in selecton or extensiie training will not in themselies
bring botom-line results. The key lies in fnding the right bundle of practces .and deieloping people.
Figure : Performance management as a focal point for integrated HR actiites

Valuing
people

Rewarding Performance Deieloping

people Management people

Inioliing
people
 Performance management, not performance
appraisal
Performance appraisal can be defned as the formal assessment and ratng of indiiiduals by their
managers at usually an annual reiiew meetng. It should be distnguished from performance
management, which is a much wider, more comprehensiie and more natural process of
management that aims to clarify mutual expectatons and emphasizes the support role of
managers, who are expected to act as coaches rather than judges and focuses on the future.
Performance appraisal has been discredited because too ofen it has been operated as a top-
down and largely bureaucratc system owned by the personnel department rather than by line
managers. It was ofen backward-looking, concentratng on what had gone wrong, rather than
looking forward to future deielopment needs.
Performance appraisal schemes existed in isolaton; there was litle or no link between them and
the needs of the business. Line managers haie frequently rejected
performance appraisal schemes as being tme-consuming and irreleiant.
Employees haie resented the superfcial nature with which appraisals haie been conducted by
managers who lack the skills required or are simply going through the motons. As Armstrong and
Murlis (1998) assert, performance appraisal too ofen degenerates into a dishonest annual ritual
Many research studies by academics haie critcized traditonal approaches to
performance appraisal. The following are some typical comments:
• Appraisal is a system of bureaucratc or management control (Barlow, 1989; Townley,
1993; Newton and Findlay, 1996).
• Appraisal enlists compliance (Barlow, 1989).
• Appraisal reinforces authority relatons and defnes dependency (Barlow, 1989).
• Appraisal implies that rewards and progress are in the hands of a single superordinate
(Grint, 1993).
• Appraisal aims at ioluntary compliance (Newton and Findlay, 1996).
• Appraisal is a form of control used to police performance (Winstanley and Stuart-Smith,
1996).
• The tendency of managements is to adopt a unitary frame of reference ( we re all in this
together , our interests coincide ) when, in reality, organizatons are more likely to be
pluralistc in the sense that there are diiergent interests that should be acknowledged
(Townley, 1993; Newton and Findlay, 1996;Winstanley and Stuart- Smith, 1996).
• Appraisal is an inconsistent and fundamentally subjectie process (Grint, 1993).
• Managements indulge in rhetoric about deielopment but ofen do not put their
espoused iiews into practce (Stles et al, 1997).
• Rarely in the history of business can such a system haie promised so much and
deliiered so litle (Grint, 1993).
In contrast, the concept of performance management is based on approaches
that aim to oiercome these negaties by emphasizing that performance
management is a contnuous and forward-looking process in which managers and
indiiiduals work together in partnership.
It is a joint process in which top-down appraisals no longer haie a part.
In many cases, performance is not rated and the principal outcome of any formal
reiiews is a personal deielopment plan that aims to proiide opportunites for
learning and experience that will not only improie performance but will also
enhance potental and employability