This literature review has three important aims.

It purposes to gain a full insight of the existing

literature on the research area. First, it will identify the key research areas on the perception and
experiences that employees have concerning performance management, second, to fully
understand the challenges of performance management system and to identify the types of
performance management system.

The differences in national cultures would contribute to the differences in the ways the
Performance Management Systems are implemented in organizations worldwide (Palethorpe,
2011). Moreover, Parker, (2013) stated that the major setback of evaluating the work
performance of organizations around the world has been to determine the performance criteria in
relation to the objective set by their organizations. According to Slavin et al., (2014) it was
justifiable to take a broad view or make assumption that PMS measures for productivity would
suit in all organizations worldwide. This was because the decision-makers were not aware of the
repercussion of the objectives until considerable and careful examination was performed.

Performance Management is defined by Armstrong, (2006) as “a means of getting better results

from a whole organization by understanding and managing within an agreed framework,
performance of planned goals, standards and competence requirements”.
A performance management system rewards excellence. It helps to align employee achievements
with the organization’s objectives. Others maintain that to encourage knowledge sharing,
organizations should design reward and recognition systems that stimulate sharing of all kinds:
goals, tasks, vision as well as knowledge. This will help to bring cohesiveness between team
members. One factor that contributes to an effective performance management system entails
ensuring that the system focuses on performance variables as opposed to personal traits (Lawrie,
2004).

Performance management can be considered as a proactive and positive system of managing

employee performance for guiding the employees and the organization in the direction of desired
performance and results. It’s about striking a harmonious alignment between employee and
organizational objectives in order to achieve excellence in performance. The Performance
Evaluation and Management System (PEMS) is Air Blue performance management process for
all staff on fixed term upon successful completion of the probationary period and continuing
contracts. PEMS and effective performance management, embraced by the Organization, its
managers and staff leads to the following outcomes: Effective partnerships between team
members and their supervisor, Focusing on results, Planning jointly for success, Coaching and
supporting the staff member to achieve their objectives, Gaining feedback to continually improve
what and how tasks are undertaken.

The performance cycle is annual and consists of three phases: Performance Planning, Mid-Year
Progress Review and Year-End Appraisal: The Performance Planning is the first phase of the
PEMS cycle, when staff and supervisors meet, discuss and agree upon the work for the coming
year. This is then documented in a PEMS that has three sections: work plan objectives,
competencies and developmental objectives.

There are a number of reasons for believing that systematically tying rewards to the outcome of a
performance management system will make the performance management system more effective
with respect to motivation, but there are also some that suggest it will make it less effective with
respect to development. In a well-known 1965 article that is based on research done in G.E.,
Meyer, Kay and French argue that when rewards are tied to performance discussions, individuals
tend to only hear the reward system part of the message. They do not hear the kind of useful
feedback that will allow them to improve their performance and develop their skills. This has led
some companies, although not G.E., to separate the discussion of rewards from the discussion of
performance.

On the other hand, it is reasonable to argue that when rewards are tied to the outcome of
performance appraisals it will lead to more effective performance management systems.
Managers will be particularly concerned about doing a good job since the outcome of the
appraisal will have a significant impact on their ability to allocate rewards based on performance
and motivate those individuals who work for them. Similarly, in the case of individuals, they
know that how well the performance review goes will affect rewards that are important to them,
so they may be particularly motivated to prepare for the session and see that it goes well. Further,
there is a good possibility that when appraisals are used to determine rewards, organizations will
put more pressure on managers to differentiate among the employees they are appraising since
this is key to rewarding individuals for their performance.

Performance management is one component of talent management and has been defined as the
measurement and management of employee and organizational performance, with the goal of
improving organizational effectiveness (De Nisi,2000). As part of performance management,
managers work together with their employees to set performance expectations, measure and
review performance results, and reward performance (DeNisi). Specifically, performance
management consists of the following elements: setting performance goals at the organizational,
departmental, team, and individual level, conducting performance appraisals, developing systems
to provided rewards, feedback, and coaching, and measuring the effectiveness of performance
management systems (Roberts, 2003).
Performance management systems can be defined by these interrelated and independent
performance management elements that influence one another to increase employee and
organizational performance in order to ultimately enhance organizational effectiveness. Each of
the elements can be present alone and can be considered performance management. However,
performance management systems consist of several performance management elements that
work together to achieve the common goal of improving organizational performance and
effectiveness.
Performance management system characteristics can be grouped into four categories: the
purpose of the system, performance measures, activities, and structural Characteristics.
According to Rudman (2003), PMS is being gradually regarded as integration of HRM activities
and organizational business objectives, in which HR activities and management are working
together to impact collective and individual behavior and to support the strategy of the
organization. Rudman (2003) also argued that it is important that PMS fit in with the
organizational culture since PMS is an integrated and completed cycle for managing
performance. Thus, the stress on PMS is that it unceasingly improves organizational
performance, which is achieved by enhanced employee performance(Macky& Johnson, 2000).,
Similarly, Lawler (2003) suggests that the objectives of PMS are to motivate performance,
enhance development of individual skills, build performance culture, determine individual
promotion, eliminate individual poor performance, and assist in implementing business
strategies. Furthermore, Zhang (2012) highlighted the major aims of PMS as to ensure that ―the
work performed by employees accomplishes the work of the company; employees have a clear
understanding of the quality and quantity of work expected from them; employees receive
ongoing information about how effectively they are performing relative to expectations; awards
and salary increases based on employee performance are distributed accordingly; opportunities
for employee development are identified; and employee performance that does not meet
expectations is addressed‖.
Meanwhile, a reliable performance measures sees employees as assets or resources and values
their strength. Employee performance is essential to organizational performance. Basically,
employee performance is regarded as what is done by an employee and what an employee does
not do; which may include presence at work, quality of productivity, quantity of productivity,
timeliness of productivity, and level of cooperation (Güngör, 2011).

According to Macky and Johnson (2000), organizational performance can also be improved by
an enhanced individual employee performance. Deadrick and Gardner (1997) view employee
performance as the number of outcomes accomplished from each job function at a particular time
period. In their view, it means that performance signifies a distribution of outcomes
accomplished, which can be measured using various parameters that explain patterns of
employee performance at a particular time period. In contrast, Darden and Babin (1994) view
employee performance as a rating system applied in numerous organizations in deciding the
output and capabilities of employees. However, according to Zhang (2012) andYing (2013),
good employee performance will lead to an increase in perception of consumer to service
quality. Meanwhile, poor performance will lead to an increase in customer complaints as well as
brand switching. Based on all these arguments, employee performance could therefore be viewed
as being the related activities that is expected from an employee and how well it executed the
activities.

In studies related to the impact of PMS on employee performance, Taylor & Pierce (1999)
examine the effects of introduction of PMS on employees ‘attitudes and effort. They found that
PMS improves employee attitudes since it increases organizational commitment as well as
cooperation and satisfaction of employees with their supervisors. Their findings also indicate that
the introduction of PMS provides staff with clear measurable targets. However, their results also
indicate that the major concerns of employee on introduction of PMS were on unfairness in
bonus distributions and ratings. Employees also feel that PMS is ―somewhat effective‖ in the
provision of performance incentive, which was the main purpose of appraising rating /bonus
distribution. Some similar previous studies like Bevan and Thompson (1992) and Fletcher and
Williams (1992) have ascertained that PMS improved employee commitment, motivation and
involvement by increasing employees' sense of individual value and improving the employee ‘s
view of empowerment.

In the literature of organizational behavior and organizational psychology, job satisfaction is

considered the most extensively researched area (Keung-Fai, 1996; George and Jones, 2008).
The different ways of satisfying the employees were found by the scholars and facilitated to the
human resource managers to attract, motivate and retained the most committed workforce. Job
satisfaction has direct impact on level of absenteeism, commitment, performance and
productivity. Furthermore, job satisfaction improves the retention level of employees and
reduces the cost of hiring new employees (Murray,1999).

According to Brudney and Coundry (1993) have explained different variables that influence
performance of the employees in the organization. They included such as pay, organization
commitment, relationship between pay and performance, etc. There are some empirical
evidences that there is positive correlation between compensation and performance (Gneezy and
Rustichini, 2000; Gardner et al., 2004; Tessema and Soeters, 2006).

Employee job performance has always been a major challenge in organizational management
and adopting effective ways to motivate employees to achieve and deliver higher job
performance as well as increase the organizational competitiveness is the main objective of every
business organization (Lee & Wu 2011). It is therefore believed that employee performance is
instrumental to organizational growth and profitability. The employees are regarded as the major
business resources that facilitate the daily activities and operations of an organization (Mudah,
Rafiki& Harahan 2014). Similarly, Oluwafemi (2010) asserted that organizational effectiveness
and efficiency depends on how effective and efficient the employees in the organization are.
Employer’s ability to comprehend employee’s satisfaction as it relates to schedules and daily
responsibilities will impact greatly on employee productivity and performance.

According to Ahmad and Shahzad (2011), apparent employee performance embodies the whole
belief of the employee about their conduct and contributions to the accomplishment of the
organization and further stated that compensation practices, performance evaluation and
promotional practices as a determinant of employee performance. Similarly, Anitha, (2013)
define employee performance as an indicator of financial or other outcome of the employee that
has a direct connection with the performance of the organization as well as its achievement,
further revealed that working atmosphere, leadership, team and co-worker relationship, training
and career development, reward programmed, guidelines and procedures and workstation
wellbeing as well as employee engagement are major factors that determine employee
performance.

Employee job performance has always been an important concern for managers of organizations
(KelidbariDizgah, &Yusefi, 2011). Similarly, employee performance is key edifice of an
organization therefore, aspects that place the grounds for high performance must be scrutinized
critically by the organizations for them to succeed (Abbas & Yaqoob, 2009).
According to Lee, et-al, (2011), in a study titled ―The effects of internal marketing, job
satisfaction and service attitude on job performance among high-tech has always been regarded
as an important item in organizational management‖ defined job performance as workers’ total
performance in meeting the anticipated worth and achievement of tasks under the procedure and
time requirements of the organization. Similarly, Liao et-al, (2012), define job performance as
the standard for advancements, redundancy, rewards, punishments, reviews and salary changes.
It also satisfies the needs for employees to realize themselves. Ahmad and Khurram (2011), also
argue that employee performance symbolizes the broad belief of the personnel about their
behavior and contributions towards the achievement of the organization.

In the literature of organizational behavior and organizational psychology, job satisfaction is

considered the most extensively researched area (Keung-Fai, 1996; George and Jones, 2008).
The different ways of satisfying the employees were found by the scholars and facilitated to the
human resource managers to attract, motivate and retained the most committed workforce. Job
satisfaction has direct impact on level of absenteeism, commitment, performance and
productivity. Furthermore, job satisfaction improves the retention level of employees and
reduces the cost of hiring new employees (Murray,1999).

According to Brudney and Coundry (1993) have explained different variables that influence
performance of the employees in the organization. They included such as pay, organization
commitment, relationship between pay and performance, etc. There are some empirical
evidences that there is positive correlation between compensation and performance (Gneezy and
Rustichini, 2000; Gardner et al., 2004; Tessema and Soeters, 2006).

Employee job performance has always been a major challenge in organizational management
and adopting effective ways to motivate employees to achieve and deliver higher job
performance as well as increase the organizational competitiveness is the main objective of every
business organization (Lee & Wu 2011). It is therefore believed that employee performance is
instrumental to organizational growth and profitability. The employees are regarded as the major
business resources that facilitate the daily activities and operations of an organization (Mudah,
Rafiki& Harahan 2014). Similarly, Oluwafemi (2010) asserted that organizational effectiveness
and efficiency depends on how effective and efficient the employees in the organization are.
Employer’s ability to comprehend employee’s satisfaction as it relates to schedules and daily
responsibilities will impact greatly on employee productivity and performance.
According to Ahmad and Shahzad (2011), apparent employee performance embodies the whole
belief of the employee about their conduct and contributions to the accomplishment of the
organization and further stated that compensation practices, performance evaluation and
promotional practices as a determinant of employee performance. Similarly, Anitha, (2013)
define employee performance as an indicator of financial or other outcome of the employee that
has a direct connection with the performance of the organization as well as its achievement,
further revealed that working atmosphere, leadership, team and co-worker relationship, training
and career development, reward programmed, guidelines and procedures and workstation
wellbeing as well as employee engagement are major factors that determine employee
performance.

Employee job performance has always been an important concern for managers of organizations
(KelidbariDizgah, &Yusefi, 2011). Similarly, employee performance is key edifice of an
organization therefore, aspects that place the grounds for high performance must be scrutinized
critically by the organizations for them to succeed (Abbas & Yaqoob, 2009). According to Lee,
et-al, (2011), in a study titled ―The effects of internal marketing, job satisfaction and service
attitude on job performance among high-tech has always been regarded as an important item in
organizational management‖ defined job performance as workers’ total performance in meeting
the anticipated worth and achievement of tasks under the procedure and time requirements of the
organization. Similarly, Liao et-al, (2012), define job performance as the standard for
advancements, redundancy, rewards, punishments, reviews and salary changes. It also satisfies
the needs for employees to realize themselves. Ahmad and Khurram (2011), also argue that
employee performance symbolizes the broad belief of the personnel about their behavior and
contributions towards the achievement of the organization.