Chapter II

Review of Literature
 REVIEW OF LITERATURE

A review of literatures relevant to the current topic of the study helps

gain a thorough knowledge about the area of the study not only for the

researcher but also for the reader of the thesis. The literature reviews can

also enable one to get a clear picture of the various aspects of the underlying

the present study. Therefore, in the chapter a focus is made on reviewing

various empirical studies available on Performance Management System

(PMS) and its effectiveness in improving managerial performance and

employee skill and development as well as its effectiveness in improving the

employee satisfaction.

2.1 LITERATURE REVIEW

Armstrong1 (1991) found that performance management provides

more opportunities for individuals to discuss their work with their managers

in an attractive atmosphere. An important feature of performance

management is its aspect of being a continuous process and a natural aspect

of management. Performance management systems assess performance by

reference to agreed objectives. The objectives may be expressed in terms of

targets, standards of performance or tasks to targets to be accomplished

within a period of time based on an agreed specification

1 th
Armstrong, M. (1991). Edition),
London: Kogan Page.
 Chapter II - Review of Literature

Lockett2 (1992) has suggested that managing performance is a

continuous process, whereby the organisation clarifies the necessary

performance levels in order to meet strategic objectives, transform them into

unit and individual objectives, and also to manage them on a continuous

basis to ensure that they are not only being achieved, but also that they stay

consistent and relevant to the overall strategic objectives.

Armstrong3 (1994) says that the aims of performance management

and human resource management are similar, namely, to achieve sustained

improved performance of organisations and employees to ensure that people

develop and achieve their fullest capacity and potential for their own benefit

and that of their organisation. Furthermore, performance management

empowers people in a way that latent potential can be realized, and to

Barlett and Ghoshal4 (1995) observed that performance management

has become more important in recent years because managers are under

constant pressure to improve the performance of their organisations. It is

now realized that the performance of organisations influence the

2
Lockett, J. (1992). Effective performance management: A strategic guide to getting the
best from people. London: Kogan Page limited.
3
Armstrong M. (1994), Performance Management, Kogan Page, London.
4

Harvard Business Review, Vol.73, No.3, pp. 132-142.

The Effectiveness of Performance Management System for Organisational Performance 30

 Chapter II - Review of Literature

general and performance management in particular. Due to the realisation

that people are the most valuable assets in an organisation, the importance of

performance management has been pushed to the fore.

According to Corvellec5 (1995), performance management is a

system used by organisation to achieve its objectives of utilizing human

capital optimally. Performance is a relative concept defined in terms of some

referent employing a complex set of time based measurement of generating

future results.

Lebas6 (1995), on the other hand, defines performance as the

prospective likelihood to carry out particular actions in order to successfully

achieve set goals within the given time frame and of the actor and the

situation.

Walters7 (1995) states that performance management system is

introduced to improve the quality and quantity of work done and to bring all

As said by Brignall and Ballantine8 (1996), performance management

consists of measuring performance, planning, implementing, and evaluating

5
Corvellec H. (1995), Stories of Achievement: Narrative Features of Organisational
Performance, Lund University Press, Sweden.
6
Lebas, M.J. (1995). "Performance measurement and performance management",
International Journal of Production Economics, Vol. 41, No.1-3, pp.23-35.
7
Walters, M. (ed.) (1995) The Performance Management Handbook , London: IPD. Cited

Far East Journal of

Psychology and Business, Vol.7, No.3, pp.13-25.

The Effectiveness of Performance Management System for Organisational Performance 31

 Chapter II - Review of Literature

improvement measures. Performance measurement is a means of monitoring

and controlling organizations' activities to ensure they achieve predefined

objectives.

Fletcher and Williams9 (1996) have stated that many organizations

are trying to cre

contribution to the overall success of the organization.

Harvey and Bowin10 (1996) have referred to performance

management as the total system of gathering information, cascaded down to

the employees in order to gain the feedback for the benefit and improvement

in the organisation.

As stated by Kaplan and Norton11 (1996), in strategic management

systems, areas such as clarifying and translating the vision and strategy;

communicating and linking strategic objectives and measures; linking

rewards to performance measures; planning, setting targets, and aligning

strategic initiatives; and; enhancing strategic feedback and learning are

highlighted as crucial elements of performance management.

8
Brignall, S., Ballantine, J. (1996), "Performance measurement in service business
revisited", International Journal of Service Industry Management, Vol. 7 No.1, pp.6-31.
9

British Journal of Management, Vol.7, pp.169-179.

10
Harvey, D and Bowin, R.B. (1996). Human Resource Management: An Experimental
Approach. New Jersey: Prentice Hall.
11
Kaplan, R.S., and Norton, D.P. (1996). The balanced scorecard: Translating strategy into
action. USA: Harvard Business School press.

The Effectiveness of Performance Management System for Organisational Performance 32

 Chapter II - Review of Literature

Heneman and Thomas12 (1997) indicate that as performance

measures for performance management, outcomes may measure

performance relative to the organization's financial goals, while

competencies represent the means by which these results are attained.

Therefore, a performance management system should be designed to

emphasize competencies as well as outcomes consistent with the

According to Jawahar and Williams13 (1997), performance evaluation

is geared toward the attainment of performance information as critical part

of a performance management system that can be used for administrative

and development purposes. Organizations should realize that it is the

employ

their attitudes toward it. It is generally predicted that ratings obtained for

administrative purposes, such as promotions, transfers, termination, and

compensation, are likely to be more lenient and less accurate than those

obtained for research, feedback, or employee development purposes.

12
Heneman, R. L., & Thomas, A. L. (1997). The Limited Inc.: Using strategic performance
management to drive brand leadership. Compensation and Benefits Review, Vol.27, No.6,
pp.33-40.

13
Jawahar, I. M., and Williams
Personnel Psychology, Vol.50, pp.905-925.

The Effectiveness of Performance Management System for Organisational Performance 33

 Chapter II - Review of Literature

Waldman14 (1997) was critical of the fact that performance

management or HRD (Human Resource Development) practitioners

typically design evaluation procedures with little or no input from users.

Performance management or HRD practitioners may be able to achieve a

degree of psychometric accuracy or freedom from bias by using their

expertise to design procedures. However, these procedures will not be used

as intended if there is resistance by raters and ratees.

According to Armstrong and Baron15 (1998), Performance

Management is both a strategic and an integrated approach to delivering

successful results in organizations by improving the performance and

developing the capabilities of teams and individuals. The term performance

management programs received utmost importance for achievement of

superior standards and quality performance. Tools such as job design,

leadership development, training and reward system received an equal

impetus along with the traditional performance appraisal process in the new

comprehensive and a much wider framework. Performance management is

an ongoing communication process which is carried between the supervisors

14
-rater and Group
based Performance Appraisal Group and Organization Management, Vol.22, No.2,
pp.264-287.

15
Armstrong, M. and Baron, A. (1998). Performance management: The New Realities.
London: Institute of Personnel and Development.

The Effectiveness of Performance Management System for Organisational Performance 34

 Chapter II - Review of Literature

and the employees throughout the year. The process is very much cyclical

and continuous in nature.

As observed by Campbell et al.16 (1998), performance management is

goal-driven, using objectives and competencies, and reward is often attached

to the achievement of such goals. Such links require robust systems of

measurement of achievement, which is acknowledged as being highly

problematic.

Fletcher et al.17 (1998) have argued that a 360-degreefeedback system

should be developed and evaluated in the same rigorous way as

psychometric tests, whether the purpose is development or appraisal.

London, Larsen, and Thisted18 (1999) insisted that raters should play

a role in the feedback process to offer useful information about career

development opportunities and organizational change demands for

employees.

16
Campbell D. J., Campbell K. M. and Chia H.- pay, performance
Human Resource
Management, Vol.37, No.2, pp.131 146.
17
Fletcher C., Baldry C. and Cunningham-
of 360-degreefeedback: an empir International Journal of
Selection and Assessment, Vol.6, No.1, pp.19 34.
18

and Self- Group and Organization Management, Vol.24, No.1, pp.5-27.

The Effectiveness of Performance Management System for Organisational Performance 35

 Chapter II - Review of Literature

Neely19

indicator used to measure the level of efficiency and effectiveness of the

action made by the employe

the definition to be improved.

As said by Taylor and Pierce20 (1999), evaluations of performance are

fed back to the individual and relevant decision-makers. In a performance

management system, feedback plays an important role both for motivational

and informational purposes and for improved rater-ratee communications.

For example, supportive feedback can lead to greater work motivation for

employees and feedback discussions about pay and advancement can lead to

greater employee satisfaction with performance management processes. In

effect, providing people with feedback about their performance will have

positive effects on their future performance.

As far as the individual being rated is concerned, De Nisi and

Kluger21 (2000) have argued that the feedback should focus on the task, not

the individual, which it should be developmental in nature and that help

19

International Journal of Operations & Production Management, Vol.19, No.2, pp.205-

228.

20
ng a performance management
Public Personnel Management,
Vol.28, No.3, pp.423-452.

21
-degree
Academy of Management Executive, Vol.14, No.1, pp.129 139.

The Effectiveness of Performance Management System for Organisational Performance 36

 Chapter II - Review of Literature

should be given in interpreting and reacting to the feedback through the

incorporation of a goal-setting component.

According to Okoli22 (2000), human resource, capacity building and

staff welfare are the basic roles of the personnel management. The universal

acceptance of the critical role of personnel in the achievement of

organizational goals and the realization and appreciation of the various

exogenous and endogenous variables which inform, determine, order and

finally condition personnel activities, led to the establishment of Department

of Personnel Administration, personnel management, or Human Resource

Management in any viable organization.

Miciak and Desmarais23 (2001) have postulated that the training of

agents and customer satisfaction are two key aspects when it comes to

performance management within the call centre environment. Top

performing call centres have in common the fact that they invest in customer

service representatives through training which correlates to customer

satisfaction

22
Okoli, J. C. (2000).

11th August, 2000.

23
Miciak, A. and Desmarais, M. (2001). Benchmarking service quality performance at
business-to-business and business-to-consumer call centres. Journal of Business &
Industrial Marketing, 16 (5), pp. 340-353.

The Effectiveness of Performance Management System for Organisational Performance 37

 Chapter II - Review of Literature

According to Roberts24 (2001), performance management involves:

the setting of corporate, departmental, team, and individual objectives

objectives to a meaningful set of targets for every individual involved); 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 performance management system;

interventions and even culture management. Thus, performance management

involves the day-to day management, as well as the support and

development of people. Therefore a performance management system needs

to be based on meaningful, realistic, attainable and measurable performance

standards. These types of standards are set, so that there is no doubt about

whether the actual performance meets the standard or not. These standards

emanate from a strategy, which is converted into plans and objectives for the

future.

As observed by Amaratunga, and Baldry25 (2002), performance

management provides the opportunity for management to refine and

improve development activities within the organization, with performance

24
Roberts, I. (2001). Reward and performance management. In I. Beardwell & L. Holden
(Eds.), Human resource management: A contemporary approach (3rd edn). Edinburgh:
Pearson.

25
Amaratunga, D., and Baldry, D. (2002). Moving from performance measurement to
performance management. Facilities, 20 (5/6), pp. 217-223.

The Effectiveness of Performance Management System for Organisational Performance 38

 Chapter II - Review of Literature

management programmes providing feedback on specifics based on certain

objectives from the desired outcomes of performance measures, and not

merely generalizations. The process of performance management is

proposed to develop participation, awareness, a decision-making process

that is decentralised, and the responsibility of achieving formulated goals.

Moreover, how the performance systems will be used is crucial, this

is as it will determine the necessary incentive structure as well as practical

arrangements for handling the information generated. This is in order to

allow for the development of a set of good practices, which leads to the

ultimate goal of transforming performance measurement to performance

management.

As viewed by Brutus and Derayeh26 (2002), the multi-source, multi-

rater, or 360-degree feedback system is characterized by the evaluation of an

performance by multiple raters from multiple levels such as

supervisors, peers, subordinates, and customers as an alternative to

traditional performance evaluation. Although procedures vary, typically an

individual is rated by others who interact frequently with the individual, who

are valued by the individual

26
Brut
Human Resource Development Quarterly,
Vol.13, No.2, pp.187-202.

The Effectiveness of Performance Management System for Organisational Performance 39

 Chapter II - Review of Literature

Cole27 (2002) observed that the expression personnel management

ble for

implementing the key objectives of the organization in respect of its use of

people (employees). Personnel have always had responsibilities towards the

workforce, for an important part of their role is a concern for fair treatment,

equitable payment and other aspects of importance to the employee

stakeholders in the organization. Thus, the personnel role as distinguishable

efforts in the pursuit of organizational goals.

Glendinning28 (2002) metaphorically refers to a performance

management system as a three-legged stool where the legs or parties are the

employees, line managers and senior management. He acknowledges that

for the stool to remain standing, the buy-in of all three legs or parties is

needed

Mondy et al.29 (2002) have said that performance management deals

with the challenge organisations face in defining, measuring, and stimulating

employee performance, with the ultimate goal of improving organisational

performance. Performance management has come to signify more than a list

Cole, G. A. (2002). Personnel and Human Resource Management. (5th edition). London:
27

Book Power.
28
Glendinning, P. Public
Personnel Management. Vo1.31, Issue.2, pp.161-179.

Mondy, R.W., Noe, R.M., and Premeaux, S.R. (2002). Human resource management (8th
29

edition). Upper Saddle River, NJ: Prentice Hall

The Effectiveness of Performance Management System for Organisational Performance 40

 Chapter II - Review of Literature

of singular practices; rather, it is seen as an integrated process in which,

managers work with their employees to set expectations, measure and

review results and reward performance, in order to improve employee

performance, with the ultimate aim of positively affecting organisational

success.

Wiiliams30 (2002) provides for three models of performance

management, viz. Organisational Performance Management: Managing the

performance of the organization, Employee Performance Management:

Managing the performance of the employees and Organisational Employee

Performance Integration: Integrating the management of organisational and

employee performance.

Boxall and Purcell31 (2003) argue that strategic HRM (Human

Resource Management) is concerned with explaining how human resource

management influences the performance of an organization. Strategic HRM

defines how the organization behaves and tries to cope with its business

environment. Because strategic human resource management is based on

human resource management principles it always incorporates the concepts

30
Williams, Richard S. (2002). Managing Employee Performance: Design and
Implementation in Organisations, Thomson Learning, London. Cited in Fletcher, C.

Journal of Occupational and Organisational Psychology, 74, pp. 473-487.

31
Palgrave
Macmillan.

The Effectiveness of Performance Management System for Organisational Performance 41

 Chapter II - Review of Literature

of strategy; which proves that human resource management is actually a

coherent approach to the management of people.

De Waal32 (2003) identified 18 individual behavioural factors that are

important in the successful implementation and regular use of a performance

management system. These can be subdivided into the managers

understanding of the nature of performance management, their attitude, the

ali

culture as well as the focus of the system on internal management control.

These individual behavioural factors have a direct impact on the accuracy

and fairness of a performance management system. Employee perceptions of

the fairness and effectiveness of the performance system are often shaped by

application of the system as well as the culture of the organisation.

From the perspective of Fisher, et al.33 (2003), it can be concluded

that there are numerous differing ways to define and discuss the elements of

performance management because there are extensive literature available on

performance management, The commonalities are encompassed in the use or

emphasis of one or more of the following 8 constructs: control; alignment

with organisational strategies; the achievement of overall goals and

32

u Management Decision, Vol4.4, No.8, pp.688-

697.
33
Fisher, J., Katz, L., Miller, K., and Thatcher, A. (2003). South Africa at work: Applying
psychology to organisations. Johannesburg: Witwatersrand University Press.

The Effectiveness of Performance Management System for Organisational Performance 42

 Chapter II - Review of Literature

objectives; rewards; training; development; appraisal and motivation These

constructs are considered to be the essence of performance management,

thus for the current research they will form the foundation for defining

performance management and images held by employees will be evaluated

according to these eight constructs. According to them, performance

management is made up of all the performance-related activities within an

organisation, it includes the following: determining how performance is

appraised; establishing organisational procedures related to performance

appraisal information; remuneration systems; training and development

systems; career development systems and assessment systems.

Mandishona34 (2003) indicates the survival of the organisation and

good service delivery is dependent on how employees perceive the whole

system. There should be a win-win situation between the employer and

employees. Organisations are therefore, called upon to make sure that

regarded as fair and just by the employees.

Noe, et al.35 (2003) defined performance management as a process

through which managers ensure that employee activities and outputs are

34
Mandisahona, S. R. (2003). Masters of Business Administration: Human Resources
Management: Module MBA, 508, Harare: ZOU.
35
Noe, R.A., Hollenbeck, J.R., Gerhardt, B. and Wright, P.M. (2003). Human resources
Management: Gaining a competitive advantage. Boston: Irwin McGraw Hill.

The Effectiveness of Performance Management System for Organisational Performance 43

 Chapter II - Review of Literature

importance of performance management in the execution of organisational

strategy. It is through performance management that managers can measure

objectives.

Rudman36 (2003) claims that performance management techniques

can be categorised into either a people approach, whereby high performance

can only be achieved through the right people, or into a process approach,

whereby the best procedural system is determined and adopted. In reality

there is a cross-over between the two approaches. He adds that for either

him, A performance management system is increasingly seen as a means of

integrating HRM activities with the business objectives of the organisation,

where management and HR activities are working together to influence

Emery37 (2004), in his study of teams in the Swiss civil service,

demonstrates that the team aspect of performance (and reward) is rarely

taken into account. He does suggest that the use of individual goals is

widespread, but he claims that it makes a limited contribution to the

36
Rudman,R.(2003). Human Resource Management in New Zealand. Auckland. Pearson
Education New Zealand Limited.

37

International Review of Administrative Sciences, Vol.70,

No.1, pp.157 68.

The Effectiveness of Performance Management System for Organisational Performance 44

 Chapter II - Review of Literature

performance and development of the team and that individual appraisal and

reward generate competition and overrides the spirit of cooperation.

Van der Heijden and Nijhof38 (2004) observed that 360-

degreefeedback, which is also referred to as multi-rater or multi-source

feedback, is the process whereby individuals receive feedback from a variety

of stakeholders about the way they carry out their jobs. Performance

feedback is typically collected from colleagues, direct reports, line

managers, internal and external customers, as well as the individual. The

rationale behind such multiple evaluations is that an individual obtains a

breadth of information which would not normally be available, and that

other people, beyond the immediate line manager, who observes or

aspects uniquely qualified, to evaluate it.

Aswathappa39 (2005) has made a modest but sincere attempt to

understanding of human resource in its proper perspective. The contents of

his work have been logically divided into six sections to enable the reader

comprehend thoroughly the vital aspects and applications of the various

principals of human resource management as: nature of human resource

management, employee hiring, employee and executive remuneration,

38

problems and prospects for 360- International Journal of

Human Resource Management, Vol.15, No.3, pp.493 511.
39
Aswathappa, K. (2005): Human Resource and Personnel Management Text and Cases,
Tata McGraw Hill Education, 4th ed. p 467.

The Effectiveness of Performance Management System for Organisational Performance 45

 Chapter II - Review of Literature

employee motivation, employee maintenance and industrial relations. In all,

the book provides a refreshing and rewarding insight into all that a reader

wants to know about management of human resource.

According to Cascio and Aguinis40 (2005), performance management

is a continuous process of identifying, measuring and developing individual

and group performance in organisations. It is not a once off event that takes

place during the annual performance review period. This definition

highlights the fact that performance management is systematic. It integrates

individual and organisational performance, and has a lifecycle that takes

place over a defined period. They also stated that performance management

systems that are designed and implemented well can serve several important

purposes, These include linking of employee activities to organisational

strategy, communicating organisational expectations, evaluating employee

progress, making employment decisions, rewarding performers and

developing non-performers as well as keeping a record of human resource

decisions.

Jones et al.41 (2005) have stated that it is essential to have

performance management system in order to achieve business goal and

40
Cascio, W.F. & Aguinis, H. (2005). Applied psychology in human resource management.
New Jersey: Pearson Prentice Hall
41
Jones, P., Clarke-
British Food Journal, Vol.107,
No.6, pp.356-360.

The Effectiveness of Performance Management System for Organisational Performance 46

 Chapter II - Review of Literature

sustain for long run in the market as retail business always faces high

competition and deals with large numbers of employees.

Shih et al.42 (2005) suggest that contextual influences operate at the

organisational, national and international levels and national culture is an

important contextual variable that influences the implementation of

performance management

According to Torrington et al.43 (2005), there is increasing

recognition of the need to consider team performance while performance

management has typically focused on individual performance. Team

working has increased in prevalence in the past 20 years because it is argued

to provide a source of competitive advantage, enabling cost reduction and

improved quality, facilitating the completion of increasingly complex

organisational tasks beyond the means of any one individual, and enabling

the empowerment of employees as decision-making is decentralised.

According to Armstrong44 (2006), employee performance

management is the system of developing individuals with competence and

commitment, working towards the achievement of shared meaningful

42
Shih, H.A., Chiang, Y.H. and Kim, I.S. (2005)
International Journal of Manpower, Vol.26,
No.2, pp.157 176.

Torrington D., Hall, L. and Taylor S. (2005). Human Resource Management (6th edition).
43

Harlow: FT/Prentice Hall.

44
Performance Management: Key Strategies and Practical
Guidelines, London: Kogan Page.

The Effectiveness of Performance Management System for Organisational Performance 47

 Chapter II - Review of Literature

objectives within an organization which supports and encourages the

achievement of overall business goal.

Grobler, et al.45 (2006) defined performance management as a total

quality management program which entails using all the management tools,

including performance appraisal, to ensure achievement of performance

goals. This view is based on the assumption that the necessity for managing

arises whenever work must be coordinated Effective performance

management will therefore enable task coordination and execution and

thereby enhance efficiency, productivi

advantage.

They affirmed that performance management is an ongoing process

of evaluating and managing both the behaviour and outcomes in the

workplace. In this instance, employee performance includes the quantity and

quality of output, timeliness of output, presence at work and cooperativeness

toward the achievement of organisational goals.

A performance management cycle or process model is often used to

provide guidance to managers, employees and teams on the activities they

will be expected to carry out in alignment with organisational goals.

45
Grobler, P., Warnich, S., Carrell, M., Elbert, N.F. & Hatfield, R.D. (2006). Human
resources management in South Africa. Bath: Thomson Learning.

The Effectiveness of Performance Management System for Organisational Performance 48

 Chapter II - Review of Literature

Boyle46 (2007) proposed that it was justifiable to generalize or make

assumption that PMS (Performance Management System) measures for

productivity would suit in all organisations worldwide. This was because the

decision-makers might have not been aware of the implication of the

objectives until considerable and careful examination was performed.

Buchner47 (2007) found that most employees have a negative feeling

about performance management. Employees feel that the system

manipulates employees without rewarding their efforts. However, research

shows that if well implemented reward based performance management can

motivate employees to be more productivity.

Dessler48 (2008) has defin

process that unites goal setting, performance appraisal and development into

46

International Journal of Cultural

Policy, Vol.13, No.3, pp.319-334.

47

Human Resources Development International.

Vol.10, No.1, pp.59-73.

Dessler, G. 2008), Human Resource Management. (11th Edition), Pearson Education Inc.,
48

Upper Saddle River, New Jersey.

The Effectiveness of Performance Management System for Organisational Performance 49

 Chapter II - Review of Literature

In a study by Narcisse and Harcourt49 (2008), the qualitative approach

is used to obtain a rich and holistic understanding of the determinants of

fairness perceptions of the employees regarding their performance

appraisals. It can therefore be said that, this method is appropriate for this

research because it seeks to determine how distributive, procedural and

Aguinis50 (2009) lists the six purposes of a performance management

system. These systems can be used administratively as a source of

information for making decisions about employees. They allow for

communication of expectations and feedback to employees. They provide

information relating to employee strengths and weaknesses, and in so doing

enable the identification of developmental needs and recommend remedial

action.

Mucha51 (2009) has defined performance management as an ongoing,

systematic approach to improve results through evidence based decision

making, continuous organisational learning and a focus on accountability for

49
Narcisse, S. & Harcourt, M. (2008). Employee fairness perceptions of performance
appraisal: a Saint Lucian case study. International Journal of Human Resource
Management, Vol.19, No.6, pp. 1152-1169.

50
Aguinis, H. (2009). An expanded view of performance management. In Smither, J.W. &
London, M. (Eds.). Performance management; putting research into action (pp 1-43). San
Francisco; Jossey-Bass.

51
Government Finance
Review, Vol.25, No.5, pp.51-54.

The Effectiveness of Performance Management System for Organisational Performance 50

 Chapter II - Review of Literature

performance. It uses evidence from performance measurements or appraisals

to support effective planning, funding and operations within the

organisation.

This empowers managers to improve on services or products on offer,

and increasing both customer satisfaction and where applicable, profits. He

has urged organisations to define their own process of performance

management. He recommends that each process should have a planning

process that defines organisational vision and objectives, a budget process

that allocates resources according to priorities, a measurement process that

supports the system, accountability mechanisms that identify individual

obligations, a process for analysing and reviewing performance data as well

as a process of using such information to drive performance improvement

Sripirabaa and Krishnaveni52 (2009) found that partnering has a

negative significant impact on the functions of performance management

system and alignment. Financial support has a negative impact on alignment,

whereas the performance management systems overall functions has a

significant positive impact on alignment. Final support also has positive

significant impact on the performance management systems functions.

52
Krishnaveni, R and
Management Research
News, Vol.32, No.10, pp.942-952.

The Effectiveness of Performance Management System for Organisational Performance 51

 Chapter II - Review of Literature

According to Qureshi et al.53 (2010), many organizations install

Performance Management Systems (PMS) formally and informally in their

organizations, with the motivation to achieve better organizational results. In

practice, organizations have difficulty in implementing a performance

management system because its different dimensions are not taken into

considerations enough. This article describes the findings of a comparative

analyses conducted between a standard performance management model and

performance management systems as applied by Local Development

Organization (LDO). Data was collected from 50 employees of the

organization with a Cronbach Alpha (0.935). Results identified barriers to

implementation of effective PMS, also recommendations and viable

solutions are presented.

Abdul and Aamer54 (2011) analyzed the theoretical framework and

models related to employee performance and found that the success or

failure of the organization depends on employee performance. Therefore

organizations are investing huge amount of money on employee

development. The study also developed a model which explains the

relationship between employee development variables (employee learning,

53
Qureshi, Jawaria Andleeb, Asad Shahjehan*, Zia-ur-Rehman and Bilal Afsar (2012).
African Journal of
Business Management, Vol.4, No.9, pp.1856-1862.

54

employee performance- A conceptual framework-

International Journal of Business and Social Sciences, Vol.2, No.13, pp.36 47.

The Effectiveness of Performance Management System for Organisational Performance 52

 Chapter II - Review of Literature

skill growth self directed and employee attitude) and employee performance

variable.

As viwed by Bussim55 (2012), performance management has to be the

core of all organisations since it gives strategic direction and how resources

are going to be distributed towards the achievement of set goals and

objectives. The aim of performance management is to improve service

delivery through effective and efficient application of resources.

Mian and Hossan56 (2012) investigated the impact of employee

performance management system on business process improvement and to

find out the importance of employee development through performance

management system in order to achieve the superior business goal. This case

study reviews the employee performance management system of the retail

industry in the UK market through in-depth interview conducted from both

managerial and non-managerial employees of the retail shops.

They have found that the organization is very powerful in employee

performance management, as they are concerned for both poor and high

performer with corrective action and reward respectively. But their

implementation of performance management system is different than what it

55 st
- Century Pay
Solutions Group. Rosebbank, Johannesburg.

56
Mi
Far East Journal of
Psychology and Business, Vol.7, No.3, pp.13-25.

The Effectiveness of Performance Management System for Organisational Performance 53

 Chapter II - Review of Literature

is supposed to be. The top level management acknowledges that they are not

good in implementing their employee performance management system and

most of their line managers are not trained enough to conduct the employee

performance review.

Sunil and Suman57 (2012) conducted the study with three main

objectives namely to know the performance management system and how it

helps in organizational development, to assess the efficacy of performance

management as a tool for HR interventions and to know how performance

management leads employee satisfaction, this ultimately increases employee

retention.

The study found that the main purpose of performance management

is to link individual objectives and organizational objectives in such a form

as to give best possible platform to the employees to perform at the highest

level.

As per Medlin58 (2013), performance management gives direction to

the employees through guidance from management. Managing organisations

is about managing performance of people who work in organisations.

57
Sunil Kumar Pradhan and Dr. Suman Kalyan Chaudhury. (2012).
employee performance management and its implication to their relation in OCL India
Asian Journal of research in social sciences and Humanities, Vol.2, Issue.4, pp.12-
18.

58
Medlin, B. (2013) Performance Management-or lack thereof-at Bell Journal of
Business Cases and Applications, Vol.7, pp.1-8.

The Effectiveness of Performance Management System for Organisational Performance 54

 Chapter II - Review of Literature

2.2 SUMMARY

From literature reviews, it is understood that PMS is both a strategic

and an integrated approach to delivering successful results in organizations

by improving the performance and developing the capabilities of teams and

individuals. Performance management is seen as an integrated process, in

which Managers work with their employees to set expectations, measure and

review results and reward performance, in order to improve employee

performance, with the ultimate aim of positively affecting organisational

success. That is, it is essential for both companies and employees as it help

to improve the employee performance and achieve the desired goals of the

companies.

There are many studies focussing PMS in respect of various aspects

mentioned above, but studies on PMS focussing on its effectiveness on

employee commitment, managerial performance, reward and recognition,

career and personal growth, communication and employee satisfaction with

job are very scarce. Further, the scenario is same in respect of availability of

research based on employee perception about their awareness and

understanding of PMS.

The Effectiveness of Performance Management System for Organisational Performance 55