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FOREIGN LITERATURE

Performance Management

Performance management is one of the many practices that comprise talent management. Collings and
Mellahi (2009) explained the talent management as activities and processes that involve the systematic
identification of key positions which contribute differently to the organization’s sustainable competitive
advantage, the development of a talent pool of high potential and high performing incumbents to fill
these roles, and the development of a differentiated human resource architecture to facilitate filling
these positions with competent incumbents and to ensure their continued commitment to the
organization. Talent management consists of standard human resources practices, functions, and
activities, including recruitment, selection, training, and performance management. Byham, 2001;
Chowanec & Newstrom, 1991; Heinen & O’Neill, 2004; Mercer, 2005; Oslen, 2000; as cited by Lewis &
Heckman, 2006).

Performance management is one component of talent management and has been defined as the
measurement and management of employee and organizational performance, with the ultimate goal of
improving organizational effectiveness (DeNisi, 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 provide 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.

Purpose of the performance management system.

The purpose of a performance management system reflects the main objectives and guiding principles
an organization has for the system to help it gain a competitive advantage (Dewettinck, 2008). Most
commonly, organizations use performance management systems for three main purposes: to achieve
results, develop employees, or accomplish administrative purposes. Performance management systems
with a results oriented purpose focus on performance outcomes and view employees as a means to
achieve organizational goals, such as increasing revenue or company sales (Dewettinck; Truss, Gratton,
Hope-Hailey, McGovern, & Stiles, 1997). Performance management systems with a development-
oriented purpose focus primarily on employee development under the assumption that empowering
employees through development leads to better performance and subsequently a competitive
advantage (Dewettinck; Truss et al.). Performance management systems that focus mainly on
administrative purposes provide organizations with valuable information for human resource-related
decisions, including promotions, pay raises, and terminations (Biron, Farndale, & Paauwe, 2011). These
decisions signal to employees what performance is valued by the organization, which helps guide
employee behaviors (Biron et al.).
 Performance measures.
A critical component of a performance management system is how performance is evaluated or
assessed. Performance is typically evaluated by use of a performance measure, which has been defined
as “a variable or metric used to quantify the efficiency or effectiveness of an action” (Olsen et al., 2007,
p. 563). The relevance of the performance measures to the employee’s actual job performance is one
characteristic of the performance management system. In addition, performance can be evaluated by
the extent to which employees demonstrate task performance, display contextual performance, achieve
goals or objectives, and attain competencies.
Performance measures can evaluate task or contextual performance. Task performance refers to how
well an employee performs fundamental technical activities deemed important to his or her job
(Borman & Motowidlo, 1997). For example, rescue operations would be a type of task performance for a
firefighter; closing a sale could be task performance for a sales position (Borman & Motowidlo).
Contextual performance, on the other hand, assesses employees' engagement in extra-role behaviors
that are not directly job-related but improve the work climate by increasing organizational effectiveness
(Borman & Motowidlo). Contextual behaviors can include helping a colleague complete a task,
maintaining enthusiasm when completing tasks, and volunteering to perform extra duties that are not a
part of one’s normal job tasks (Borman & Motowidlo). Contextual behaviors improve social
communications and reduce tension in the workplace, which facilitates organizational effectiveness
(Arvey & Murphy, 1998).
Employee performance can also be evaluated on the attainment of competencies or achievement of
goals. Draganidis and Mentzas (2006) define a competency as “a combination of tacit and explicit
knowledge, behavior, and skills that gives someone the potential for effectiveness in task performance”
(p. 53). Examples of competencies include team leadership, initiative, self-confidence, and flexibility. In
performance management systems, organizations may choose to assess employees on competencies
the organization deems as important for organizational effectiveness (Draganidis & Mentzas). Finally,
performance can be assessed on the extent to which employees achieve their performance goals or
objectives; these goals or objectives are typically specific to each employee’s role.

FOREIGN STUDY

According to Cardy, A., (2004) it is not an overemphasis that performance management is indispensable
to the effectiveness of organization due to the fact that it serves as a process that ensures that
employees are working hard towards accomplishing the mission and objectives of the organization
(Gruman & Saks, 2011).

Performance management is regarded as the “Achilles Heel“ of human capital management (Pulakos,
2009), and which means that it should thus be managers top priority (Lawler, 2008). Despite the fact
that one third of employees believe that the performance management process of their company helps
them improve their performance, there is not enough focus on performance management and on
studies relating to employee satisfaction in companies(Pulakos, 2009). However, in recent years and
based on modern issues confronting these companies, they have started refocusing their attention
towards performance management system (PMS) (Buchner, 2007; Gruman& Saks, 2011) to improve
their employee performance. Most of these companies now combine their PMS with strategic
management system such as Balance Scorecard (BSC) which will clarify their strategy and translate it
into achievement (Kaplan& Norton, 1992; 1996; 2001). The argument of their paper is that the use of
BSC as a strategic management system affects how PMS enhances employee performance since BSC is
used as a tool to assess and manage organizational performance (Braam&Nijssen, 2004). Therefore,
their paper examines the moderating effect of BSC on the relationship between PMS and employee
performance.
The remainder of this paper firstly focused on the literature review and the development of the
hypotheses, and then it presents the research methodology which includes the statistical model and
testing procedures. The report of the empirical results is given with discussions on the findings. Finally, a
conclusion was reached with a provision of implications, limitations and suggestions for future studies.

Performance Management System and Employee Performance

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 amount 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) and Ying (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.

Local Study

According to Gutierrez, R.I., (2020) He shared a quote saying, “What you cannot measure, you cannot
manage. What you cannot manage, you cannot improve.” He stated that it is for the reason that most
companies implement a performance management system. He explained that performance
management is a process of establishing a shared understanding about what is to be achieved, how it is
to be achieved, and an approach of  managing people to increase the probability of achieving success.
The goal of a good performance management system is the improvement of the overall organizational
performance while ensuring productivity and the wellbeing of its employees. Upon the analizations of
strengths, learning from areas for improvement, and examining potential growth and development,
organizations can develop talent, enhance individual performance, and weed out problems as needed.
An effective performance management system encourages reward and recognition and boosts
employee engagement and productivity.

Local Literature

The Civil Service Commission (2014) has shared a system called Strategic Performance Management
System (SPMS) which defined as a mechanism that links employee performance with organizational
performance to enhance the performance orientation of the compensation system. It ensures that the
employee achieves the objectives set by the organization and the organization, on the other hand,
achieves the objectives that it has set as its strategic plan.
The SPMS Objectives are: (a) to concretize the linkage of organizational performance with the Philippine
Development Plan, Agency Strategic Plan, and Organizational Performance Indicator Framework OPIF;
(b) to ensure organizational and individual effectiveness by cascading institutional accountabilities to the
various levels of the organization; and (c) to link performance management with other HR systems.
More importantly, the SPMS complements the Results-Based Performance Management System that is
implemented by the Office of the President and that links organizational performance to societal goals.
It is also linked to the Performance-Based Incentive System (PBIS) that consists of the Productivity
Enhancement Incentive (PEI) and the Performance-Based Bonus (PBB).
The CSC (2014) also stated that The SPMS follows a four-stage cycle, consisting of the following: (1)
Performance planning and commitment (2) Performance monitoring and coaching (3) Performance
review and (4) evaluation and Performance rewarding and development planning.
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