HISTORY OF

PERFORMANCE
MANAGEMENT
INTRODUCTION
 Performance management is a process for establishing shared
understanding about what is to be achieved, and an approach
to managing and developing people in a way which increases
the probability that it will be achieved in the short and longer
term
HISTORY
 The first formal monitoring systems evolved out of the work of
Fredrick Taylor and his followers before World War I

 Rating for officers in US armed services was introduced in 1920s and

this spread to UK

 Merit rating came to force in USA and UK in 1960

 MBO then came and went in 1960 and 1970 and simultaneously
experiments were made with critical incident technique and BARS

 A revised form of result oriented performance appraisal emerged in

1970s which still exists today

 The term ‘performance management' was first used in 1970s but did not
become a recognized process until the later half of 1980s
Early days
 The first recorded use of the term performance management is in Beer
and Ruh (1976) ‘Employee Growth through Performance
Management’. Harward Business Review July-August

 Their thesis was that “Performance is best developed through practical

challenges and experiences on the job with guidance and feed back
from superiors”

 They described the performance management system at Corning Glass

Works, the aim of which was to help managers give feedback in a
helpful and constructive way
FEATURES

 Emphasis on both development and evaluation

 Use of a profile in defining the individual strength and development
needs
 Integration of the results achieved with the means by which they have
been achieved
 Separation of development review from salary review
 The concept of Performance Management lay fallow for some years but
began to emerged in USA in the mid 1980s as a new approach to
managing performance however one of the first books exclusively
devoted to performance management was published in 1987 by Plachy

 In UK the first published reference to performance management was

made at a meeting of Institute of personnel management (IPM) in 1987
by Don Beattie

 By 1990 performance management had entered the vocabulary of HRM

in UK as well as USA
 Full recognition of the existence of performance management was
provided by the research project conducted by Institute of personnel
management (1992)
Merit Rating
 Defined as a payment system in which the personal qualities of an
employee are rated according to organizational requirements, and a pay
increase or bonus is made against the results of this rating

 Merit rating has been in use since the 1950s

 Unlike new performance-related pay systems, which focus rewards on

the output of an employee, merit rating examines an employee's input
to the organization

For example attendance, job knowledge, skill, competence, motivation

and commitment

 In merit rating programs, these factors may be weighted to reflect their

relative importance and the resultant points score determines whether
the employee earns a bonus or pay increase
 MANAGEMENT BY OBJECTIVES

Conceived by Peter. F. Drucker

Defined as a participative system of managing in which managers look

ahead for improvements , think strategically, set performance stretching
objectives at the beginning of a time period , develop action and
supporting plans and ensure accountability for results at the end of the
time period
 MBO should include the following ingredients

1. A collaborative diagnosis of organizational problems from which it is

concluded that a collaborative MBO effort would be functional

2. Increased skills in interpersonal communications and group process

3. Real subordinate participation, in team configuration and goal setting

4. A team approach to reviewing individual and group targets and their

achievement

5. Ongoing individual and team problem solving discussions with

supervisors

6. A continuous helping relationship within teams and in supervisor –

subordinate relationship

7. Attention to personal and career goals in a real effort to make these

complementary to organizational goals
 PROCESS
Step 1:
The subordinate proposes a set of goals for the upcoming time period. This proposal
sets forth specific goals and performance measures.
Step 2:
The subordinate and supervisor jointly develop specific goals and targets. It should be
specific, measurable objectives for each area of responsibility and the supervisor and
the subordinate must mutually agree upon them.
Step 3:
A period of performance in which actual performance of the individual involved is
measured against his or her individual goals.
Step 4:
The feedback of results to the individual and appropriate rewards for performance.
Step 5:
The outcome of the performance review provides the basis for setting new performance
goals and recycling of the goal setting process.
PRINCIPLES

1) Principle of improvement: managers must act to make the future of an

organization better than in the past . (Or part of an organization, such as a
government Home Office)..

2) Principle of expectation: people expend more effort when the probability of

receiving a reward from achieving the goal is known in advance.

3) Principle of achievement : large achievements are accomplished by people

who break these down into smaller related elements.

4) Principle of strategic planning : decision on desired future effects and

formulation of present day causes to make them happen.

5) Principle of targeting: the greater the focus of effort on a specific goal, the
greater the possibility of reaching it within a certain time scale.
6) Principle of risk taking: a concerted effort should be made to set
objectives to optimise expected value and minimise risk of failure

7) Principle of performance stretch: the more managers tolerate

mediocrity in subordinates the more they tolerate it in themselves

8) Principle of accountability: when employees participate in and are

held responsible for what is being done

9) Principle of motivation: the greater the alignment of employee

expectancies ( needs) with employer expectancies (objectives) the
greater the motivation to accomplish both
10) Principle of prioritising: assignments from a spectrum of possible
objectives should be made on the basis of high payoff for both the
organization and the individual

11) Principle of participation: productivity increases rapidly when

employees participate in the decision affecting it and when expected
benefits are shared

12) Principle of feedback: the quicker the difference between actual and
planned performance is fed back to managers, the quicker adjustments can
be made

13) Principle of commitment: this locks individual managers and their

plans together for a period of time to achieve objectives which are commitments

14) Principle of system control: control over a new situation increases when
key points of control are identified
CRITICAL INCIDENT
 Developed by Flanaganan 1954

 This was to avoid trait assessment (merit rating) and over concentration
on output (MBO), appraisers should focus on critical- behavior
incidence which were real unambiguous and illustrated quiet clearly
how well individuals were performing their task

 Method of assessment of employees based on some critical incidents

which might happen regularly and are recorded by supervisors

Eg: A shop floor worker repairing a machinery himself without

approaching a technician. This helps in saving time and also improves
his performance. This in turn helps in determining his performance.
 BARS (Behaviorally Anchored Rating Scales)
Behaviorally Anchored Scales sometimes called Behaviorally Expectation
Scales are rating scale points are determined by statements of effective
and ineffective behavior.

Here the employees behavior at work are assessed on scales which is rated
as extremely good, good, slightly good, neither poor nor good, slightly
poor, poor, extremely poor.
 BARS (Behaviorally Anchored Rating Scales) Cont..
FEATURES
 Areas of performance to be evaluated are identified and defined by the people
who will use the scales

 The scales are anchored by descriptions of actual job behavior that supervisors
agree, represent specific levels of performance

 All dimensions of performance to be evaluated are based on observable

behavior and are relevant to the job being evaluated since BARS are tailor-
made for the job

 BARS are developed to provide results which subordinates could use to

improve performance
DIFFERENCE BETWEEN MBO, PERFORMANCE APPRAISAL
AND PERFORMANCE MANAGEMENT

MANAGEMENT BY PERFORMANCE PERFORMANCE MANAGEMENT

OBJECTIVES APPRAISAL
Packaged System Usually tailor made Tailor made

Apply to managers Apply to all staff Apply to all staff

Emphasis on individual Individual objectives Emphasis on integrating

objectives may be included corporate, team and
individual objectives
Annual appraisal Annual appraisal Continuous one or more
formal reviews
Top-Down system with Top-Down system with Joint process, ratings
ratings ratings less common
May not be a direct link Often linked to pay May not be a direct link
to pay to pay
Complex paper work Complex paper work Documentation often
minimised
Owned by line mangers Owned by personnel Owned by line
and personnel department management
management