A short history of performance

management
• According to Koontz (1971), the first known
example of performance appraisal took place
during the Wei dynasty (AD 221-65) when the
emperor employed an ‘imperial rater’ whose
task it was to evaluate the performance of the
official family.
• In the 16th century Ignatius Loyola established a
system for formal rating of the members of the
Jesuit Society.

• The first formal monitoring systems, however,

evolved out of the work of Frederick Taylor
and his followers before the First World War.
Rating for officers in the US armed services was
introduced in the 1920s and this spread to the
UK, as did some of the factory-based American
systems.
• Merit rating came to the fore in the United States
and the UK in the 1950s and 1960s,
when it was sometimes re-christened
performance appraisal.

• Management by objectives then

came and largely went in the 1960s and 1970s,
and simultaneously, experiments were made
with assessment techniques such as
behaviourally anchored rating scales.
• A revised form of results-orientated
performance appraisal emerged in the 1970s
and still exists today. The term performance
management was first used in the 1970s but it
did not become a recognized process until the
latter half of the 1980s.
 Merit rating

• Merit rating was the process of assessing how well

someone was regarded in terms of personality
traits such as judgment or integrity and qualities
such as leadership or cooperativeness.

• The term ‘merit’ recalled classroom judgments

made by teachers. Merit rating often involved the
quantification of judgments against each factor,
presumably in the belief that the quantification of
subjective judgments made them more objective.
• W D Scott was the American pioneer who
introduced rating of the abilities of workers in
industry prior to the First World War.

• He was very much influenced by F W Taylor

(1911) and invented the ‘Man to Man
Comparison’ scale, which was Taylorism in
action.
• Attacks on merit rating and performance
appraisal Although merit rating in different
guises still persists, a strong attack on the
practice was mounted by McGregor in his
highly influential Harvard Business Review
article, ‘An uneasy look at performance
appraisal’ (1957).
 Douglas McGregor on performance
appraisal

• The emphasis should be shifted from appraisal to

analysis. This implies a more positive
approach. No longer is the subordinate being
examined by his superior so that his [sic]
weaknesses may be determined; rather he is
examining himself, in order to define not
only his weaknesses but also his strengths and
potentials… He becomes an active
agent, not a passive ‘object’.
 Management by objectives

• The management by objectives movement

claimed that it overcame the problems of trait
rating. It was based on the writings of Peter
Drucker and Douglas McGregor.
 Peter Drucker on management by
objectives
• What the business enterprise needs is a principle of
management that will give full scope to individual
strength and responsibility and at the same time give
common direction of vision and effort, establish
teamwork and harmonize the goals of the individual
with the common weal. The only principle that can do
this is management by objectives and self-control.

• Drucker emphasized that ‘an effective management

must direct the vision and efforts of all managers
towards a common goal’.
Douglas McGregor on the principle of
integration and self-control
• The tactics are worked out in the light of the
circumstances. Forms and procedures are of
little value… ‘selling’ management a
programme of target setting and providing
standardized forms and procedures is the
surest way to prevent the development of
management by integration and self-control.
 Criticisms of management by
objectives
• One of the first and most formidable attacks on management by
objectives was made in the Harvard Business Review by Levinson (1970).
His criticisms were: Every organization is a social system, a network of
interpersonal relationships. A person doing an excellent job by objective
standards of measurement may fail miserably as a partner, superior,
subordinate or colleague.

• The greater the emphasis on measurement and quantification, the more

likely it is that the subtle, non-measurable elements of the task will be
sacrificed. Quality of performance frequently loses out to quantification.

• It (management by objectives) leaves out the individual’s personal needs

and objectives, bearing in mind that the most powerful driving force for
individuals comprises their needs, wishes and personal objectives.
Performance appraisal (1970s version)

• In the 1970s a revised approach to performance assessment

was developed under the influence
of the management by objectives movement.

• It was sometimes called ‘results-orientated

appraisal’ because it incorporated the agreement of
objectives and an assessment of the results
obtained against these objectives.

• Ratings were usually retained of overall performance and in

relation to individual objectives. Trait ratings were also
used, but more recently these were
replaced in some schemes by competency ratings
 Early days

• The earliest reference to performance management in the literature was made by

Warren (1972). On the basis of his research in a manufacturing company he
defined the features of performance management as follows. Features of
performance management as defined by Malcolm Warren in 1972
• Expectations - a large group of employees - preferably all - must be told clearly,
objectively and in their own language what is specifically expected of
them.
• Skill - a large group of employees must have the technical knowledge and skill
to carry out the tasks.
• Feedback - workers must be told in clear terms, without threats, how they are
doing in terms of expectations.
• Resources - employees must have the time, money and equipment necessary to
perform the expected tasks at optimal level.
• Reinforcement - employees must be positively reinforced for desired
performance.
Performance management established

• Full recognition of the existence of

performance management was provided by
the research project conducted by the
Institute of Personnel Management (1992).
 Institute of Personnel Management IPM (1992):
definition of a performance management system

• It communicates a vision of its objectives to all its employees.

• It sets departmental and individual performance targets that are related to
wider objectives.
• It conducts a formal review of progress towards these targets.
• It uses the review process to identify training, development and reward
outcomes.
• It evaluates the whole process in order to improve effectiveness.
• It expresses performance targets in terms of measurable outputs,
accountabilities and training/learning targets.
• It uses formal appraisal procedures as ways of communicating
performance requirements that are set on a regular basis.
• It links performance requirements to pay, especially for senior managers.