The Foundations of

Performance Management

Performance Management Defined

A systematic process for improving
organizational performance by
developing the performance of
individuals and teams
Means of getting better results by
understanding and managing
performance within an agreed
framework of planned goals,
standards and competency
requirements

Briscoe and Claus (2008)

PM is the system through which
organizations set work goals,
determine performance standards,
assign and evaluate work, provide
performance feedback, determine
training ad development needs and
distribute rewards

PM
It is much more than appraising
individuals
It contributes to the achievement of
culture change and it is integrated
with other key HR activities
especially human capital
management, talent management,
learning and development and
reward management

Short History
Koontz (1971) says that the first known
example of performance appraisal took
pace during the Wei Dynasty (221-65 AD)
Emperor employed an imperial rater
whose task 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

Short History
First formal monitoring system was the work of
Fredrick Taylor and his followers before WWI
Rating of officers in the US armed forces
introduced in 1920s and this spread to UK
Merit rating then came to US and UK in 1950s
and 1960s
MBO came in 1960s and 1970s
A revised form of resulted oriented performance
appraisal emerged in 1970s and still exists
The term PM first used in 1970s and recognized
in late 1980s

Merit Rating
Process of assessing how well someone
was regarded in terms of personal traits
such as judgment or integrity and qualities
such as leadership or cooperativeness
It involved quantification of judgments
against each factor
W.D Scott an American introduced rating of
the abilities of workers in industry prior to
WWI

Merit Rating
Scott scale was modified and used to rate
efficiency of US army officers
Supplanted seniority system of promotion
and initiated an era of promotion on basis of
merit
Perceived success led to adoption by British
army
Then came the Graphic Rating Scale
Key criteria for rating people at work
Merit rating now sometimes called PM

Attacks on Merit Rating and

Performance Appraisal
Merit rating still exists in different guises
Douglas McGregor criticized these in his famous
article An uneasy look at 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 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. He is no longer a pawn
in a chess game called management development.

McGregor
The main factor in the management
of individual performance should be
the analysis of the behaviour
required to achieve agreed results,
not the assessment of personality.

Management by Objectives
Based on the writings of Peter Drucker and Douglas
McGregor.
The term management by objectives was first
coined by Peter Drucker (1955)
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
This would ensure that individual and corporate
objectives are integrated and would also make
it possible for managers to control their own
performance:
Self-control means stronger motivation: a
desire to do the best rather than just enough to
get by. It means higher performance goals and
broader vision.

 McGregors (1960) contribution arose

from his Theory Y concept. He wrote:
The central principle that derives
from Theory Y is that of integration:
the creation of conditions such that
the members of the organization can
achieve their own goals best by
directing their efforts towards the
success of the organization.

The Management by Objectives

System

Management by objectives as described by John Humble

MBO is a continuous process of:
reviewing critically and restating the companys strategic and
tactical plans;
clarifying with each manager the key results and performance
standards he must achieve, and gaining his contribution and
commitment to these, individually and as a team member;
agreeing with each manager a job improvement plan that
makes a measurable and realistic contribution to the unit and
company plans for better performance;
providing conditions (an organization structure and
management information) in which it is possible to achieve the
key results and improvement plan;
using systematic performance review to measure and discuss
progress towards results;
developing management training plans to build on strengths,
to help managers to overcome their weaknesses and to get
them to accept responsibility for self-development;

 Management by objectives was

adopted enthusiastically by many
companies in the 1960s and1970s.
But it became discredited by the
1990s why?

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 individuals
personal needs and objectives, bearing in mind that the most
powerful driving force for individuals comprises their needs,
wishes and personal objectives.

R H Schaffer on Management by Objectives

In many MBO programmes, as lists of

goals get longer and thicker, the focus is
diffused, bulk is confused with quality, and
energy is spent on the mechanics rather
than the results.
A manager challenged on the
performance of his group can safely point
to the packet of papers and assert: My
managers have spent many hours
developing their goals for the year.

Comparison of Management by Objectives and

Performance Management by Fowler
Fowler in 1990 criticized the MBO because:
It was not right for all organizations it required a highly
structured, orderly and logical approach that did not fit the
opportunistic world of the entrepreneur
Only limited recognition was given to the importance of
defining the organizations corporate goals and values
the emphasis was on the role of the individual manager
Line managers perceived it as a centrally imposed
administrative task
It became a formal once-a-year exercise bearing little
relationship to managers day-today activities
There was an overemphasis on quantifiable objectives to
the detriment of important qualitative factors

Performance
Management
The concept of performance
management incorporates some of
the notions and approaches of
management by objectives and
performance appraisal but it includes
a number of significantly different
features

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

PM
Another early use of the term
performance management was made
by Beer and Ruh (1976)
Their thesis was that: performance
is best developed through practical
challenges and experiences on the
job with guidance and feedback from
superiors.

Features of this System

The features of this system that
distinguished it from other appraisal
schemes were as
follows:
emphasis on both development and evaluation;
use of a profile defining the individuals strengths
and development needs;
integration of the results achieved with the
means by which they have been achieved;
separation of development review from salary
review

Performance management as
described by Plachy and Plachy in 1988
Performance management is communication: a manager and an
employee arrive together at an understanding of what work is to
be accomplished, how it will be accomplished, how work is
progressing toward desired results, and finally, after effort is
expended to accomplish the work, whether the performance has
achieved the agreed-upon plan.
The process recycles when the manager and employee begin
planning what work is to be accomplished for the next
performance period.
Performance management is an umbrella term that includes
performance planning, performance review, and performance
appraisal. Major work plans and appraisals are generally made
annually. Performance review occurs whenever a manager and an
employee confirm, adjust, or correct their understanding of work
performance during routine work contacts.

Fowler (1990)
Management has always been about getting
things done, and good managers are
concerned to get the right things done well.
That, in essence, is performance
management
the organization of work to achieve the
best possible results. From this simple
viewpoint, performance management is not a
system or technique, it is the totality of the
day-to-day activities of all managers.

Institute of Personnel Management (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