Week 1 Discussion

Post by Day 3 a cohesive and scholarly response in APA format, based on and supported by your required readings, media, and research this week, which addresses the following:

• Explain performance management, its evolution, and the role it plays within an organization. 
• Describe 2 advantages of implementing a well-designed performance management system. 
• Explain at least 3 purposes of a performance management system.  

350 words

https://hr.berkeley.edu/hr-network/central-guide-managing-hr/managing-hr/managing-successfully/performance-management/concepts

HUMAN PERFORMANCE

Why we hate performance management–—And why
we should love it

Herman Aguinis *, Harry Joo, Ryan K. Gottfredson

Kelley School of Business, Indiana University, 1309 E. Tenth Street, Bloomington, IN 47405-1701, U.S.A.

Business Horizons (2011) 54, 503—507

www.elsevier.com/locate/bushor

KEYWORDS
Performance
management;
Strategic goals;
Appraisal;
Feedback;
Coaching;
Human resources

Abstract Individual performance is a building block of organizational success. Not
surprisingly, virtually all organizations have in place some type of performance
management system. Yet, managers and employees are equally skeptical that per-
formance management adds value; usually, it is seen as a waste of time and resources.
We argue that the potential benefits of performance management are not realized
because most systems focus exclusively on narrow and evaluative aspects such as
performance appraisal. Herein, we offer a broader view of performance manage-
ment, including discussion of how it differs from performance appraisal. We highlight
specific and important benefits of performance management for employees, man-
agers, and organizations. We also describe research-based conclusions regarding how
performance management systems should be designed and implemented to realize
these benefits. We hope our article will demonstrate that well-constructed perfor-
mance management systems should not be hated, but rather embraced.
# 2011 Kelley School of Business, I

ndiana University. All rights reserved.

1. Introduction

As noted by former Siemens CEO Heinrich von Pierer,
‘‘whether a company measures its workforce in
hundreds or hundreds of thousands, its success relies
solely on individual performance’’ (Bisoux, 2004).
This view is held by many; Heinrich von Pierer is
certainly not alone in this train of thought. Results of
a survey including senior executives from the Sun-
day Times list of best employers in the United
Kingdom indicated that performance management
is one of the top two most important human re-
source management functions in their organiza-
tions. Management scholars agree (Liu, Combs,

* Corresponding author.
E-mail address: haguinis@indiana.edu (H. Aguinis).

0007-6813/$ — see front matter # 2011 Kelley School of Business, I
doi:10.1016/j.bushor.2011.06.001

Ketchen, & Ireland, 2007; Platts & Sobótka,
2010). Accordingly, virtually all organizations–—
ranging from universities to governmental and pub-
licly traded firms–—implement some type of system
to assess the performance of individual workers. In
fact, results of a survey of 278 organizations, about
two-thirds of which are multinational corporations
from 15 different countries, showed that more than
90% implement a formal performance management
system (Cascio, 2006). Despite the popularity of
performance management systems, dozens of stud-
ies indicate the consistent result that firms are not
managing employee performance very well. Specif-
ically, only 3 in 10 employees believe that their
company’s performance review system actually
helped them improve their performance (Holland,
2006). There is obviously something very wrong with
this picture.

ndiana University. All rights reserved.

http://dx.doi.org/10.1016/j.bushor.2011.06.001

mailto:haguinis@indiana.edu

http://dx.doi.org/10.1016/j.bushor.2011.06.001

504 HUMAN PERFORMANCE

Our goal here is to offer research-based guidance
on how to realize the important potential benefits
of a well-designed and implemented performance
management system. First, we describe key differ-
ences between performance management and
performance appraisal. Second, we discuss the
many benefits of performance management. Third,
we describe the characteristics of an ideal perfor-
mance management system: the type that all organ-
izations should strive to create. Because we use
evidence from academic research to discuss a topic
of high salience and importance for organizations,
our article helps bridge the much lamented science-
practice divide in the field of management (Aguinis
& Pierce, 2008; Cascio & Aguinis, 2008).

2. Let’s set the record straight:
Performance appraisal is NOT
performance management

Performance management is ‘‘a continuous process
of identifying, measuring, and developing the per-
formance of individuals and teams and aligning
performance with the strategic goals of the organi-
zation’’ (Aguinis, 2009b, p. 2). On the other hand,
performance appraisal is the depiction of the
strengths and weaknesses of employees in a non-
continuous manner, typically just once a year. This
process is often perceived as a bureaucratic waste of
time created by the human resource department.
When asked to describe the performance manage-
ment system in our own organizations, many of us
will recall personal stories similar to the following
situation (Aguinis, 2009b):

Sally is a sales manager at a large pharmaceu-
tical company. She is overwhelmed with end-of-
the-year tasks, including supervising a group of
10 salespeople. One day during this hectic time
period, she gets a phone call from HR saying,
‘‘Sally, we have not received performance eval-
uation forms for your employees. They are due
by the end of the fiscal year. Thanks in advance
for your cooperation in maintaining our valued
performancemanagementsystem.’’Sallythinks,
‘‘Oh, those performance evaluation forms. . . .
A waste of my time!’’ From Sally’s perspective,
there is no value in filling out those seemingly
meaningless forms. She does not see her subor-
dinates in action because they are usually in
the field visiting customers. All that she knows
about their performance is based on sales fig-
ures, which depend more heavily on the prod-
ucts and geographic territory than on the
effort and motivation of each salesperson.

Plus, ratings do not affect rewards, which
are based more on seniority than merit. Having
less than 3 days to turn in her forms, Sally
simply gives everyone the maximum possible
rating. That way, she believes the employees
will be happy and less likely to complain. Sally
fills out the forms in less than 20 minutes, to get
back to her ‘real job.’

Survey results suggest that Sally’s story occurs all
too frequently in organizations (Aguinis, 2009a). As
managers engage in performance appraisals, they
rarely reap any benefits from the process, and their
time and efforts are simply wasted. Managers may
even think that there is something inherently wrong
with performance management. As a result, many
view performance management and human re-
source management in general as a bureaucratic
requirement to be overcome (Stewart & Woods,
1996). No wonder lots of managers simply ‘‘hate
HR!’’ (Hammonds, 2005, p. 40).

But let’s set the record straight. Sally’s story
takes place in an organization which assesses per-
formance once a year; the process is required by the
HR function, it is focused entirely on past perfor-
mance, and there are no clear benefits for the
supervisor, employees, or the organization as a
whole. In contrast, consider how Merrill Lynch–—
one of the world’s leading financial management
and advisory companies–—has transitioned from a
performance appraisal system to a performance
management system. The new system emphasizes
conversation between managers and employees
whereby feedback is exchanged and coaching is
provided, if needed. Employees and managers joint-
ly set employee objectives each January. Mid-year
reviews assess what progress has been made toward
the goals and how personal development plans are
faring. The end-of-the-year review incorporates
feedback from several sources, evaluates progress
toward objectives, and identifies areas that need
improvement. Managers also receive extensive
training on how to set objectives and conduct re-
views. Further, there is a website that managers can
access, with information regarding all aspects of the
performance management system. Merrill Lynch’s
goal for its newly-implemented performance man-
agement program is worded as follows: ‘‘This is what
is expected of you, this is how we’re going to help
you in your development, and this is how you’ll be
judged relative to compensation’’ (Fandray, 2001).

As illustrated by the system implemented at
Merrill Lynch, performance management entails
and represents much more than performance ap-
praisal. First, measuring performance–—the exclu-
sive focus of performance appraisal–—is only one

HUMAN PERFORMANCE 505

Table 1. Some benefits resulting from a well designed and executed performance management system

For Employees

� Employees experience increased self-esteem.
� Employees better understand the behaviors and results required of their positions.
�Employees better identify ways to maximize their strengths and minimize weaknesses.

For Managers

� Managers develop a workforce with heightened motivation to perform.
� Managers gain greater insight into their subordinates.
� Managers make their employees become more competent.
� Managers enjoy better and timelier differentiation between good and poor performers.
� Managers enjoy clearer communication to employees about employees’ performance.

For Organizations

� Organizations make administrative actions that are more appropriate.
� Organizations make organizational goals clearer to managers and employees.
� Organizations enjoy reduced employee misconduct.
� Organizations enjoy better protection from lawsuits.
� Organizations facilitate organizational change.
� Organizations develop increased commitment on the part of employees.
� Organizations enjoy enhanced employee engagement.

component of performance management. Under a
performance management system, the supervisor
and the employee agree on set goals for the em-
ployee to achieve. These goals include both results
and behaviors; results are the outcomes that an
employee produces, while behaviors refer to how
the outcomes are achieved. Second, performance
management takes into account both past and fu-
ture performance. Personal developmental plans
specify courses of action to be taken to improve
performance. Achieving the goals stated in the
developmental plan allows employees to keep
abreast of changes in their field or profession. Such
plans highlight an employee’s strengths and the
areas in which he or she needs development; more-
over, they provide a course of action to improve
weaknesses and further develop strengths. Third,
performance management requires managers to
ensure that employees’ activities and outputs are
congruent with the organization’s goals, toward the
end of gaining competitive advantage. In other
words, performance management frames employee
performance within broader unit- and organization-
level performance. Fourth, in contrast to perfor-
mance appraisal, performance management is on-
going. It involves a never-ending process of setting
goals and objectives, observing performance, and
giving and receiving ongoing coaching and feedback
(DeNisi & Kluger, 2000). Fifth, and also in sharp
contrast to performance appraisal, performance
management is ‘owned’ by those who participate
in the system: raters and ratees. Performance man-
agement benefits most those who take part in the
system, and is not an HR function exclusively but
rather a business unit function.

3. Yes: DO ask what performance
management can do for you!

The aforementioned differences between perfor-
mance appraisal and performance management
make the latter much more than just a conduit to
distribute rewards. For example, performance man-
agement helps top executives achieve strategic busi-
ness objectives because the system links the
organization’s goals with individual goals. Also relat-
ed to this point is that performance management
serves as an important communication tool regarding
the types of behaviors and results that are valued and
rewarded; this, in turn, leads to an understanding of
the organization’s culture and its values. Further, a
performance management system allows organiza-
tions to improve workforce and succession planning
activities, as it is the primary means through which
accurate talent inventories can be assembled.

Table 1 lists 15 benefits of performance manage-
ment systems for employees, managers, and orga-
nizations (Aguinis, 2009b; Plump, 2010; Thomas &
Bretz, 1994). We focus on three of these. First,
because a performance management system offers
feedback and coaching to employees, workers gain a
better understanding of their strengths and weak-
nesses, and are able to identify developmental
activities targeted toward both. Second, a perfor-
mance management system helps managers develop
employees who are more competent. This benefit is a
result of the ongoing goal-setting and developmental
activities (i.e., feedback and coaching). Third, per-
formance management systems help organizations
bring about desired organizational change. For ex-
ample, in the 1980s, IBM sought to create a new

506 HUMAN PERFORMANCE

Table 2. Characteristics of an ideal performance management system

� Strategically congruent. Individual goals are aligned with unit and organizational goals.
� Contextually congruent. The system is congruent with the organization’s culture, as well as the broader
cultural context of the region or country.
� Thorough. All employees are evaluated (including managers), all major job responsibilities are
evaluated, the evaluation includes performance spanning the entire review period, and feedback
emphasizes both positive and negative performance.
� Practically feasible. Benefits resulting from the system outweigh the costs.
� Meaningful. The standards and evaluations conducted for each job function are important and
relevant, performance assessment emphasizes only those functions that are under the control of the
employee, evaluations take place at regular intervals, the system provides for the continuing skill
development of evaluators, and results are used for important administrative decisions.
� Specific. There is detailed and concrete guidance about what is expected of raters and ratees, and how
they can meet these expectations.
� Identifies effective and ineffective performance. The system provides information that allows for
distinguishing between effective and ineffective behaviors and results, thereby also allowing for the
identification of employees displaying various levels of performance effectiveness.
� Reliable. Performance scores are consistent and free of error.
� Valid. Performance measures include all relevant performance facets and do not include irrelevant ones.
� Acceptable and fair. The system is acceptable, and the processes and outcomes are perceived as fair
by all participants.
� Inclusive. All participants are given a voice in the process of designing and implementing the system.
� Open. A good system has no secrets. Performance is evaluated frequently and performance feedback is
provided on an ongoing basis, the appraisal meeting consists of a two-way communication process
during which information is exchanged, not delivered from the supervisor to the employee without
his or her input, and performance standards are clear and communicated on an ongoing basis.
� Correctable. No system is 100% error-free. Thus, establishing an appeals process, through which
employees can challenge what may be unjust decisions, is an important aspect of a good performance
management system.

organizational culture that emphasized customer
service. To facilitate this, the company used perfor-
mance management to realign individual perfor-
mance to the new, customer service-oriented goals
and objectives of the organization; performance
evaluation of staff members took into consideration
customer satisfaction ratings (Peters, 1987). Hicks
Waldron, former CEO of cosmetics giant Avon, said:
‘‘It took me a long while to learn that people do what
you pay them to do, not what you ask them to do’’
(Cascio & Cappelli, 2009). In the case of IBM, perfor-
mance management was used as an instrument to
improve the culture of the organization and help
achieve crucial business objectives.

4. Okay – I’m convinced of the benefits
of performance management. How
should I do this?

As is the case with many other management prac-
tices, execution is key (Bossidy & Charan, 2002). So,
what can organizations do to maximize the net
benefits derivable from performance management
systems? To begin, they should strive to create a
framework that is as close as possible to the ideal.
Next, we describe a few characteristics of an ideal

performance management system; a more complete
list of these features is included in Table 2, and a
more detailed discussion of these and other char-
acteristics is provided by Aguinis (2009a, 2009b).

First, the system should be congruent with the
culture of the organization, as well as the culture of
the region or country. Regarding congruency with
organizational culture, imagine an organization that
has a culture where communication is not fluid and
hierarchies are rigid. In such an organization, a 360-
degree feedback system–—whereby individuals re-
ceive comments on their performance from subordi-
nates, peers, and superiors–—is likely to be resisted,
and thus ineffective. Regarding congruency with re-
gional or national culture, for example, note that
Japan tends to emphasize the measurement of both
behaviors (i.e., how people do the work) and results
(i.e., the outcome of people’s work), whereas the
United States tends to more heavily emphasize re-
sults over behaviors. Accordingly, a results-only sys-
tem in Japan is not likely to be effective. Ultimately,
the ideal performance management system must
have contextual congruence.

Second, the system should be thorough regarding
four dimensions. Specifically, all employees should
be evaluated, including managers; all major job
responsibilities should be evaluated, including

HUMAN PERFORMANCE 507

behaviors and results; the evaluation should include
performance spanning the entire review period,
not just a few weeks or even months before the
review; and feedback should be given on positive
performance aspects, as well as areas in need of
improvement.

Third, the system should be reliable. It must use
measures of performance in a way that minimizes
error and maximizes consistency. For example, if two
supervisors provide ratings of the same employee and
performance dimensions, ratings should be similar. To
ensure such consistency, the ongoing training of per-
formance raters–—usually managers–—is a must.

Fourth, another important characteristic of an
ideal performance management system is that it
should be practically feasible. For example, it is not
optimal to ask managers to evaluate employees so
often that little additional information is gained,
while managers spend significant amounts of time,
effort, and energy in producing these evaluations.

5. Conclusion

Measuring and developing individual performance is
a key determinant of organizational success and
competitive advantage (Ployhart, Weekley, &
Baughman, 2006). Despite its importance, perfor-
mance management is not living up to its promise in
most organizations. A major reason for this is that
most performance management systems focus al-
most exclusively on performance appraisal. Herein,
we have summarized science-based conclusions
regarding the benefits of performance manage-
ment, as well as the features of a system that will
lead to realizing these benefits. We hope our article
will prompt implementation of more effective per-
formance management systems and further re-
search on the conditions under which such
systems are most effective (Aguinis & Pierce, 2008).

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http://www.aacsb.edu/publications/archives/mayjune04/p18-25

http://www.aacsb.edu/publications/archives/mayjune04/p18-25

http://findarticles.com/p/articles/mi_m3495/is_1_54/ai_n31332855/

http://findarticles.com/p/articles/mi_m3495/is_1_54/ai_n31332855/

http://www.workforce.com/

• Why we hate performance management-And why we should love it

Introduction
Let's set the record straight: Performance appraisal is NOT performance management
Yes: DO ask what performance management can do for you!
Okay – I’m convinced of the benefits of performance management. How should I do this?
Conclusion
References