Performance management

Based on Human Resource Management, 4th edition, by Alan Price

Performance assessment has a long history based on comparative judgements of human worth. In the early part of the 19th century, for example, Robert Owen used coloured wooden cubes, hung above work stations, to indicate the performance of individual employees at his New Lanark cotton mills in Scotland. Various merit ratings were represented by different coloured cubes which were changed to indicate improvement or decline in employee performance.

Like employee selection techniques, modern performance assessment developed from sophisticated rating systems designed by work psychologists for military use during the two world wars. By the 1950s, such methods had been adopted by most large US business organizations, spreading worldwide thereafter. Initially, performance assessment was used to provide information for promotions, salary increases and discipline. More recently, performance measurement has had wider purposes: 

• To identify and enhance desirable or effective work behaviour.
• Reinforcing this behaviour by linking rewards to measured performance.
• Developing desired competences and building human capital within organizations.

Enthusiasts for performance assessment argue that it serves a key integrating role within an organization's human resource processes. Firstly, it provides a checking mechanism for resourcing policies and procedures, evaluating the quality of recruits and hence the underlying decision-making process. Secondly, it monitors employee commitment and the relevance of their working behaviour to business objectives. Thirdly, it provides a rationale for an organization's pay policies. Taken at face value, these intentions seem entirely compatible with an integrated and strategic approach to human resource management. In reality, however, the definition and measurement of good performance is a controversial matter, involving fundamental issues of motivation, assessment and reward.

All aspects of performance management arouse controversy, especially appraisals and performance-related pay. Critics point to weaknesses in their methodology and basic philosophy. Employees are often dissatisfied with the methods of performance management systems and managers are frequently reluctant to engage in the process because of its confrontational nature. At a deeper level, it can be argued that if true commitment exists performance management is superfluous. In too many organizations it enforces the compliance of an unhappy workforce. 

Despite its problematic reputation, the use of performance assessment has been reinforced through the increasing prevalence of performance related pay (PRP). As we will see later in this chapter this is based on an over-simplified view of work motivation. Employers, consultants and right-wing politicians remain wedded to PRP schemes despite considerable evidence against their effectiveness as motivators.

Within HR literature there is some ambiguity as to whether reward should play a supporting role, a view implicit in the Harvard model of human resource management, or, conversely, that it should drive organizational performance - an opinion which finds greater favour amongst exponents of hard HRM (Kessler, 1995: 254).

In this section we set out to debate these issues and to search for answers to questions such as:

• What criteria should be applied to distinguish 'good' from less acceptable performance?
• Which are the most appropriate techniques for measuring performance?
• How can performance management be used to reinforce an organization's human resource strategies?
• How can true competence be identified in jobs which allow a considerable degree of impression management?
• *   Does performance management really encourage desirable work behaviour?

We begin with a discussion of the environmental factors which have led to the widespread use of performance assessment techniques. These include legislation, 
the demands of technological change, increasing flexibility and diversification and changes in workforce composition. We proceed to look at the way in which organizations favour certain stereotypes of good performance. The next section evaluates decision-making underlying the adoption of performance assessment strategies. Finally we discuss the activities involved in assessment such as appraisal and counselling.

Performance and Compensation   >  Environmental Context