Effectiveness of Performance Management System

 

Effectiveness of Performance Management System for Employee Performance 

Performance management system effectiveness (PMSE) is the measure of alignment between employee and organizational objectives (Armstrong, 2015).

Researchers (e.g., Kennerley & Neely, 2003; Kolich, 2009; Tan & Smyrnios, 2006) have substantiated that a careful implementation of an effective PMS ensures this consistency. An effective PMS implementation process necessitates that employees eagerly accept and effectively participate in the goal-setting process. A detailed examination of previous literature show that majority have focused on PMSE in the context of organizational performance only (Busco et al., 2008; de Wall & Coevert, 2007; Elliot, 2016; Garengo et al., 2005; Ohemeng, 2009; Payambarpour & Hooi, 2016; Thursfield & Grayley, 2016), while ignored the employees’ perception completely. Some recent literature has attempted to address this aspect and recommended exploring PMSE from employees’ perspectives.

More specifically, studies recommended the exploration of PMSE in terms of its impact on employees’ motivation, work engagement, performance, and retention (Audenaert et al., 2019; Mishra, 2014; Sharma et al., 2016). The current study examines the missing link between PMSE and employees’ work engagement and performance

Dewettinck and van Dijk (2013) have studied PMSE for its clarity of goals and expectations and the extent to which these were linked with their individual objectives of performance, development, and career enhancement. Their study also indicated strong linkages between PMSE and goal setting, control, and expectancy theories. They added the items of “employees’ work engagement” to determine PMSE including employees’ self-esteem, comfort, and most importantly employees’ realization of the fact that their performance adds value and contributes positively to the overall organizational performance. They included perception of fairness as a mediator in the study but did not consider it as a part of an effective PMS.

However, Sharma et al. (2016) adopted a slightly different approach to use these factors to ascertain PMSE. They defined PMSE as a combined effect of performance management system accuracy (PMSA) and performance management system perceived fairness (PMSF). They conceptualized PMSA as a set of effective goal setting, feedback and control, measurement and review, and reward system. PMSF was the extent to which all these practices were perceived just and equitable by the employees (Becker & Gerhart, 1996; Marr et al., 2004; Stokes, 2000). They also established the link between PMSE and theories of goal setting and equity. The current study uses the same premise by taking PMSA and PMSF as important dimensions of PMSE.

Teeroovengadum et al. (2019) investigate PMSE from three types of organizational purposes—strategic, development, and administrative. Similarly, in another study, Lappalainen et al. (2019) indicate that PMSE serves two main functions—judgmental and developmental. The first one is evaluative and helps make administrative decisions about employees, whereas the developmental part is related to its potential for high performance (McAfee & Champagne, 1993) leading to higher organizational outcomes (Kagaari et al., 2010). Research suggests that employee performance can be managed by effectively controlling its determinants and therefore should be explored from this perspective (Almatrooshi et al., 2016; Kang & Choi, 2019).

Work engagement (WE) is an effective antecedent of employee performance (Abraham, 2012; Macey & Schneider, 2008a). de Vries et al. (2016) define work engagement as “active investment of energy in domains of interest.” Smith and Bititci (2017) conduct an exploratory action research involving pilot and control groups from two departments of a U.K. bank to find out the interaction between performance management, work engagement, and performance.

An effective PMS is considered as a useful tool to achieve organizational effectiveness in the modern management literature and practice (Aguinis & Pierce, 2008; den Hartog et al., 2004; Lawler & McDermott, 2003). We conceptualize PMSE as a combined effect of PMSA and PMSF. PMSA has been defined by Sharma et al. (2016) as,

"Employee perception of the correctness of PMS through the alignment of the employees’ and organization’s goals; clarity about goals, performance standards and skills/behaviors required at different levels; clear linkage of goals with business needs (e.g., the market potential for sales); performance evaluation against planned standards; proper evaluation of employee strengths; regular feedback about performance; facilitation of employee development; and clear linkage between performance and performance management system outcomes (rewards and recognition, p. 231).”

References

Alarcon, G. M., Edwards, J. E. (2011). The relationship of engagement, job satisfaction and turnover intentions. Stress and Health, 27(3), 294–298.

Anitha, J. (2014). Determinants of employee engagement and their impact on employee performance. International Journal of Productivity and Performance Management, 63(3), 308–323.

Armstrong, M., Baron, A. (2004). Managing performance: Performance management in action. CIPD.

Buchner, T. W. (2007). Performance management theory: A look from the performer’s perspective with implications for HRD. Human Resource Development International, 10(1), 59–73

Gruman, J. A., Saks, A. M. (2011). Manage employee engagement to manage performance. Industrial and Organizational Psychology, 4(2), 204–207.

Lawler, E. E., McDermott, M. (2003). Current performance management practices. World at Work Journal, 12, 49–60

Ohemeng, K. L. F. (2009). Constraints in the implementation of performance management systems in developing countries: The Ghanaian case. International Journal of Cross-Cultural Management, 9(1), 109–132

Schleicher, D. J., Baumann, H. M., Sullivan, D. W., Yim, J. (2019). Evaluating the effectiveness of performance management: A 30-year integrative conceptual review. Journal of Applied Psychology, 104(7), 851–887