Phase 2: Qualitative Study
3.4 CONCEPTUALISATION OF PERFORMANCE MANAGEMENT
Prior to the emergence of performance management, organisations focussed on performance appraisal systems. Taylor (1911), having scientifically measured workers’ jobs, laid the
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foundation for appraisal systems and believed that good workers should not be limited to their rewards if their productivity was good. In the late 1950’s, McGregor (1957) suggested a shift towards job performance by assessing goals, using Drucker’s (1954) management by objectives principles. Over the next few years, there was an increased focus on employee participation in improving employee and organisational performance. As a result of this focus, the concept of performance management began to emerge.
Beer and Ruh (1976) first used the concept of ‘performance management’. Beer and Ruh (1976, p.60) analysed a “performance management system” that was designed with the aim of incorporating the strengths of Management by Objectives so that managers could better
“observe, evaluate and aid in improving the performance of subordinates”. Performance management differed from the traditional appraisal system in that performance management was about translating goals to results, where the focus is not only on individual employees, but also on teams, programmes, processes and the organisation as a whole (Shamsi, 2010). Shamsi (2010, p.80) suggested that performance management should have “a long term perspective, with an emphasis on employee development and process improvement” integrated with leadership development, succession planning, and training programmes.
During the 1980’s and 1990’s, as organisations adapted to changing internal and external environments, Eccles (1991, p.131) suggested a performance measurement revolution would take place where “senior executives will recognise that new strategies and competitive realities demand new measurement systems”. According to Eccles (1991, p.131), there would be a “shift from treating financials as the foundation for performance measurement, to treating them as one of a broader set of measures. The introduction of the balanced scorecard by Kaplan and Norton (1992) in the early 1990’s, was seen as one of the most revolutionary theories in performance management at the time. Kaplan and Norton (1992)’s balanced scorecard (BSC) was first proposed as a performance measurement tool. Kaplan and Norton’s BSC (1992, p.73- 77) consisted of “four perspectives, namely financial, internal business processes, customer, and learning and growth, and was aimed at capturing both financial and value-creating activities from the organisation’s intangible assets”. From initially been considered as a performance measurement tool, these authors later proposed the BSC as a strategic performance management tool, that could translate the organisation’s mission and strategy into
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objectives and measures, as well as allow a balance between short-and long-term objectives.
Although not devoid of its critics, Kanji and e Sá (2002) criticized its top down approach, while Norreklit (2000) was critical of the assumed relationship between the four perspectives, the BSC still remains a popular performance management tools.
The shift in the late 1990’s until the 2000’s was towards seeing performance management as a strategic imperative for organisations. This was indicated by the way Kaplan and Norton (1996a) suggested a better alternative to using the balanced scorecard i.e. as a strategic performance management tool. The new direction emphasised the importance of aligning and developing employee performance to business performance. Armstrong and Baron (1998, p.7) emphasised the “strategic and integrated nature of performance management” which they believed “focused on increasing the effectiveness of organisations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors”. Dessler (2005) similarly saw performance management as an integrated strategic method which comprises multiple components such as appraisals, goal- setting, and development. These, according to Dessler (2005), form a united and coherent structure with a clear aim of aligning the individuals’ performance goals with the wider objectives of the organisation. In this study, the BSC was used to manage performance as it was hypothesised that it’s underlying four perspectives of financial, customer, internal business process, and learning and growth could effectively lead to an improvement in the performance of employee performance, and ultimately organisational performance.
The managers’ role in performance management has also been emphasised in recent years.
Managers play an integral part in ensuring organisational and individual success. According to Stivers and Joyce (2000, p.22), “managers must play a major role in helping organisations design and implement new performance management systems”. Specifically, according to Strivers and Joyce (2000, p.22), managers can educate co-workers “about the importance of performance management systems, assist the management team in gaining consensus on strategic goals, help identify the financial and nonfinancial performance measures that are linked directly to strategic goals, assist in the implementation of new performance management systems, and review and update their performance management systems as necessary”.
53 3.5 PERFORMANCE MEASUREMENT
According to Simons (1995, p.5), performance measurement is a “formal, information-based routine and procedures” the managers use “to maintain or alter patterns in organisational activities”. Performance measurement is seen as an important component of performance management. Garvin (1993, p.89) famously suggested that “if you can't measure it, you can't manage it”. Performance management uses the information that performance measurement provides on employee performance to manage and develop their future performance. In the context of this study, performance measurement is critical to managing performance, as the quantified performance data that the balanced scorecard provides for each employee, is used to manage and develop future employee performance which in turn impacts on organisational performance. Thus, as Saxena (2010) suggests, since performance measurement drives a company or system towards favourable future goals and delivers solutions for management, it can be considered principle indicator of performance management.
According to Lemieux-Charles, McGuire, Champagne, Barnsley, Cole and Sicotte (2003), performance measurement indicates where change is required and which will, in turn, produce the desired behaviour that will produce improved performance. Hopf, Pratsch, Executive, Welch, Denett, Litman and Tychan (1999, p.35) suggested “that the results of performance measurement will tell you what happened, not why it happened, or what to do about it”. These authors further suggested that “performance measurement can provide the basis to assess how well you are progressing towards your predetermined objectives, help identify areas of strength and weakness, and decide on next steps, with the ultimate goal of improving organisational performance”. By understanding where performance gaps are through measurement, organisations can strategically devise business and learning initiatives to address those gaps.
The success of any performance management system is dependent on a quantifiable performance measurement process. This is emphasised by Oakland (1993), who suggested that in terms improving the quality and productivity within a company, performance measurement has a key part to play. According to Oakland (1993), when organisation measure performance, they ensure that the principles for determining comparisons are provided, the customer desires are being met and that feedback for ensuring improvements are provided.
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Many types of job measures are used to measure employee performance. These include, but are not limited to, performance scorecards, performance rating scales and employee productivity reports. According to Viswesvaran and Ones (2005), the measurement of employee job performance was previously distinguished into organisational records and subjective evaluations. Subjective evaluations, according to Viswesvaran and Ones (2005), depends on human judgement and could include either ratings or rankings, while organisational records could refer to direct measures of productivity and personnel data. However, the introduction of the balanced scorecard allowed managers to look at a unique way of measuring performance. According to Kaplan and Norton (1992, p.79), the combination of the BSC four perspectives “helps managers understand many interrelationships”. This in turn, according to these authors, “transcends the traditional notion about functional barriers” and ultimately
“leads to improved decision making and problem solving”. In the context of this study, Kaplan and Norton’s balanced scorecard is seen as the most appropriate method to improve and develop employee performance. The financial performance target required by the stores in the study is dependent on non-financial components: customer service, seamless system processes, and the technical competencies of the managers.
The inclusion of performance measurement as part of a comprehensive performance management system, is seen as imperative in today’s competitive environment. The reason for this, according to Eker and Eker (2009), is that organisations need to create value for both shareholders and customers in a competitive environment. The best way to do this, according to Eker and Eker (2009), is to continuously monitor activities and processes, compare standard targets with actual results, reveal reasons for the deviations and perform necessary corrections, and finally convey the organisation’s strategy to employees.