performance management literature review pdf

• A-Z Publications

Annual Review of Organizational Psychology and Organizational Behavior

Volume 6, 2019, review article, the evolution of performance management: searching for value.

• Elaine D. Pulakos 1 , Rose Mueller-Hanson 2 , and Sharon Arad 3
• View Affiliations Hide Affiliations Affiliations: 1 PDRI, Washington, DC 22209, USA; email: [email protected] 2 Community Interface Services, Carlsbad, California 92054, USA; email: [email protected] 3 PDRI, Minneapolis, Minnesota, 55401, USA; email: [email protected]
• Vol. 6:249-271 (Volume publication date January 2019) https://doi.org/10.1146/annurev-orgpsych-012218-015009
• First published as a Review in Advance on July 13, 2018
• Copyright © 2019 by Annual Reviews. All rights reserved

This article reviews the history of performance management (PM), beginning with performance evaluation. We discuss various strategies that have been used to enable accurate ratings as well as cognitive processes and contextual factors that have been shown to significantly impact ratings. We raise questions about the concept of true performance and whether raters can be enabled and motivated to make accurate ratings. We progress to discussing more structured and comprehensive PM processes that typically involve cascading goals, goal setting, competency modeling, evaluation of behavior and results, and implementation. These systems have proven to be tedious and low-value, resulting in unprecedented, wide-spread experimentation with innovative practices to move companies away from heavy PM processes to simpler, cost-effective strategies that actually drive performance. These have ranged from abandoning ratings to implementing innovations in goal-setting, real-time feedback, coaching, and PM behavior change. Directions for future research and practice are discussed.

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Please note you do not have access to teaching notes, managing the most important asset: a twenty year review on the performance management literature.

Journal of Management History

ISSN : 1751-1348

Article publication date: 18 January 2022

Issue publication date: 6 May 2022

The three objectives served by this review are to provide readers a limpid insight about the topic performance management (PM), to analyse the latest trends in PM literature and to illustrate the theoretical perspectives. It would be fascinating for the practitioners and researchers to see the latest trends in the PM system, which is not yet covered in previous reviews. The study covers the historical and theoretical perspectives of human resource management practices. We also try to unveil some of the theoretical debates and conflicts regarding the topic.

Design/methodology/approach

We reviewed 139 studies on PM published within the last 20 years (2000–2020). The method used here is the integrative review method. The criteria used to determine studies are articles from peer-reviewed journals regarding the PM system published between 2000 and 2020. The initial search for studies was conducted using an extensive journal database, and then an intensive reference-based search was also done. Each selected article was coded, themes were identified, and trends for every 5 years were determined. All the articles were analysed and classified based on the methodology used to identify qualitative and quantitative studies.

The review concludes that PM literature's emphasis shifted from traditional historical evaluations conducted once or twice a year to forward-looking, feedback-enriched PM systems. By segregating the studies into 5-year periods, we could extract five significant trends that prevailed in the PM literature from 2000 to 2020: reactions to PM system, factors that influence PM system, quality of rating sources, evaluating the PM system and types of the PM system. The review ends with a discussion of practical implications and avenues for future research.

Research limitations/implications

It is equally a limitation and strength of this paper that we conducted a review of 139 articles to cover the whole works in PM literature during the last 20 years. The study could not concentrate on any specific PM theme, such as exploring employee outcomes or organizational outcomes. Likewise, the studies on public sector and non-profit organizations are excluded from this review, which constitutes a significant share of PM literature. Another significant limitation is that the selected articles are classified only based on their methodology; further classification based on different themes and contexts can also be done.

Originality/value

The study is an original review of the PM literature to identify the latest trends in the field.

• Performance management (PM)
• Performance appraisal
• Performance measurement

Justin M.A., E. and Joy, M.M. (2022), "Managing the most important asset: a twenty year review on the performance management literature", Journal of Management History , Vol. 28 No. 3, pp. 428-451. https://doi.org/10.1108/JMH-04-2021-0023

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Performance Management System. A Literature Review

• First Online: 01 January 2013

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• Chiara Demartini 2  

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

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This Chapter proposes a broad systematic review of PMS design, describing the evolution of the approaches to PMS design, based on the application of theories; introducing both concepts and frameworks that characterise the field and clearly call out for more research on a comprehensive PMS framework; and showing how PMS mechanisms should relate to each other in order to develop both efficiency and innovation, which result in long-term survival. From the review on PMS design, we can argue that effective design of PMS design is contingent to both external and internal variables; financial performance measures are more and more assessed together with non-financial performance measures; the link between PMS and strategy should be enacted trough different kind of PM mechanisms; PMS is a dynamic package of PM mechanisms, which should be considered as a whole in order to assess the overall effectiveness. Finally, since the analysis of the effect of single mechanisms on the overall effectiveness is partial and problematic, there is a call for more loosely coupled PMSs, which develop both control and flexibility.

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The transition from measurement to management of performance has been called the second wave of knowledge management, since in the first wave “knowledge management – in particular in Nonaka’s view – concerns the single individual’s personal tacit knowledge and the subsequent problem of distributing such knowledge to other individuals in the organisation”, while in the second wave “knowledge management is about management control where managers combine, apply and develop a corporate body of knowledge resources to produce and use value around the company’s services” (Mouritsen and Larsen 2005 : 388).

Anne Huff defined the systematic literature review as the “explicit procedures to identify, select, and critically appraise research relevant to a clearly formulated question” (Huff 2009 : 148).

Although the review is focused on ‘performance management’ and ‘performance management system’, the search terms included other concepts, which are closely related to the main research question.

The sophistication of the management accounting systems has been defined as the “capability of an MAS to provide a broad spectrum of information relevant for planning, controlling, and decision-making all in the aim of creating or enhancing value” (Abdel-Kader and Luther 2008 : 3).

Previous studies on leadership style analysed the effect of this variable on budgetary participation, and the results were statistically significant (Brownell 1983 ).

Tolerance for ambiguity measures “the extent to which one feels threatened by ambiguity or ambiguous situations” (Chong 1998 : 332).

TCE develops the idea that controlling complex economic transactions by “hard contracting” is expensive and an optimal choice between firm and market governance should be taken according to asset specificity. “If assets are non-specific, markets enjoy advantages in both production cost and governance cost respects […]. As assets become more specific, however, the aggregation benefits of markets […] are reduced and exchange takes on a progressively stronger bilateral character” (Williamson 1981 : 558).

Even though the first framework developed four perspectives (financial, internal business, customer, and innovation and improvement), Kaplan and Norton specified that each firm, or unit, using the BSC should adjust the number and focus of perspectives and their measures to the specific case under analysis. Therefore, the number of perspectives can be higher than four and the perspectives caption can be changed according to the strategic issues that the firm has to monitor in order to be successful.

Together with the BSC, other performance measurement systems based on both financial and non-financial performance measures have been developed, such as the Results and Determinants (Fitzgerald et al. 1991 ), the Performance Pyramid (Lynch and Cross 1995 ), and the PISCI (Azofra et al. 2003 ).

According to Kim and Oh, the performance measures related to R&D departments should be based on behavioural and qualitative measures, such as “leadership and mentoring for younger researchers”, and appraised by a “bottom up (e.g., R&D researchers’ evaluation of their own bosses say, R&D managers) as well as horizontal (e.g., peers and/or colleagues)” evaluation scheme (Kim and Oh 2002 : 19).

Simons described the old management control philosophy as a “command-and-control” one, in which strategy setting follows a top-down direction, a lot of emphasis is put on standardization and efficiency, results are compared to and should be aligned to plan, and much effort is devoted to keeping things on track and minimizing the number of “surprises”. On the other hand, he pointed out that the new management control philosophy is more concerned with “creativity […], new organizational forms, […] the importance of knowledge as a competitive asset”, which has resulted in “market-driven strategy, customization, continuous improvement, meeting customer needs, and empowerment” (Simons 1995 : 3).

Mission statement, vision and corporate credo are all examples of “organizational definitions”.

However, Simons also warned about setting boundaries that could inhibit adaptive change and survival ( 1995 : 55–53).

Benefits from managerial creativity relate to all the new alternatives and solutions that managers can invent in trying to either create value for the organization or solve problems (Christenson 1983 ; Nelson and Winter 1982 ), while dysfunctionalities refer to research activities that are either too risky or too vague, and thus not value creating.

Argyris and Schon also called the intended strategy an “espoused theory” in contrast to “theory-in-use” (Argyris and Schon 1978 : 10–11).

Simons argued that critical performance variables are “those factors that must be achieved or implemented successfully for the intended strategy of the business to succeed” (p. 63); they can be identified through effectiveness and efficiency criteria (Anthony 1965 ). He also agreed with Lawler and Rhode ( 1976 ) that critical performance variables should be related to objective, rather than subjective measures; complete, instead of incomplete; and responsive, rather than unresponsive, measures. Simons also posited that all the three features rarely occur in diagnostic control systems (Simons 1995 : 76).

Simons asserted that in “normal competitive conditions, senior managers with a clear sense of strategic vision choose very few – usually only one – management control system at any point in time” (Simons 1991 ). The reasons for this limited choice are related to both economic and cognitive, as well as strategic issues. Since the interactive use of control systems require managerial attention, managers will be distracted by other day-to-day operations, which can be handled only for one system at a time. From a cognitive perspective, individuals can cope and make decisions simultaneously only with a limited amount of information; otherwise they will be overwhelmed by data. From a strategic standpoint, “the primary reason for using a control system interactively is to activate learning and experimentation” (Simons 1995 : 116); therefore it is better to avoid poor analysis, or decision paralysis coming from too many projects under analysis.

Nonetheless, Collier acknowledges the implementation of the beliefs system lever of control (Collier 2005 ).

She also stressed that investigating “how differences in interpretation of strategic contingencies shape management control systems would enrich Simons’ model” (Gray 1990 : 146).

The portfolio of management control mechanisms is made up of “standard operating procedures, position descriptions, personal supervision, budgets, performance measurement, reward systems and internal governance, and accountability arrangements [as well as …] less obtrusive forms of control, such as personnel selection, training and socialization processes” (Abernethy and Chua 1996 : 573).

An example of such frameworks is the value based management tool introduced by Ittner and Larcker ( 2001 ).

Mission has been defined as the “overriding purpose of the organization in line with the values or expectations of stakeholders”, while the vision develops the “desired future state: the aspiration of the organization” (Johnson et al. 2005 : 13).

In their work, Malmi and Brown specified that, although their framework represents a broad typology, it is also a parsimonious one, since it encompasses only five types of control (Malmi and Brown 2008 : 291).

Merchant and Van der Stede’s framework develops different forms of control according to the different objects under control, which are culture, personnel, action and results controls (Merchant and Van der Stede 2007 ).

Nonetheless, the authors acknowledged that culture may sometimes be beyond managerial control.

On the issue of a tentative framework, the authors call for “further research [that] should reveal the missing and unnecessary elements in it” (Malmi and Brown 2008 : 295).

Although budgets can cover a shorter, or longer period, it is usually based on a 12-month period.

Giorgio Brunetti stressed that both purposes should be accomplished by the management control system, although one of the two may be “stressed” (Brunetti 1979 : 69) a little bit further, indeed, he argued that a control system, which is uncoupled from the rewarding system, results in an amount of information aimed at sustaining, rather that coordinating, operations (p. 70).

In line with the contingency approach, the effective design, according to Brunetti, lies in the “congruency”, or “fit” of management control system’s variables with both management control system’s inputs and outputs (Brunetti 1979 : 98).

Other limitations to the cybernetic approach to the design of management control system can be found elsewhere in this work (§ 2.3).

To Mella, a system of transformation is an “‘entity’ able to transform certain ‘objects’ that enter the system into different ‘objects’ which leave the system” (Mella 1992 : 456).

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Demartini, C. (2014). Performance Management System. A Literature Review. In: Performance Management Systems. Contributions to Management Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-36684-0_3

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Chapter 3: Literature Review: Performance /Employees Productivity Management 3.1. Performance Management 3.2. Performance Management – Process Chapter 3.1: Performance Management

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