Performance management is a core business process (Hartle, 1997) that attracts an ever-growing amount of attention (Haligan, 2010). Its primary objective is to obtain the best performance from individual employees and teams in an organisation as well as improve the overall performance of the business. Hence, effective performance management involves sharing the same objectives, setting goals and targets that need to be achieved and then effectively managing, coaching, motivating, evaluating and developing employees in a way that allows such shared goals to be consistently met in an effective and efficient manner (Dransfield, 2000).
There is no precise agreement of what a perfect performance management programme should involve. Nevertheless, the most commonly used elements are: clear corporate strategy, SMART goals, effective performance appraisal, performance-based pay and regular management review (Winfield, 2004). A number of actions can arise as a result of the performance review, such as new employee development plan, the allocation of performance-related pay or bonuses as well as a career progression (Bacal, 2004).
The beginning of managing individual and team performance in a holistic way dates back to the 1980s (Armstrong, 2005a) and nowadays the system of managing performance in a continuous way is widely used in some form or other in most organisations (Gooier, 2000). However, as noted by Armstrong (2009) instead of being praised, performance management has attracted a lot of criticism from both scholars as well as practitioners.
As claimed by Winstanley (2000), when it comes to motivational aspect and technical effectiveness performance management is one of the most heavily criticised human resource management practises. And Grint (1993 in Redman, 2009, p. 186) even states that “rarely in the history of business can such a system have promised so much and delivered so little”. The critics of performance management are divided into two groups. Most practitioners and some academics claim that the idea behind performance management is good but in reality it does not bring expected results.
Another group that consists mainly of academics is of the opinion that performance management initiative is bad and it simply does not work. The academic critique of performance management paradigm can be discussed from different angles. Winstanley (2000) identifies three main critical approaches to performance management, functionalists, radical and humanistic as a basis for a debate. The functionalist critique of performance management is classified under three headings: problem in operationalisation, subjectivity and bias, performance management and effectiveness.
As far as problems in operationalisation are concerned, performance objectives ought to be SMART- Specific, Measurable, Achievable, Realistic and Time-bound (Robertson, 2007). Nonetheless, as argued by the functionalists, in practise performance objectives and organisational goals are hard to design and agree upon. They are notoriously difficult to apply to the whole of an employee’s job and may lack flexibility when it comes to responding to changes (Torrington, 2009). Other criticisms relate to the problem of appraisal itself.
Opponents of performance management argue that the problems with the system are very often caused by the over-bureaucratisation of the process. Another reason for the status quo is the lack of time and devotion to the process that is often seen as unimportant. Line managers are mostly to blame as they are reluctant to get actively involved and they do not perform their duties well. Moreover, in most cases too much emphasis is put on rewards rather than employee development (Collings, 2009).
As concerns subjectivity and bias, unfairness has led to loss of confidence in the effectiveness of performance management in many organisations (Elegbe, 2010). Winstanley (2000) divides unfairness into two sorts: procedural unfairness, with regard to methods used and outcomes fairness, concerning the effects it has on people. In most cases lack of fairness arises from the bias and subjectivity of the evaluator and appraiser (halo and horn effect, similar-to-me effect, stereotyping) along with their lack of skills and proper training in equal opportunities.
The results of a survey conducted by Armstrong and Baron (1998 in Torrington, 2009) reveals that over half of employees were of the opinion that individual ratings were based on manager’s liking or disliking of an employee rather than an objective assessment. Thus, the whole process of rating the performance is heavily criticised by the staff that deride the rating system and see it as “subjective and inconsistent” (Torrington, 2009, p. 110). With regards to performance management and its effectiveness, questions have been raised as to whether it actually meets its set objectives (Williams, 2002).
Critics have been questioning whether performance management efforts actually result in improving performance (Grote, 2002) and whether or not they have a positive impact on employees’ motivation (Price, 2007). The uncertainty in the effectiveness of performance management programmes is strengthened by the lack of conclusive evidence that adopting and practising performance management lead to improved performance at all (Winstanley, 2000). And this claim has been supported by research evidence.
In a recent survey of employee attitudes conducted by the HR consulting firm Watson Wyatt, only 30 per cent of employers said they believed their firm’s performance management programme actually had a positive impact on employee performance (Bohlander, 2010). As highlighted by a number of authors, performance management practises “are often perceived as forms of control that are inappropriately used to ‘police’ performance” (Armstrong, 2009, p. 51). Thus, they can cause negative site effects such as demoralisation, demotivation of the workforce as well as overbureaucratisation (Watkins, 2010).
Although enhancing business and employee performance was the main reason behind introducing performance management systems, the on-going surveys and case studies conducted in the UK by the IPD were unable to show any association between outstanding organisational performance and the presence of a formal performance management scheme (Bevan & Thomson, 1992 in: Winstanley, 2000). William Deming and Phillip Crosby believe there are two main reasons behind performance management not delivering expected results. Firstly, the system is too complex, difficult and problematic for most people managers and employees.
Secondly, most schemes are very poorly designed and administered (Armstrong, 2009). What’s more, the evidence against the success of performance management is particularly strong when the effects of combining it with performance related pay (PRP) are also scrutinised. In recent years a significant amount of research has been conducted regarding the effectiveness of this method of renumerating employees and there is some strong evidence that this concept does not always work (Armstrong, 2004). As claimed by Taylor (2005, p. 86) the concept of PRP will never succeed due to the fact that “its capacity to demotivate outweighs its positive motivational effects”. In addition to that the incentive remuneration cannot buy a permanent compliance. Therefore, it improves the performance of employees only temporarily which, as a result, makes it difficult to focus their attention on long-term goals (Armstrong, 2005b). Last but not least, PRP can also demotivate unrewarded. It can cause unhealthy competition and jealousy between colleagues and may have a negative impact on teamwork.
People tend to concentrate more on their own objectives (Armstrong, 2004) thus affecting teamwork, resulting in poor communication and lowering the performance level (Cooper, 2004). From the radicalists point of view on the exercise of power and control, performance management is nothing more but a new form of “Taylorism”. Performance management is a means of controlling the labour process through firstly setting performance objectives and deciding on the most effective way of measuring it and then supervising and evaluating employees’ efforts to ensure organisational goals are met (Winstanley, 1996).
Carter (1996 in Flood, 2000) raises a question in regards to performance management being ‘arms’ length regulations’ or ‘boundary control’. The radicals claim that in highly hierarchical organisations various components of performance management such as appraisal, performance-related pay and behavioural selection criteria have become a part of a bigger managerial plan to substitute direct with indirect forms of control where employees have less rights (Winstanley, 1996). As far as a postmodern perspective is concerned, it examines issues of power, control and surveillance in regards to performance management.
Some critics argue that from a point of view of the appraised employees this form of managerial control is less ethical than other methods. Even though it enables “more discretion over how work gets done”, it can develop into a formal police state, where all evidence and information about employees are collected and where the management spies on the staff instead of visibly and directly supervising them. Hence, Townley (1993) draws on a work of Foucault (1997) and perceives appraisal as a prison (‘information panopticon’) with managerial power becoming stronger and seen as legitimate, rational and objective (Winstanley, 2000 p. 98). Some critics have also strongly opposed the behavioural approaches to performance management. The critical management studies disapprove of Skinner’s (1953) theory of operant conditioning and rewarding desired behaviour in order to reinforce it and punishing unwanted behaviour in order to reduce it (Armstrong, 2009). It has been recognised that focusing too much on rewarding employees’ positive behaviour can result in strengthening extrinsic and weakening intrinsic forms of motivation (Armstrong, 2004).
From a humanistic approach to performance management, there are few issues that should be dealt with in order to make the process more ethical. In order to resolve the problems highlighted by the functionalists the presence of unfairness, bias and subjectivity should be resolved by introducing procedural fairness to reduce the negative impact it has on employees. The basis for the decision-making should be examined and performance evaluation criteria need to be clearly stated to everyone. In case of any misconduct employees ought to have the right to appeal against manager’s ratings.
In addition to that, performance management should not be simply imposed on individual employees. Moreover, as far as privacy is concerned, employees’ files and appraisal review findings must be kept confidential at all times. An ethical answer to the radical critique of performance management that sees it as an intrusive managerialist control of passive individuals would be to follow the human relations approach to work and enable greater employee involvement and participation in the design and conduction of the process.
Giving voice to stakeholders and seeking their views on the process would enable employees to be seen as ‘creators’ rather than just ‘victims’ of performance management practices. Furthermore, radicals recognise pluralism as the main ideology in most organisations. In this case it may be difficult to make a consensus when designing the most appropriate performance measurements and the operation strategy. Therefore, an effective mechanism is needed to ensure procedural fairness where all parties, not just the power holders, are heard (Winstanley, 1996).
To conclude, performance management is an important business process. However, despite its growing popularity in most organisations, practitioners and academics have argued that the traditional models of performance management are mostly not succeeding in meeting their set objectives. Instead of enhancing employee performance the system tends to be hard to design and implement. Rather than being viewed as a developmental tool, performance management is perceived as a controlling apparatus of bureaucratic management that is ambiguous and demotivating for the staff.