CHAPTER 3 LITERATURE REVIEW: PERFORMANCE MANAGEMENT SYSTEMS
In this chapter, the conceptual aspects of PMSes and the PMS implementation cycle are discussed. Managing performance through a performance management system is important for institutions. This chapter presents a discussion of contemporary performance management systems.
The concept of “performance management”
The Community Foundations of Canada (2017) defines PM as a process by which managers and employees work together to plan, monitor and review an employee’s work objectives and overall contribution to the organization. More than just an annual performance review, performance management is the continuous process of setting objectives, assessing progress and providing on-going coaching and feedback to ensure that employees are meeting their objectives and career goals.
The United Nations Children’s Fund (2016) describes PM as follows:
Performance management focuses on the effective management of people to achieve organizational goals and better serve its customers and assists in creating a work environment in which people are enabled to perform to the best of their abilities. It is an on-going process through which managers and their employees gain a shared understanding of work expectations and goals, exchange performance feedback, identify learning and development opportunities, and evaluate performance results.
Varma, Budhwar and DeNisi (2008:40) define PM as “a range of practices an organisation engages in to enhance the performance of a target individual or group with the ultimate purpose of improving organisational performance”. PM thus has several processes (also referred to as “practices”, “activities”, or “steps”) that must be managed. These can be classified as performance planning, monitoring, and reviewing. PM has come to signify more than just a list of activities aimed at measuring and adapting employee performance.
The approach to PM has over the years shifted from dictating to discussion, creating understanding, and reaching agreement on the objective(s), based on performance indicators, between the leader and the employee (Abay 2002:7; Den Hartog, Boselie & Paauwe2004:557; Torrington & Hall 1987:291, 300). PM is not only about assessing the individual employee; it is an ongoing and mutual process, where the employee, with the assistance of the employer, strives to improve their individual performance and contribution to the organisation’s wider objectives (Hellriegel, Jackson, Slocum, Staude, Amos, Klopper, Louw & Oosthuizen 2004:249). Armstrong (1997:232) correctly concludes that PM is based on management by agreement, rather than management by command. To this end, deliverables expected of employees must be aligned and defined, along with employees’ responsibility. Failure to meet the desired expectations should entail accountability. Employees who cannot meet their targets will have the opportunity to develop their competencies through training and their personal effort.
Furthermore, assessment of performance is not the end of the process anymore. Performance evaluation is now regarded as a tool that helps to determine how employees contribute to the big picture of the organisation (Green 2005:3). In this context, performance assessment is therefore an aspect of performance management. The focus of performance management is on the skills and capabilities development of human capital, thus enhancing organisational capability and realising achievement of sustained competitive advantage (Armstrong 2009:59).
The working definition of PM in the Ethiopian Civil Service Training Manual (2005:56) is in line with current international perspectives on PM. It defines PM as “a strategic and integrated approach to deliver success to organisations by improving the performance of the people who work in them and by developing the capabilities of team and individual contributors”.
In general, performance management (PM) aims to ensure a bottom-line profit, doing jobs better than competitors, maximising organisational effectiveness, achieving organisational objectives, and assigning or deploying resources effectively (Torrington & Hall 1987:291).
The concept of “performance management system”
Effective PM starts with thoughtful planning, which should permeate monitoring or supportive supervision and evaluation processes. To develop, integrate and manage all these processes requires performance management strategies. A PMS assists an institution in successfully implementing its performance management strategy (Varma et al 2008:3). To this end, a PMS involves the setting of corporate, departmental and team objectives, and the cascading down of these strategic objectives in a fair and equitable manner to a meaningful set of targets for every individual involved. Stone (2008:40) explains that a PMS reveals a strategic link with the evaluation of performers’ knowledge, skills and ability. Ultimately, a PMS aims at improving performance at individual, team, departmental and institutional level (Hervie 2016:88).
PMSes have the following processes and functions: planning performance, developing measurement tools, communicating expectations, monitoring and quantifying performance, appraising performance, seeking feedback on performance, and communicating personnel decisions and developments based on results (Gergely 2012:4). PMSes aim at improving employees’ understanding of service delivery, performance dialogue, and measuring performance against the strategic goals of the institution (Ochurub et al 2012:2).
The working definition of a PMS for this thesis is the process of managing the overall performance of an institution against initially-set strategic actions, goals and objectives, standards, and time limits, to ensure institutional effectiveness and to determine distribution of rewards among performers. The performance management cycle is discussed in the following section.
Performance management cycle
A performance management cycle helps a manager to design a structure for managing people’s performance in the organisation. This cycle is based on the basic elements of the PM process. PMSes have the following elements: planning performance, monitoring performance, measuring performance, providing feedback, training and development, and rewarding performance (Armstrong 2001:153). Diagram 3.1 shows the cycle of performance management.
Proper planning followed by implementation and monitoring, feedback on performance, capacity development, and reward systems, enhances the effectiveness of PMSes. It thus stands to be argued that proper application of the performance management cycle (presented in Diagram 3) to HEIs in Ethiopia would ensure institutional goal achievement.
In performance management, planning plays a leading role in identifying and prioritising tasks according to their urgency. Ying (2012:11) explains that in the PMS process, planning constitutes the primary stage of its cyclical steps. Planning is a continuous task that helps to encourage commitment and understanding, by linking individual work with the organisation’s goals and objectives. Planning entails the action of designing various activities, which are to be performed within a given period and in a given sequence. Boyne and Gould-Williams (2003:116) assert that planning leads managers to clarify their organisational objectives, and it provides a framework for allocating resources in relation to the organisation’s mission.
In order to establish common understanding of the measurement variables and expected deliverables, the supervisor and the employee must engage in consultative performance planning.
In this regard, Nel, Werner, Haasbroek, Poisat, Sono and Schultz (2008:167) state that in planning, specifying and clarifying the required responsibilities of a group or an individual performer, an action plan is essential to control and monitor the process. Satterfield (2003:15) asserts that the outcome of planning is to help meet the stated goals and to discharge the performers’ responsibilities. Smith et al (1990:118) identify the relationship between planning and performance by stressing that “if you have a quality plan your organisation performs well”. Although the researcher agrees with these authors on the importance of planning, he contends that a more balanced approach should be preferred, and that planning should not be seen as a guarantee of institutional success, but it should rather be regarded, as Hervie (2016:88) regards it, as the basis for performance appraisal and measurement. Performance management planning should be regarded as a prerequisite for institutional success.
Institutional objectives or strategic plans may not be effectively and fully implemented, due to a number of barriers, such as vision barriers, people barriers, resource barriers, and management barriers (Balanced Scorecard Collaborative 2002). The Balanced Scorecard Collaborative (2002) explains these barriers as follows:
Vision barriers: employees may not have the knowledge about their institution’s vision and strategy. Failure to understand the vision and the strategy can affect PMS implementation;
People barriers: linkage of individual and institutional objectives is important;
Resource barriers: time, energy, and money are not allocated to those things that are critical to the organisation. For example, if resources are not linked with the institutional strategy, achievement of institutional objectives may not be cost-efficient, resulting in wasted resources; and
Management barriers: the management must pay due attention to and focus on the strategic issues, rather than routine ones and short-term tactical decision-making. In order to plan, the following three questions should be considered: “Who to include in the planning process?”, “What to plan?”, and “How to plan?”
Who should be included in the planning process?
A plan can be prepared by the manager, or by a unit that is designated to do that. What matters here is the degree of employee participation and involvement in the planning process (Weldeyohannes 1996:24). Ying (2012:11) confirms that employee involvement in the entire planning process has motivational value, because it promotes commitment, common understanding, and a sense of ownership. Effective planning requires a shared understanding between the leaders and the performers of the HEIs on the institutional goals. A shared understanding can only occur if employees are involved in the planning process. Common understanding of the institutional goals enhances teamwork and ensures that employees understand what they are expected to contribute towards institutional goal accomplishment (Heslin et al 2009:104; Torrington & Hall 1987:317).
Designing a policy framework is essential for an effective PMS. Erasmus, Swanepoel, Schenk, Van der Westhuizen and Wessels (2005:276) indicate that designing a policy framework should be a collaborative process involving employees, customers, partners, and other professionals. Collaboration does not only give directions on implementation, but also ensures increased accountability. Ivancevich, Konopaske and Matteson (2011:182) argue that participation by the concerned role players in the process creates room for improvement and keeps stakeholders informed about improvements.
What to plan?
The question of what to plan covers a set of activities or actions to be performed in the so-called SMART (systematic, measurable, achievable, realistic, and time-bound) way, to ensure that the objectives of the institution are met. Planning includes identifying the key stakeholders, customers and employees of the organisation that should be involved in the planning (Ying 2012:11). Other steps or activities that should be planned for are
designing a policy framework,
developing a model or system,
signing performance agreements on PM,
undertaking performance evaluation, and
managing the outcome of the performance evaluation (Erasmus et al 2005:272). Policy development is an essential element and the first step of planning the management of performance at HEIs. In this context, institutional policy frameworks should focus on assessment of all the institutional operations. Policy should address aspects such as what is to be measured, who are responsible for measuring it, the period of evaluation, how results will be aligned with individual goals and achievement, and rewards. Spangenberg (1994:30) asserts
that a plan emphasises designing and defining the organisation’s mission, vision, strategy and goals.
The next step is developing the system itself. Erasmus et al (2005:275) explain that developing a performance measurement system means issuing evaluation formats or performance indicators. To ensure satisfactory performance practice, the system should be clear and easy to understand for all employees and management of the institution. Especially the link between individual effort and institutional strategic objectives must be well-defined (Banfield & Kay 2008:310).
The third step is performance agreement that refers to individual goal setting. As such, performance agreement supports goal-setting theory. For PM to be effective, it must link individual goals with institutional strategic objectives or goals. The critical issue in performance agreement is individuals’ contributions to the achievement of organisational targets. It is important to note that the process of signing a performance agreement is not in itself the end of the process; performance agreements need to be reviewed and examined regularly. The following section presents the “how” part of the plan.
How to plan?
The methods and ways of preparing the plan are discussed in this section. An institution’s success emanates from quality plan preparation and setting of objectives and goals. Cognisant of this idea, Spangenberg (1994:31) emphasises that the main goal and target of an organisation should be linked to individual/team objectives towards the needs of the customers. The planning department or a planner collects data about past performance and future needs, which helps it in prioritising activities. Williams (1964:72) stresses that planners need to attach due importance to prioritising activities, which will help to realise implementation of the plan, as it focuses on key functions to increase productivity and effectiveness. In addition, targets must be set for each performance area, which will drive employees towards achievement of the overall institutional goals (Ying 2012:11).
The term “performance monitoring” is defined as “[w]orkplace practices that focus on the collection of employee performance data in order to track their behaviour and performance” (Stanton 2015:3). Torrington and Hall (1987:327) suggest that performance monitoring is mainly concerned with overall assessment and overview of individuals’ activities and management of their performance, and that it does not rely on appraisal alone. Thus, performance monitoring should establish a more holistic view of PM to ensure institutional effectiveness. Performance monitoring is a process where individual performance is integrated with the entire system of the institution to measure its achievement and success. Stanton (2015:10) explains that performance monitoring enhances satisfaction through the implementation of fair work standards, and a monitoring and feedback system, and it provides mechanisms to enhance employee control over monitored tasks. Monitoring is simply collecting different information about the performance results of individuals, teams, and the institution, in order to review their work effectiveness and productivity. In addition, it specifies the required contributions of each employee, department or team to the success of the institution’s plan. In other words, performance monitoring is testing an individual’s effort against the priority objectives of the team, the department, or the institution.
Performance measurement is simply measuring employees’ performance and results. Performance management is a comprehensive overall appraisal of the institution’s performance, through ongoing and continuous assessment. In addition, PM focuses on the activities that link organisational strategic objectives with individual jobs. Measuring performance is an effort geared towards knowing the level of institutional outcomes, and it investigates whether a particular project, programme or target has been effective or has improved or has met its objectives (Bless, Higson-Smith & Kagee2006:182). One can understand that based on this conceptual definition of performance measurement, traditional performance measurement did not include the interests of stakeholders and the university community in measuring performance of HEIs in Ethiopia. Its emphasis was on internal evaluation of operations (i.e. the teaching-learning process), and external factors (i.e. the university community and stakeholders) were neglected. Traditional measurement did not reflect the overall operation and activities of HEIs.
As Balabonienė and Večerskienė (2014:605) explain, the importance of performance measurement is that it is essential to realise efficiency and effectiveness of HEIs in general and of each institution in particular. Cokins (2004:47) concurs that there are many factors that influence institutional performance negatively, which can be eliminated if employees better understand their institutional strategy and the key initiatives chosen to achieve it, and if supervisors select the correct performance measurement approach. To avoid evaluating tasks based on a single variable, as was done in the traditional measurement approach, performance measurement is now based on agreement with employees about which tasks should be performed, how the tasks should be performed, and what the stated targets are for a specific period. Buford and Lindner (2002:247) argue that a PMS is subject to various variables, which influence how effectively the system actually measures individual, group and department contributions in work settings. Performance measurement, using different indicators, can measure the overall performance of an organisation.
Examining past experiences and performance of an institution is necessary to determine the organisation’s results. Quality results are a major aspect of an organisation’s success. Boyne and Gould-Williams (2003:120) in this regard assert that an organisation’s performance is basically measured by focusing on the quality and the quantity of output and the effectiveness of service provision.
The literature cited above reveals that talking about measurement means talking about weighing up individual, team and institutional achievements according to the given and agreed-upon standards. Continuous and regular assessment of performers’ outcomes enables supervisors to identify whether they have met the institutional targets or not. Erasmus et al (2005:285) emphasise the importance of the performance agreement in relation to performance measurement. Banfield and Kay (2008:284) state that each “key result area” as stated in the performance agreement must be rated by the manager within the given range of standards. The Cranfield School of Management (2007) explains that performance measurement includes development of strategies and objectives, and the taking of action to improve performance based on the insight provided by the performance measurement, and this is why feedback is so important.
O’Reilly (2009:110) asserts that feedback is the provision of certain information about employees’ achievement and/or failure. Feedback is an important component for PMS, since the feedback provided by the supervisor enables employees to learn from their mistakes and develop their strengths for further achievement. In a PMS, feedback transmits information on performance results from the supervisor to the performer, in order to generate corrective action or to stimulate and motivate new action. The aim is for feedback to promote understanding of how well employees have been doing, and how effective their behaviour has been, so that appropriate action can be taken. This can be corrective action, where feedback has revealed that something has gone wrong, or, more positively, action taken to make the best use of the opportunities that feedback has revealed (Armstrong 2000:125–126). This means, as Lunenburg (2011a:3) latter elaborated, feedback helps employees to know their goal attainment, that is whether they have performed well, or they need further improvement on their task. Especially positive feedback plays a developmental role in building desirable behaviours that motivate and enhance employees’ effort (Xingshan, Ismael, Yin & Dan 2015:225).
Armstrong and Ward (2005:15) assert that a leader with the ability to provide to-the-point and fair feedback is most important to improve performance and correct underperformance. They add that leaders should not consider performance management as an additional task, but as part of their daily responsibilities.
Feedback in performance management should be constructive, in the sense that its aim is to point the way to further development and improvement, not simply to tell people where they have gone wrong (which is categorised as negative feedback). Rajasekar and Khan (2013:45) assert that providing constructive feedback for all performers during and after a performance measurement is vital for organisations to take full advantage of such activities. As mentioned above, feedback must nevertheless report on failures too. However, failures should not be dwelt on as opportunities for apportioning blame, but rather as opportunities for learning, so that the failures are less likely to be repeated in future (Armstrong 2000:126).
Heslin et al (2009:106) suggest that to reduce defensive behaviour, feedback should focus on a specific performance of an individual or team, rather than deal with characteristics of the individual or team. In addition, managers should not compare employees, and they should avoid talking about the performance of other employees when giving feedback to an employee. Feedback should be based on facts, not opinions, and it should be presented in such a way that it enables individuals to recognise and accept its factual nature (Armstrong 2000:126).
Armstrong (2000:127) provides the following guidelines for performance evaluation feedback:
Build feedback into the job. This will ensure timely and consistent feedback.
Provide feedback on actual events. Feedback must be based on the actual results or observed behaviour, and must be supported by evidence.
Do not judge. Feedback should be presented as a description of what has happened, but should not be accompanied by a judgement.
Select key issues, and stick to them.
Focus on aspects of performance that the individual can improve.
Provide positive feedback. Feedback should be on the things that the employee did well, in addition to areas for improvement.
London, Mone and Scott (2004:326) note that feedback can play a key role, along with goal setting, in promoting self-regulating and inspiring towards better endeavours. In general, feedback supports performance goals that are important to an organisation when it discovers errors, maintains goal direction, influences new goals, and provides information on performance capabilities and the effort or energy needed to achieve the goals. Hence, good results enhance an institution’s growth and its provision of quality products and/or services.
Performance results, however, are not always good, and hence, implementing a results-based performance system allows a way to deal with unsatisfactory performance results (Decenzo & Robbins 2007:261; Ndungu 2017:45). Unsatisfactory performance must be supported by capacity building for the employees who have failed to meet the expected results, to help to bring them on board. Banfield and Kay (2008:288) assert that unsatisfactory performance can be managed through training, retraining, coaching, mentoring, and creating an enabling working environment. Termination of employment may thus only follow unsuccessful attempts to assist through training, coaching, or mentoring.
Effective human resource development is a crucial component for institutional and national competitiveness in the global market (Ndungu 2017:44). Thus, staff development is a programme designed to improve employees’ competency for future work activities and assignments. Haile Selassie (2004:16) defines staff development as “a whole range of planned activities by which education personnel in active service have opportunities to further their education [and] develop their understanding of educational principles and techniques”. Hence, staff development assists to improve employees’ performance in their current jobs, by building up the required knowledge and skills (Dessler 2012:11). Developing staff through planned and designed training and development programmes is essential to establish knowledge, create entrepreneurial skills and enhance the innovative capabilities of performers. Development is not only for employees, but also for everyone in the university community, i.e. from top management to the front-line managers of the institution, because it enhances their strategy development, PM, and decision-making skills.
As argued by Rajasekar and Khan (2013:38), the training and development strategy and policy must be seen primarily as a means of assessing and addressing skill and knowledge deficiencies in an organisation, through capacitating, motivating and inspiring employees. The training and development policy should be put in writing, in order to provide an effective mechanism for structuring and governing the training and development function of an institution (Clardy 2013:5–15).
The training and development policy can help to pinpoint the key concerns of an institution, by enhancing its endeavours and empowering all performers in the implementation of policy and strategy issues.
In sections 2.1 and 2.5.4, the researcher already alluded to the importance of rewards, and that expectancy theory supports the argument that rewarding good performance is essential and plays a significant role in motivating employees. Some good practices are evident from the literature review: HEIs should develop their own rewards manuals; rewards should be informed and supported by performance results; rewards are essential to create expectancy of success and to motivate employees towards excellence; identifying the best performer at individual, team, departmental or college level promotes transparency and builds trust (Clardy 2013:11; Mntambo 2011:75).
As indicated above, rewarding performance is the sixth step in the PM cycle. Recognising individuals and teams for the effort they exert towards achievement of institutional goals is one aspect of rewarding good performance. According to Amoatemaa and Kyeremeh (2016:46), through formal and informal acknowledgement of an employee’s behaviour, effort and/or performance, their morale and energy are directed towards accomplishment of institutional goals and objectives. In this regard, Erasmus et al (2005:289) note that good performance should be encouraged with both financial and non-financial rewards, such as salary increment, offering a performance bonus, and recognition. The positive experience of being rewarded for successes and contributions encourages employees to improve on those areas where they have failed to perform or where they have performed unsatisfactorily (Hervie 2016:89). Rewards improve employees’ productivity and retention. As argued in expectancy theory, rewarding good performance also assists the institution to attract qualified people, retain current skilled personnel, and motivate the existing workforce to improve their performance and productivity (Ivancevich et al 2011:18; Mntambo 2011:719). In the following section, the researcher discusses some measurement instruments that are essential for implementation of PMSes in HEIs in Ethiopia.
TABLE OF CONTENTS
TABLE OF CONTENTS
List of abbreviations
List of abbreviated titles of laws and policies
List of diagrams
List of tables
List of figures
CHAPTER 1: OVERVIEW OF THE STUDY
1.2 Background to the study
1.3 Motivation for the study
1.4 Statement of the problem
1.5 Aim and objectives of the study
1.6 Significance of the study
1.7 Delimitation of the study
1.8 Research methodology
1.9 Structure of the final research report
1.10 Ethical clearance
1.11 Legitimation of qualitative and quantitative methods
1.12 Conclusion to the chapter
CHAPTER 2: LITERATURE REVIEW: A CONTEXTUALISATION OF PMSES IN ETHIOPIAN PUBLIC UNIVERSITIES
2.2 Theoretical framework
2.3 Civil service reform in Ethiopia
2.4 The importance of PMSes for higher education institutions
2.5 The principles underlying PMSes
2.6 Factors affecting successful PMS implementation
2.7 Conclusion to the chapter
CHAPTER 3: LITERATURE REVIEW: PERFORMANCE MANAGEMENT SYSTEMS
3.2 The concept of “performance management”
3.3 The concept of “performance management system”
3.4 Performance management cycle
3.5 Performance measurement instruments
3.6 Conclusion to the chapter
CHAPTER 4: RESEARCH METHODOLOGY
4.2 Research paradigm
4.3 Research approach
4.4 Research design
4.5 Research sites, population, and sampling
4.7 Demographic data of the respondents and participants
4.8 Data collection
4.10 Data-analysis and -interpretation procedure
4.11 Ensuring the scientific rigour of the study
4.12 The issue of research ethics
4.13 Conclusion to the chapter
CHAPTER 5: QUALITATIVE DATA PRESENTATION, ANALYSIS AND INTERPRETATION
5.2 Literature study
5.3 Document analysis
5.4 Qualitative data (interviews) presentation and analysis
5.5 Conclusion to the chapter
CHAPTER 6: QUANTITATIVE DATA PRESENTATION AND ANALYSIS
6.2 Exploratory analysis
6.3 Advanced analysis
6.4 Conclusion to the chapter
CHAPTER 7: DATA INTERPRETATION
7.2 Interpretation of analysed data
7.3 Conclusion to this chapter
CHAPTER 8: FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
8.2 Summary of the research
8.6 Suggestions for further research
8.7 Conclusion to the chapter
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