Nama : Diah Wulansari

NIM : C1B022018
Prodi : S1 Manajemen
Mata Kuliah : Manajemen Kinerja
Dosen Pengampu : Nur Hasanah, S.E., M.M

The concept of performance management

A. Performance management defined

Performance management is the continuous process of improving perfor mance by
setting individual and team goals which are aligned to the strategic goals of the
organization, planning performance to achieve the goals, review ing and assessing
progress, and developing the knowledge, skills and abilities of people.
Here are some other definitions :
 ‘Performance management is a continuous process of identifying, measur ing
and developing the performance of indivicuals and teams and aligning
performance with the strategic goals of the organization.’ (Aguinis, 2005)
 ‘Performance management is the system through which organizations set work
goals, determine performance standards, assign and evaluate work, provide
performance feedback, determine training and development needs and
distribute rewards.’ (Briscoe and Claus, 2008)
 ‘Performance management is a broad set of activities aimed at improving
employee performance.’ (DeNisi and Pritchard, 2006)
 ‘Performance management is the key process through which work gets done.
It’s how organizations communicate expectations and drive behav iour to
achieve important goals; it’s also about how organizations identify 8 The Basis
of Performance Management ineffective performers for development
programmes or other personnel actions.’ (Pulakos, 2009)
 ‘Performance management is regarded as a continuous, future-orientated and
participative system; as an ongoing cycle of criteria setting, monitor ing,
informal feedback from supervisors and peers, formal multi-source
assessment, diagnosis and review, action-planning and developmental
resourcing.’ (Shields, 2007)
Managing performance is what line managers do and performance manage ment is
supposed to help them do it. An effective system of performance management can
play an important part in increasing levels of employee engagement.

B. The Conceptual Framework

 The theoretical basis of performance management is discussed below under the
following headings:
 the meaning of performance;
 the factors affecting performance;
 underpinning theories;
 performance management and the psycholog.cal contract.

C. The Meaning Of Performance

It can be said that if you can’t define performance you can’t measure or manage it.
Bates and Holton (1995) pointed out that: ‘Performance is a multidimensional
construct, the measurement of which varies depending on a variety of factors.’ They
also stated that it is important to determine whether the measurement objective is to
assess performance outcomes or behaviour or both.
Latham et al (2007) emphasized that an appropriate definition of perfor mance is a
prerequisite for feedback and goal setting processes. They stated that a performance
theory is needed which stipulates:
• the relevant performance dimensions;
• the performance standards or expectations associated with different
performance levels;
• how situational constraints should be weighed (if at all) when
evaluating performance;
• the number of performance levels or gradient»;
• the extent to which performance should be ba»ed on absolute or
compara tive standards.
There are different views on what performance is. It could just mean outputs - the
results obtained. Or it could mean behaviour - how the results were obtained. Or it
could be both results and behaviour.
1. Performance as outcomes
Kane (1996) argued that performance ‘is something that the person leaves
behind and that exists apart from the purpose’
2. Performance As Behaviour
Campbell (1990) explained that: ‘Performance is behaviour and should be
distinguished from the outcomes because they can be contaminated by systems
factors.’ Aguinis (2005) was positive that: ‘Performance is about behaviour or what
employees do, and not about what employees produce or the outcomes of their work.’
They suggested that performance is multidimensional and that each dimension is
character ized by a category of similar behaviour or actions. The components consist
of: (1) job-specific task proficiency, (2) non-job specific proficiency (eg
organizational citizenship behaviour), (3) written and oral communication 9 10 The
Basis of Performance Management proficiency, (4) demonstration of effort, (5;
maintenance of personal discipline, (6) facilitation of peer and team performance, (7)
supervision/ leadership and (8) management/administration.
3. Performance As Both Outcomes and Behaviour
When people are said to be performing well it does not solely refer to what
results they deliver; it is also concerned with how they deliver them. As Brumbach
(1988) put it:
Performance means both behaviours and results. Behaviours emanate from the performer and
transform performance from abstraction to action. Not just the instruments for results,
 behaviours arc also outcomes in their own right - the product of mental and physical effort
applied to tasks - and can be judged apart from results.
Levels of individual performance are affected by a number of influences and
factors as discussed below.

D. Factors Affecting Performance

Four major influences on performance were identified by Harrison (1997):
o the learner, who needs the right level of competence, motivation,
support and incentives in order to perform effectively;
o the learner’s work group, whose members will exercise a strong
positive or negative influence on the attitudes, behaviour and
performance of the learner; The Concept of Performance Management
o the learner’s manager, who needs to provide continuing support and act
as a role model, coach and stimulator related to performance;
o the organization, which may produce barriers to effective performance
if there is no powerful, cohering vision; ineffective structure, culture or
work systems; unsupportive employee relations policy and systems, or
inappro priate leadership and management style.
These can be analysed into individual, systems and contextual factors.
Individual Factors
A formula for performance was produced by Blumberg and Pringle (1982) that
emphasized the importance of the organizational context. Their equa tion was:
Performance = Individual Attributes x Work Effort
x Organizational Support
A variation on the above was offered by McCloyet al (1994). They proposed that
a combination of three factors enables some people to perform at higher levels than
others:
1. Declarative knowledge (about facts concerning task requirements and goals).
2. Procedural knowledge (a combination of knowing what to do and how to do it).
3. Motivation (level and persistence of effort).

The ‘AMO’ formula put forward by Boxall and Purcell (2003) is a combination of
the Vroom and the Bailey et al ideas. This model states that performance is a 11 12
The Basis of Performance Management function of Ability + Motivation +
Opportunity to Participate (note that the relationship is additive not multiplicative).

System Factors
Individual performance is influenced by systems factors as well as person factors
(Cardy and Dobbins, 1994). Systems theory as formulated by Miller and Rice (1967)
states that organizations should be treated as open systems that transform inputs into
outputs within the environments (external and internal) upon which they are
dependent.
Systems factors include the support people get from the organization and other
factors outside the control of individuals. Jones (1995) proposed that the aim should
be to ‘manage context not performance’ and went on to explain that.
Contextual Factors
Systems operate within the context of the organization. Nadler and Tushman
(1980) commented that:
The manager needs to understand the patterns of behaviour that arc observed t o predict in
what direction behaviour w ill move (particularly in the light o f management action) and to
use this knowledge to control behaviour over the course of time. Effective managerial action
requires that the manager be able to diagnose the situation he or she is working in.
This point should be extended to include the people managers manage - they
equally want to know and are entitled to know the situation they are work ing in.

Organizational Culture
Organizational culture is the pattern of shared beliefs, norms and values in an
organization that shape the way people act and interact and strongly influence the
ways in which things get done. Frcm the performance manage ment viewpoint one of
the most important manifestations of organizational culture is management style.
Employee Relations Climate
The employee relations climate of an organization represents the perceptions of
employees and their representatives about the ways in which relationships between
management and employees are maintained.
People
Performance management processes will vary in accordance with the compo
sition of the workforce. For example, a firm employing mainly knowledge workers is
likely to adopt a different approach than a manufacturing firm. Within the
organization, approaches may vary between different groups of employees. In the
Victoria and Albert Museum, for example, it is recognized that the way in which
objectives are agreed by a curator will be different from how the standards of
performance are agreed for security guards.
Structure
A hierarchical or functional organization structure with well-defined layers of
authority is more likely to support a directive, top-down approach to setting objectives
and reviewing performance. A flatter, process-based struc ture will encourage more
flexible participative approaches with an emphasis on teamwork and the management
of performance by self-directed teams.
A structure in which responsibility and authority are devolved close to the scenes
of action will probably foster a flexible approach to performance management. A
highly centralized organization may attempt to impose a monolithic performance
management system, and fail.
Tecnology and Working Practices
There is no conclusive evidence that advanced tezhnology and working prac tices
are associated with advanced approaches to performance management.
 Size
They described the management process in small firms as likely to be charac
terized by the highly personalized preferences, prejudices and attitudes of the firm’s
entrepreneur or owner, who will probably work close to the operating process.
The Exsternal Environment
If the external competitive, business, economic and political environment is
turbulent - which it usually is - organizations have to learn to respond and The
Concept of Performance Management adapt rapidly.
E. Underpinning Theories
Performance management practice is underpinned and explained by the theo ries
summarized below. Goal theory has perhaps been the most influential because setting
goals and assessing performance against the goals are such a significant part of a
conventional performance management system.

Goal Theory
Goal theory as developed by Latham and Locke 11979) highlights four mech
anisms that connect goals to performance outcomes: (I) they direct attention to
priorities; (2) they stimulate effort; (3) they challenge people to bring their knowledge
and skills to bear to increase their chances of success and (4) the more challenging the
goal, the more people will draw on their full repertoire of skills. This theory underpins
the emphasis in performance management on setting and.

Expectansi Theory
Performance management is concerned with influencing behaviour to achieve
better results. It operates in line with expectancy theory by defining the relationship
between effort, achievement and reward thus motivat ing people and providing them
with a sense of direction.

Control Theory
Control theory provides the basis for feedback intervention theory as formulated
by Kluger and DeNisi (1996) - this theory focuses attention on feedback as a means of
shaping behaviour.

Reinforcement Theory
Reinforcement theory (Hull, 1951) states that successes in achieving goals and
rewards act as positive incentives and reinforce the successful behaviour that is
repeated the next time a similar need arises. Positive feedback there fore provides for
positive reinforcement. Constructive feedback can also reinforce behaviours, which
seek alternative means of achieving goals.

Social Learning Theory

Social learning theory, as formulated by Bandura (1977), combines aspects of
reinforcement and expectancy theory. It recognizes the significance of the basic
concept of reinforcement as a determinant of future behaviour but also empha sizes
the importance of internal psychological factors, especially expectations about the
values of goals and the ability of individuals to reach them.
 Self Efficacy Theory
Self-efficacy theory as also developed by Bandura (1982) indicates that self
motivation will be directly linked to the self-belief of individuals that they will be able
to accomplish certain tasks, achieve certair. goals or learn certain things. An important
aim of performance management is to increase self-efficacy by giving individuals the
opportunity to consider and discuss with their managers how they can do more. But
the onus is on managers to encourage self-belief in the minds of those with whom
they discuss performance and development.

F. Performance Management and the Psychological Contact

A psychologi cal contract is implied and inferred rather than stated and agreed. It
cannot necessarily be spelt out in detail because it evolves over time. But performance
management processes can be used to ensure that performance expectations are
agreed and reviewed regularly. And this should contribute to the clarification of the
psychological contract and the employment relationship.

Aims of Performance Management

Ideally, the overall objective of performance management is to develop and
improve the performance of individuals and teams and therefore organiza tions. When
done well, it ensures that people are clear about what success 19 20 The Basis of
Performance Management looks like and the part they play in delivering this success.
A strategic approach means that performance management processes such as setting
objectives are explicitly designed to align individual objectives with the
organization’s stra tegic objectives.
Respondents to the e-reward 2014 survey cf performance management reported
that their most important performance management objective was:
o to improve organizational performance - 33 per cent;
o to align individual and organizational objectives - 22 per cent;
o to develop a performance culture - 17 per cent;
o to improve individual performance - 14 per cent;
Principles of Performnce Management
Two further important principles were suggested by Sparrow and Hiltrop (1994):
first, that top management must support and be committed to the system, and second,
that it should be owned and driven by line management. It is evident that managers
down the line will only take performance manage ment seriously if it is clear to them
that top managers believe in it and act accordingly. And performance management
will only work if line managers want it to work and are capable of making it do so.
Both these principles emphasize that the bad old days of performance appraisal as the
property of the personnel or HR department should be over although they often aren't.

G. Ethical Principles
Performance management should also operate in accordance with agreed and
understood ethical principles. These have oeen defined by Winstanley and Stuart-
Smith (1996) as follows:
1. Respect for the individual - people should be treated as ‘ends in them selves' and not
merely as ‘means to other ends’.
2. Mutual respect - the parties involved in performance management should respect each
other’s needs and preoccupations.
3. Procedural fairness - the procedures incorporated in performance management should
be operated fairly in accordance with the principles of procedural justice.
4. Transparency - people affected by decisions emerging from performance management
processes should be given the opportunity to scrutinize the basis upon which decisions
were made.

Examples of Approaches to Performance Management

Performance Management Stages in AstraZeneca

1. Business role clarification - clear statement of agreed role and objectives
2. Performance planning - agreement of targets to achieve the ‘plan-do-eval uate'
elements of managing performance.
3. Performance development - agree skills required and prepare individual
development plan.
4. Performance measurement - provide ongoing feedback and an annual summary of
an employee’s performance (no overall ratings).

Civil Service Basic Design Principies

• Stretching objectives agreed at the beginning of the year.
• Individuals know the competencies and behaviours they are expected to
demonstrate. The Concept of Performance Management
• Regular discussions during year between individuals and their managers to
discuss progress.
• Formal meeting at the end of the year to record whether objectives have been
achieved and levels of competence demonstrated.

What makes good performance management - Scottish Parliament

• New staff know what is expected of them from the outset
• Everyone is clear about corporate goals and works towards them.
• Objectives are SMART.
• A system exists to accommodate day-to-day performance feedback
• Evidence is available to support assessments.
• The personal development plan is used to help self-developmental activi ties or
improve performance
• The line manager provides and the jobholder undertakes the training needed to
support the individual and the organization.

Thames Valley Police performance and development review process

• Key to the performance management strategy.
• Establishes strong employment relationships.
• Provides a route to individual, team and organizational performance planning. •
Secures future training and development.

Arguments for formal performance management systems

The arguments for having a formal system of performance management are that
it provides the means for management to:
• improve individual, team and therefore business performance;
• develop a performance culture;
• integrate individual and corporate objectives:
• guide individual and team effort to meeting cverall business needs;
• motivate and engage employees;
• recognize individual contribution;
• plan individual careers (talent management);
• introduce relevant and effective learning and development programmes to meet
identified needs.
Requirements for success
Performance management also needs to be evidence-based. Assessments of
performance and feedback should be based on facts not opinions. Evidence based
performance management refers to results, events, critical incidents and significant
behaviours that have affected performance in specific ways. It compares what has
actually happened with what was supposed to have happened. It refers to agreed
objectives, goals, success criteria and perfor mance measures, and uses the latter to
establish outcomes.