Performance Management

Performance management has developed from a very operational focus to a more strategically oriented concept, i.e. where it plays an integral role in the formulation and implementation of strategy (Scott-Lennon, 1995). It is this strategic impetus which differentiates it from performance appraisal. Performance management seeks to align a number of processes (e.g. performance related pay systems) with corporate objectives (McKenna and Beech, 2008). Theoretically it involves a shared process between managers, individuals and teams where goals are agreed and jointly reviewed. Further, corporate, divisional, departmental, team and individual objectives should all be integrated. Performance appraisal is a crucial element of the performance management process, involving a formal review of individual performance. It is contended that performance management represents possibly the greatest opportunity for a human resource (HR) system to make a telling contribution to organisational performance (Sparrow and Hiltrop, 1994). It represents a system that can inform how the firm's human resources contribute to the organisation's strategic objectives. Unfortunately the extent to which it is an effective and useful system in practice remains open to question. For example, the high use of various facets of performance management does not always correlate with high results regarding perceived effectiveness (CIPD, 2005). This chapter provides a contemporary review of performance management which is now believed to be used in some form or other in most organisations (Lawler, 2003; CIPD, 2005). We begin by defining performance management and reviewing its evolution. We then consider the performance management process by applying a critical lens to some of the main approaches set out thus far. Following this, we consider the primary tool used in performance management systems, namely performance appraisal. We then discuss some of the more contemporary developments including the use of 360-degree feedback and forced distribution, before concluding. Please contact author for copy of this article