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CHAPTER
 PART ONE
FUNDAMENTALS OF
PERFORMANCE MANAGEMENT

Chapter 1: Introduction to Performance Management

Chapter 2: Defining and Measuring Performance
Chapter 3: Historical Perspective of Performance Management
Chapter 4: Goal Setting Theory and Expectancy Theory
Chapter 5: Performance Management Model and System

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 Historical Perspective of
Performance Management

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CHAPTER

Performance Management
 INTRODUCTION

From the very evolution of civilization, people have

been developing methods and systems of managing
performance and evaluating the performance in their
own ways. But there was no scientific approach for
either managing performance or its evaluation. The
true antecedents of performance appraisal cannot be
exactly traced. Armstrong and Baron (2006), in their
book “Performance Management” gave a short history
of performance management, which in brief is
presented below.

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Performance Management
 MERIT-RATING AND PERFORMANCE
APPRAISAL (EARLIER VERSIONS)
WD. Scott was the American pioneer who introduced
rating of the abilities of workers prior to World War I.
He was very much influenced by Taylor and invented
a rating scale to rate the efficiency of US Army
Officers. The pioneering efforts of Scott in the 1920s
and 1930s led to what was termed the “graphic rating
scale”, which was used to assess various qualities of
workers, supervisors and managers. This scale was
used to analyze subordinates in terms of the traits
essential for success in their work. The focus of merit
rating was judgmental in nature assessing the
personality traits.

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 CRITICISM OF MERIT-RATING AND
PERFORMANCE APPRAISAL
Although merit-rating in different guises persists even today, a
strong attack on the practice was mounted by McGregor in his
highly influential Harward Business Review article, “An
uneasy look at performance appraisal” (1957).

In short, the attack on merit-rating was often made on the

ground that it was mainly concerned with the assessment of
traits, and the main factor in management of performance
should be the analysis of the behaviour required to achieve
the agreed results, not the assessment of personality. Though
traint theorists advocate that traits represent predispositions to
behave in a certain way in a variety of situations, but research
showed that trait behaviour was independent of situations.

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 MANAGEMENT BY OBJECTIVES

As practioners were frustrated with merit-rating, the

management by objectives (MBO) approach
advocated by Peter F. Drucker gained popularity as a
tool of performance appraisal. MBO took both factors
(traits and outcomes) into consideration and claimed
to have overcome the problem of merit-rating. The
MBO movement claimed that ‘an effective
management must direct the vision and efforts of all
managers towards a common goal’.

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 CRITICISM OF MANAGEMENT BY
OBJECTIVES
One of the first and most formidable attacks on MBO was
made by Levinson (1970). He criticized that MBO
emphasized measurement and quantification and quality of
performance was often sacrificed. Further, MBO did not
take care of the individual’s personal needs, wishes and
objectives.
The cause of the demise of MBO as a performance
appraisal tool was no doubt the fact that the process
became over-systemized as too much emphasis was placed
on quantification of objectives. In addition, MBO often
became a top-down affair with little dialogue, and it tended
to focus narrowly on the objectives of individual managers
without relating them to corporate objectives.
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Performance Management
 CRITICAL-INCIDENT TECHNIQUE
The 1970’s saw a renewed interest in revising the
performance appraisal system as practitioners were
frustrated by the negative effect of both merit-rating
and MBO. The critical incident technique came to
prominence because it avoided trait assessment
(merit-rating) and over concentration on output
(MBO). The critical-incident method focused on
critical- behaviour incidents and managers should
keep a record of these incidents and use them as
evidence of actual behaviour during review meetings,
thus increasing objectivity. Managers should keep a
record of both positive as well as negative incidents.

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 CRITICAL-INCIDENT TECHNIQUE
Even the concept of critical incident technique has not
survived as a specific assessment technique, though
it does survive as the basis for review processes
which rely on factual evidence rather than opinion.
Then, organizations began developing behaviourally
anchored rating scales (BARS) to reduce rating
errors. In this system, ratings are anchored (fixed) to
the specific behaviours reflecting various levels of
performance. Under BARS system, a number of
performance dimensions such as teamwork, quantity
of output, quality of output, etc., are converted into
specific behaviours on the basis of which an
employee is rated.
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 BEHAVIOURALLY ANCHORED
RATING SCALES
For example, the dimension of ‘teamwork’ can be rated on the following
scale.
A. Continually contributes new ideas and suggestions
B. Takes a full part in group meetings and contributes useful
ideas frequently
C. Delivers opinions and suggestions at group meetings from
time to time, but is not a major contributor to new thinking or planning
activities.
D. Tendency to comply passively with other people’s
suggestions. Not very interested in what others doing.
E. Tendency to go own way without taking much account of the
need to make a contribution to team activities.
F. Generally uncooperative. Goes own ways, and completely
ignores the wishes of other members and takes no interest in the
achievement of team objectives.

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 PERFORMANCE APPRAISAL
(1970S VERSION)
In the 1970s a revised approach to performance appraisal
was developed under the influence of the management-
by-objectives movement. It was sometimes called ‘results-
oriented appraisal’ because it incorporated the agreement
of objectives and an assessment of the results obtained
against these objectives. Ratings were usually retained of
overall performance and in relation to individual objectives.
Trait ratings were also used but, more recently, these
have been replaced in some schemes with competence
ratings. This form of performance appraisal received a
boost during the late 1980s because of the use of
performance-related pay based on performance ratings.

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 EMERGENCE OF PERFORMANCE
MANAGEMENT
The first recorded use of the term ‘performance management is in
Beer and Ruh (1976) though the concept became popular only in
1980’s. Beer and Ruh described the performance-management
system at Corning Glass Works, the aim of which was to help
managers give feedback in a helpful and constructive way, and to
aid in the creation of a developmental plan. The features of this
system, which distinguished it from other appraisal schemes, were
as follows:
• Emphasis on both development and evaluation.
• Use of a profile defining the individual’s strengths and
development needs.
• Integration of the results achieved with the means by
which they have been achieved.
• Separation of development review from salary review.

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 WHY PERFORMANCE MANAGEMENT?
Performance management arrived in the late 1980s partly
as a reaction to the negative aspects of performance
appraisal. Of course, it at first incorporated many of the
elements of earlier approaches: for example, rating,
objective-setting and review, performance pay and
tendency towards trait assessment. Some of these
features have changed over time. According to Plachy
(1987), performance management is an umbrella term
that includes performance planning, performance review
and performance appraisal. “Performance management is
not a system or technique, it is the totality of the day-to-
day activities of all managers” (Fowler, 1990). Today,
performance management has emerged as a distinct
management practice with a separate body of knowledge
in the sphere of human resource management.
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 RATIONALE BEHIND PERFORMANCE
MANAGEMENT
An ideal ‘performance management system (PMS)’ serves the
following purposes:
• It communicates the vision and objectives of the organization
to all its employees.
• It sets departmental and individual performance targets that
are related to wider objectives.
In addition, performance management systems:
• Express performance targets in terms of measurable
outputs, accountabilities and training/ learning objectives.
• Use formal appraisal procedures as ways of communicating
performance requirements on a regular basis and systematically
evaluate performance.
• Link performance requirements to pay, especially for senior
managers.
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 PERFORMANCE APPRAISAL AND
PERFORMANCE MANAGEMENT COMPARED
We conclude by providing a summary of the conceptual
differences between performance appraisal and
performance management.
As already noted, the term ‘performance management’ is a
strategic and integrated approach to manage the total
performance of individuals and teams. It is a broader
concept. The term ‘performance appraisal’ refers to
measurement of performance of individuals periodically.
Performance management is an integrated system which
involves performance planning, monitoring, appraising,
reviewing and linking with rewards. Thus, performance
appraisal is only one part of performance management
process.

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 Performance Appraisal and
Performance Management Compared

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 End of Chapter 3
Thank you

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