Performance Management

Theory and Practice

Susan Hutchinson

• Publisher: CIPD - Kogan Page
• Year: 2013
• ISBN:
  9781843983286
• Edition: 1
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

How do you systematically decide and communicate strategic performance aims, objectives, priorities and targets? How do you plan effective policies and practices? Which techniques, rewards and sanctions should you use to improve performance? How do you critically evaluate the effectiveness of performance management? Performance Management combines theory and practice to help students master these key concepts and apply their learning. Mapping to the CIPD Level 7 Advanced unit by the same name, the book is a core text for any student taking a performance management module at undergraduate or postgraduate level. Featuring examples from a range of sectors and organizations across the globe, Performance Management is packed with pedagogical features such as learning outcomes, case studies, activities, reflection questions and further reading to fully engage students with the subject. Online supporting resources include an instructor's manual, lecture slides and annotated web links for students.

CHAPTER 1

Setting the Scene: HRM and Performance

SUE HUTCHINSON

LEARNING OUTCOMES

By the end of this chapter you should be able to:

• explain and critique the research on HRM and performance

• understand and explain key theories that seek to explain the link between HR policies and individual and organisational performance

• appreciate the importance of the role of the line manager

• evaluate the role of employee attitudes and behaviours necessary for effective HRM and performance management

• begin evaluating issues for effective performance management.

INTRODUCTION

Performance management has many different meanings, but in essence it is about improving performance, and usually refers to a range of management initiatives which seek to make performance more ‘manageable’. It can be viewed from a diverse range of perspectives including strategy, organisational behaviour, operations management, economics and accounting, and HRM. This book adopts the latter perspective, and is focused on how to improve performance through the management of people. In this context performance management is generally portrayed as an integrated process in which managers engage with employees to set expectations, measure and review results, agree improvement plans, and sometimes reward performance (Den Hartog et al, 2004). As such, it involves aligning a range of interrelated HR activities, such as induction, training and development, performance appraisal, and performance-related pay, with the aim of affecting individual and organisational performance. The same emphasis can be found in the strategic human resource management (SHRM) literature, which emphasises the importance of a system of HR work practices that leads to better performance (eg Appelbaum et al, 2000). Performance management can therefore be seen as a microcosm of SHRM (Boselie, 2010).

Before embarking on the theories, activities and debates surrounding performance management it is important to consider the basic premise that HR or people management activities can and do lead to improved organisational performance. The relationship between HRM and organisational performance has proved a fertile ground for academic research, and although significant progress has been made, there still remain many unanswered questions about the nature of this link, such as how HR policies work, and why there is a relationship. This has come to be known as ‘the black box’ problem (Purcell et al, 2003; Wright and Gardner, 2004).

The purpose of this chapter is to review recent research in this area and provide some insight into the causal relationships between HRM and performance. This is necessary if we are to understand how performance management works. The chapter begins with an overview and critique of the research on HRM and performance, and then moves on to explore theory and research on the ‘how’ and the ‘why’ of this relationship. A model of the HR causal chain is presented which proposes a linked sequence of events to explain the connection between HR practices, employee outcomes and performance in which emphasis is given to the effectiveness of HR policies and their implementation. The role of line managers, the psychological contract, and key employee attitudes and behaviour are considered. The chapter concludes with a framework for managing performance.

HRM AND PERFORMANCE: KEY THEORIES

Searching for a causal link between HRM and organisational performance has dominated academic research in the field of HRM over the last few decades (Purcell and Kinnie, 2007). Although stimulated by research by US academics (eg Huselid, 1995; Pfeffer, 1998a), studies have tested this relationship in different countries, different sectors, different-sized organisations, with different units of analysis and using different performance outcomes (Boselie, 2010). Overall, the conclusion from this vast body of work is that HRM is positively related to performance, albeit modestly (Boselie et al, 2005; Combs et al, 2006). This led the CIPD to confidently claim in 2001 that that there is ‘no room to doubt that a clear link between people management and performance exists’ (CIPD, 2001: 4). Others, however, remain more cautious. Guest, for example, maintains that although a large majority of the published studies show an association between HRM and performance, the analysis provides evidence of an association rather than of causation (Guest, 2011).

This research into the link between HRM and performance has been primarily dominated by two schools of thought: ‘best practice’, and ‘best fit’. More recently, a third approach has entered the debate based on the resource-based view of the firm. These debates are very well covered elsewhere in the HRM literature (see list below), and so are only briefly considered here.

Review articles/chapters of the research on HRM and performance

Boselie, P., Dietz, G. and Boon, C. (2005) ‘Commonalties and contradictions in research on human resource management and performance’, Human Resource Management Journal, Vol.15, No.3: 67–94

Boxall, P. and Macky, K. (2009) ‘Research and theory in high-performance work systems: progressing the high-involvement stream’, Human Resource Management Journal, Vol.19: No. 1: 3–23

Guest, D. (2011) ‘Human resource management and performance: still searching for some answers’, Human Resource Management Journal, Vol.21, No.1: 3–13

Marchington, M. and Grugulis, I. (2000) ‘“Best practice” human resource management: perfect opportunity or dangerous illusion?’, International Journal of Human Resource Management, Vol.11, 6 December: 1104–24

Marchington, M. and Wilkinson, A. (2012) Human Resource Management at Work, 5th edition. CIPD (Chapters 3, 4, 15)

Purcell, J. (1999) ‘The search for best practice and best fit in human resource management: chimera or cul de sac?’, Human Resource Management Journal, Vol.9, No.3: 26–41

Wall, T. and Wood, S. (2005) ‘The romance of HRM and business performance, and the case for big science’, Human Relations, Vol.58, No.4: 429–62

Wood, S. (1999) ‘Human resource management and performance’, International Journal of Management Review, Vol.1, No.4: 367–413

BEST PRACTICE

Best practice advocates that there is a distinctive set of HR practices which can be adopted by any organisation, irrespective of setting, which will result in improved performance. Various other terms are used to describe this approach, including ‘high-commitment management’ (eg Wood and de Menezes, 1998), ‘high-involvement management’ (eg Lawler, 1986) and ‘high-performance work systems’ (eg Appelbaum et al, 2000). A common theme in all of these studies is that combining HR practices into a coherent and integrated ‘bundle’ has stronger effects on performance than individual practices (Combs et al, 2006; Boxall and Macky, 2009). This is based on the assumption that firstly, practices have an additive effect (MacDuffie, 1995), and secondly, that synergies occur when one practice reinforces another. For example, training enhances participation programmes because employees are better equipped to make decisions that participation programmers empower them to make (in Combs et al, 2006). It is also possible for HR practices to reduce organisational performance by producing ‘deadly combinations’, wherein practices work against each other (Becker et al, 1997). The classic example is teamworking and performance-related pay which rewards highly individual behaviour.

There are many different lists of what the HR practices should be. One of the best known is presented by Pfeffer (1998a), who identifies seven practices, distilled from a previous list of 16. This includes employment security, selective hiring, extensive training, self-managed teams, high compensation contingent on organisational performance, reduction in status differentials and information-sharing. Arthur’s (1994) study of small steel mills contains six type of practices (training, empowerment, high wages, performance-based reward, collective participation and skill development). Wood and de Menezes (1998) add recruitment, appraisal and job security to Arthur’s list. There are many more – for instance, Guest and Hoque (1994) list 23 practices, MacDuffie (1995) has 11 practices, and Lawler (1986) four types of practices. Appelbaum et al’s study (2000) uses a range of practices based on three components of high-performance work systems: opportunity to participate, skill enhancement and incentives to increase motivation (see the box below). Whatever the list, the common assumption is that these practices are universally applicable and successful.

Appelbaum et al’s research on high-performance work systems (HPWSs)

Appelbaum and colleagues (2000) researched the links between high-performance working practices and organisational performance in 44 US manufacturing sites in steel, clothing and medical electronics equipment in the mid-1990s. Unlike many other studies, their research involved surveys of worker responses to HR initiatives rather than managerial responses. HR practices included autonomy in decision-making, development of self-directed teams, offline team membership, communication, formal and informal training, and extrinsic and intrinsic rewards (such as pay, employment security, promotion opportunities, work–life balance). Employee outcomes included workers’ trust, intrinsic satisfaction, commitment, job satisfaction and stress. Overall, the research found that the introduction of HPWSs leads to a win/win outcome for manufacturing plants and workers (2000: 115). Plant performance was higher, and there was consistent evidence of positive links between greater use of various HR practices and positive employee outcomes. The researchers discerned little support for the view that these systems have a ‘dark side’, with no evidence of ‘speed up’ or work intensification and higher levels of stress. The research also highlighted the importance of positive discretionary effort as the critical behaviour that can give an organisation its competitive advantage, as discu...

Table of contents

• Cover
• Firstpage
• Publisher Information
• Title Page
• Copyright Page
• Contents
• List of figures and tables
• Contributor biographies
• Acknowledgements
• CIPD qualifications map
• Walkthrough of textbook features and online resources
• Chapter 1 Setting the Scene: HRM and Performance
• Chapter 2 Strategic Performance Management
• Chapter 3 Motivation at Work
• Chapter 4 The Role of Line Managers in Managing Performance
• Chapter 5 Defining and Measuring Individual Work Performance
• Chapter 6 Performance Appraisal and Feedback
• Chapter 7 Integrating Learning and Performance
• Chapter 8 Performance-related Rewards
• Chapter 9 Managing Under-Performance
• Chapter 10 Absence Management
• Chapter 11 International Performance Management
• Chapter 12 Developing Performance Management
• References
• Index