Performance Management and Culture
KeywordsOrganizational Culture Performance Management Organizational Performance Public Sector Organization Organizational Mission
Performance management is a collective process of setting objectives in line with organizational mission and goals and monitoring individual performance in the achievements of these objectives through constant communication and feedback. Inherent in the communication and feedback are coaching and mentoring, information on performance directions, rewards, and in some cases penalties. Organizational culture relates to relationships and shared norms, beliefs, and values developed over time through both formal and informal arrangements in the organizational setting. National or ethnic culture, on the other hand, emphasizes the indigenous or traditional dictates and practices that define the identity, both individually and collectively, of those who constitute organizational participants.
The turbulence in organizational environments leading to unpredictable futures for organizations now pressurizes them to demand more from their employees. Besides, pressures for bottom line, demands for quality services and products, and the uncompromising attitudes of clients and citizens among other factors have combined to drive organizations to want to improve performance of their employees. In fact, in the last couple of decades, organizations have witnessed a surge in concerns among stakeholders about performance and accountability. Indeed, for public sector organizations, since the introduction of the New Public Management (NPM) with its characteristic emphasis on efficiency and effectiveness in service delivery, there has been intense pressure on organizations to devise better means of ensuring improved performance, both as a survival strategy in a highly competitive environment and to satisfy stakeholder expectations. It has become evident that the quest to explore new ways of improving performance has often been assumed to be more pressing in the public sector than in the private sector. This is based on the assumption that the private sector, at least in relative terms, only needs a readjustment in its operations in order to satisfy new expectations. On the other hand, the general verdict on public sector organizations has often been one of persistent failure – dotted with visible cases of inefficiency, ineffectiveness, corruption, and gloom. In effect, improving performance in the public sector requires some assimilation of private sector practices while also imbibing new ways of enhancing existing performance regimes.
While the jury is still out on the efficacy of NPM prescriptions for the public sector, it appears there near-consensus on the necessity to refine (or deviate from) old ways of doing things in order to ensure performance effectiveness. The call has been on the need for performance management. Underlying this call for a new paradigm is the significant re-awakening to the fact that earlier performance regimes tended to adopt a top-down approach where managers set indicators meant to guide employees in the execution of their mandate. Managing performance is today viewed as a shared approach that recognizes the primacy of collective goal setting, communication, and prompt feedback mechanisms.
Recent knowledge on organizational performance or performance management effectiveness points to the significance of culture in eliciting positive or enhanced response from organizational participants. Here, culture could be viewed from two fronts: organizational culture and national or ethnic culture. Organizational culture relates to relationships and shared norms developed over time through both formal and informal arrangements in the organizational setting. National or ethnic culture, on the other hand, emphasizes the indigenous or traditional dictates and practices that define the identity, both individually and collectively, of those who constitute organizational participants. Nowadays, it is becoming apparent that performance management regimes stand little chance of being effective if they do not create or expand the space for accommodating the organizational and national/ethnic cultures that have defined the behavior or identity of individuals over time. It is important to point out that even though there has been extensive interest in the relationship between performance management and culture, there are also previous studies that have questioned or de-emphasized the role of culture in improving organizational performance (Lim 1995; Wilkins and Ouchi 1983; Schein 1990).
In this section, an attempt is made to explore the definitional issues related to performance management, its importance and disadvantages, or negative consequences. The section also discusses the definition and forms of culture and attempts to draw or question the link between performance management and culture.
Performance Management: Concept and Relevance
There is a notable tendency to use the concepts of performance management and performance appraisal synonymously. Elsewhere, some organizations purport to have instituted a performance management regime, which upon scrutiny are performance measurements at best. This mistaken assumption or practice finds expression in the various definitions of performance management which are argued to require refinements.
The US Department of Health and Human Services views performance management as the process whereby organizations set targets or goals and ensure that there are processes that check performance against the expected targets. Neely (1999) offers a similar definition when he notes that PM essentially relates to a set of indicators which are meant to gauge the extent of efficiency and effectiveness of employees in the firm. Although those definitions, like several others in the literature, are useful, they fail to highlight the role of the employee in setting targets and the mechanisms needed to be employed to ensure that employees are able to contribute effectively to organizational goals. Studies by Bevan and Hood (2006), Smith (1995), and Kells (2011), among others, point to the likelihood of organizational actors falling into a fixation for measurement concerns, strategic behavior, nit-picking, and other unintended consequences if managers focus on measuring, instead of managing, performance. Perhaps this explains why the Balanced Score Card (BSC) by Kaplan and Norton, arguably one of the most popular performance measurement instruments, has now transformed into a performance management tool. There is also a call to holistic performance arrangements that link individual performance to organizational mission in ways that ensure the realization of broader or strategic organizational objectives.
Based on the above, performance management is defined here as the collective process of setting objectives, monitoring individual performance through constant communication and feedback in ways that ensure the achievement of the organizational mission and goals. This definition highlights some components which are worth noting.
Continuous and shared process: Performance management is not a one-time activity; it is an ongoing and sometimes iterative process which entails a number of related activities. These activities involve setting goals or targets and putting appropriate mechanisms in place to ensure that employees are not only guided or checked in their pursuit of those goals but that they are also promptly given feedback on their performance. Thus, inherent in this process are real time corrective measures which address emerging issues which could potentially derail overall performance. What then differentiates this process from other (usually “measure fixation”) approaches is that managers do not wait to the end of a task before they proceed to assess the quality of performance and its relationship to the set targets. Equally important is the fact that the shared nature of such a process means that organizational actors or employees do not see it as an imposition by management. Rather, they contribute to the design and shaping of those objectives or targets and thus see success or failure as a collective responsibility. In recent practice, the emphasis on collective performance has led to a laudable practice in some organizations where, even in cases when individual performance in the collective chain needs to be appraised, there is a direct or indirect opportunity for every member to contribute to that process. This means that, contrary to previous practices where only superiors appraised their subordinates, best practice in performance management provides some opportunity for subordinates to also have a say in the assessment of their superiors. Thus, the role of an organizational culture that places more premiums on team work, instead of individualism, is of paramount consideration.
A shift from outputs to a focus on outputs and inputs: Several scholars, including Martinez (2001), have observed that the move toward holistic performance management regimes as opposed to mere goal setting and appraisal means that inputs are also as important as outputs. While the latter was previously the focus of managers, the new concern is not only about what people are able to achieve but also how they are able to achieve them. This is akin to the principal-agent relationship that imposes obligations on both parties which must of necessity be met before there could be realistic assessment of performance. Such a shift in management thinking is crucial in providing the requisite incentive for employees to meet performance expectations. In the public sector, for example, there is often a tendency to sit in judgment against public servants for failing to meet their targets, i.e., if they set any. However, little attention is paid to whether public servants have the capacity, resources, and enabling environment to pursue their individual targets, which in most cases are even imposed by their superiors. Thus, given the new line of thinking which places premium on both inputs and outputs, performance management is real in its expectations as it places a burden on managers to provide the resources that would serve as a moral basis to assess the performance of employees. While this is imperative, it should be noted that a good performance management system should not only ensure that resources are provided, but, more importantly, those resources should be utilized efficiently.
Connection between individual performance and strategic goals or mission: Employee performance, if properly managed, feeds into the achievement of the mission of the organization. Thus, while various activities could be broken into individual tasks under different sections or departments of the organization, it is imperative to ensure that managers assist organizational actors to see the bigger picture. Viewed sequentially, a good performance management system first sets strategic objectives, followed by unit or departmental objectives, which then leads to the setting of individual objectives. Related to the component discussed early on, the significance of such strategic-departmental-individual level linkages lays in the call to team work in the bid to meet organizational expectations. This is because if individuals are left to operate in “silos,” they are likely to pursue different interests and also receive little cooperation from other members of the organization who would view their operations as either in competition or in pursuit of different ends.
Some studies have identified numerous advantages that are likely to accrue to public sector organizations if they implement performance management systems (see, e.g., Aguinis 2005). Among others, performance management helps organizational participants to adapt to change. Here, it is contended that where an organization decides to place more emphasis on some aspects of its operations or introduces new products and orientations to meet customer expectations, it can align its goals and objectives to these new arrangements and accordingly fashion individual tasks through the introduction of appropriate performance management systems. Aguinis, for instance, cites the example of IBM in the 1980s. He notes that given that the company decided to focus primarily on customer satisfaction, the evaluation of the performance of every employee was done in relation to customer satisfaction. In effect, employees had every incentive to focus on the big picture in order to remain relevant to current organizational objectives. Performance management also enhances the motivation of employees to work harder and improve their contribution to the organization. This is because employees get constant feedback on their performance, and this involves prompt communication on areas to improve and commendations on the tasks that they have performed well. Additionally, effective performance management systems require that managers build the capacity of their staff following gaps identified in the appraisal process. This enhances the ability of employees to perform better and in some cases also strive to achieve ambitious goals. Also, managers are able to gain first-hand and prompt information about the performance of employees in order to make better decisions about rewards, promotion, training, and in some cases disciplinary actions. Elsewhere, Bianchi and Rivenbark (2012) conclude, based a comparative analysis of performance management systems in Sicily and North Carolina, that performance management systems are useful in aiding public officials to exact better forms of accountability and transparency especially in periods of political or economic crisis.
There is no doubt that the discussion so far points to the prospects of improving or enhancing organizational performance, in the public sector especially, through the adoption of performance management practices. While this expectation is justifiable, it is important to note that the introduction of a performance management system does not automatically lead to performance effectiveness; it requires the right kind of environment to thrive. Current practice and research indicate the significance of culture, albeit expressed in varied forms, as being an indispensable enabler in implementing or adopting new performance management systems. Also, it has been argued that if wrongly implemented, performance management could lead to many adverse consequences.
Performance Management: What Has Culture Got to Do with It?
As pointed out in the previous section, there is a popular thinking in modern management literature that performance management systems could hardly be successful if they do not have regard to culture. Culture is used here in relation to organizational dictates (organizational culture) and the lifelong ethnic/traditional values or dictates which form the basis for socializing employees in their communities. While the former is specific to organizations and is therefore transient, the latter, also referred to as national culture, has some form of permanency in its influence on the human being who is here regarded as the employee for the purposes of the discussion. Studies by Hofstede (1980) and other scholars attempt to explain, or perhaps provide the basis for popularizing, the belief that when organizations exhibit divergent values, notions, and beliefs, they are likely to experience differences in performance. The essence of such organizational cultures as an analytical apparatus in examining performance is rooted in the observation that the emergence of countries such as Japan, China, Singapore, and Malaysia in the global economic scheme of things is perhaps based on some national/traditional cultural imperatives. In other words, if culture is crucial in explaining success of the so-called Asian Tigers, for instance, then it follows that organizations could also develop their own culture to propel improvement in performance. The relationship between traditional culture and performance management is discussed first, followed by organizational culture.
Every human being is born into a cultural context which defines his or her way of life. Culture influences people’s choices and how they respond to situations. It is therefore ridiculous, even impossible, to expect employees to completely shirk their cultural identity in favor of a wholesale adoption of a new way of life. Unfortunately, studies have found out that most of the performance management systems implemented globally, especially in developing countries, have little regard to the traditional cultural values of organizational members. This obviously has implications for the effectiveness or otherwise of such systems. For example, although modern organizations purport to thrive on the Weberian bureaucratic principle of impersonality in decision-making, the sense of communality inherent in most cultures makes such expectations wishful at best. Within the African context, for example, it has been found out that appraisal systems hardly provide a true picture of performance since informal connections or relationships override organizational expectations, not least because managers are unwilling to provide information which they reckon could deny their subordinates the right to promotion and other organizational incentives. The point is not to project a rigid or impenetrable cultural climate which is not receptive to positive influences needed for growing modern organizations. Rather, it is important for managers and leaders of today to see divergent cultural backgrounds of employees as a strength to be harnessed rather than a weakness to be overcome.
The extant literature on organizational development and corporate governance has also emphasized the importance of ethics to the growth and sustenance of both public and private sector organizations. Previous notions of ethics disregarded, or supplanted, traditional ethical values in favor of the so-called best practices. The belief was that cultural values were inimical to the growth of modern organizations. This rather mistaken assumption has also found expression in prevailing performance management systems. However, it is now evident that attempts to detach employees from their culture often leave them rather alienated in ways that complicate how they are able to imbibe the so-called new cultures needed to aid their performance in organizations. Some national and organizational-level studies have argued that there are visible signs of “ethical breakdown” (Dwivedi et al. 2007) which have had deleterious consequences on organizational performance. Findings from studies funded by international organizations such as the IMF and the World Bank have revealed prevalent cases of corruption, bribery, moonlighting, and other cases of ethical misconduct in the public sector especially. Attempts to address these ills in organizations through dissemination and training workshops have yielded very little impact. Part of the reason for this state of affairs is that employees often see the so-called ethical principles catalogued in training manuals as not only an imposition but also mere wishes which have no practical relevance. In view of the above, there is a call for the reintegration of traditional ethical values, in effect culture, in performance management, development management, and every facet of national or organizational operations. There is no doubt that traditional cultural values could influence the quality of organizational culture in order to create the right environment for the implementation of an effective performance management system.
By organizational culture is meant the experiences, values, and expectations developed over time by the organization both in relation to its internal actors and its interaction with those outside the organization. Several scholars, including Schein (1985), have attempted to model or conceptualize organizational culture or identify some dimensions of culture which could aid the understanding of organizational culture. But most of these approaches essentially identify some values or shared meanings that influence organizational decision-making and response to situations. While some of these shape the responses of organizational participants in visible ways, others are implied or tacit. In effect, organizational culture is how the organization operates. This means that the organizational culture determines the nature of decision-making processes and feedback mechanisms. It follows that an organization that does not foster collective decision-making may find it extremely difficult to implement a performance management system of the nature discussed earlier in this section. Put differently, organizations are likely to achieve the expected gains of performance management if their culture provides room for employees to contribute to setting goals or objectives. Similarly, organizational culture that allows employees to make known their grievances without any fear of vilification is better able to provide the right environment for the implementation of performance management systems. While there is pressure on public organizations to assimilate the ideals of the NPM, it is clear that political interferences leave little room for the voices of public service bureaucrats to be heard, much less to challenge management decision without suffering penalties. It therefore follows that to ensure the effective implementation of performance management systems, public sector managers require some mitigating measures in order to prevent or mediate political interferences. Another aspect of organizational culture which can aid or frustrate performance management is the reward systems or incentive mechanisms at play. It is simply not enough for managers to aspire toward raising their productivity or improving the finances of their organization through performance management without also putting in place systems to reward those who can actualize these objectives. Thus, although it is instructive to win the cooperation of employees in every change management process, such as the introduction of performance management systems, it is equally important to recognize that employees are the organization’s most “valuable assets.” This could be done through clear communication of the incentives that accompany performance. It should be noted that in organizations where managers are usually fond of reneging on their word, the promise of incentives could elicit little response. Thus, any organization that aspires to an effective performance management needs a culture of trust as the basis for rallying employee to action.
There is a lot to be said for the primacy of culture in ensuring better performance management systems in modern organizations. Conversely, where the right cultural climate is missing, performance management systems could be implemented in a vacuum, serving as a disincentive to the achievement of broader organizational goals. It has also been pointed out early on that some scholars regard culture as “phenomenal or irrelevant” in attempting to appreciate organizational performance (Wilkins and Ouchi 1983: 3). In fact, many claim that there is little or no direct relationship between organizational culture and performance. However, it has also been contended that the contesting verdict on the significance of organizational culture on performance could largely be explained by the differences in methodology, the likelihood of interference of extraneous variables in influencing conclusions of previous studies on organizational culture, and the lack of a universal definition on what constitutes organizational culture.
Modern organizations must continually change their modus operandi in order to remain relevant in a highly competitive environment as well as meet stakeholder expectations. One means of realizing this goal is by instituting effective performance management systems. This entails a collective effort involving all organizational actors in setting organizational goals as well as monitoring and measuring the implementation of strategies to achieve those goals through effective feedback and incentive mechanisms. While the advantages of performance management are numerous, the latter stands little chance of being effective without recognizing the cultural values that mold the behavior of employees. Nor is performance management likely to serve any better ends if the prevailing organizational culture does not provide the right incentives for employee cooperation and output. These arguments notwithstanding, it has been acknowledged that some previous studies found little evidence of any direct relationship between organizational culture and performance improvement. This, however, does not negate the fact that a good performance management regime stands a better chance of harnessing culture for organizational effectiveness. Clearly, there is an urgent need for scholars to broaden the organizational management discourse by providing more recent empirical basis for conclusions on the relationship between performance management and culture.
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