The Effect of the Competitive Status of an Organization on the Relevance of Different Performance Criteria: A Conceptual Analysis

Article excerpt

This article discusses performance criteria from the viewpoint of competitive advantage. Based on the concept of competitive advantage, the criteria used to assess employees' performance are suggested to be contingent on the competitive status of a firm. When a firm is at the stage of seeking competitive advantage, competency-based criteria should be focused. Thereafter, behavior- and outcome-based criteria become crucial. While each stage should take different focus, multiple criteria are suggested.

Introduction

Deciding performance criteria is an important step in performance appraisal. It is the dimension employees are evaluated as well as the performance expectation from the organization. Performance criteria act as the catalyst that directs employees' behaviors toward organizations' expectation.

Performance appraisal has traditionally viewed as a tool to measure employee performance reliably and validly (Murphy and Cleveland, 1995). However, to accomplish organizational goal, it should not be just passively viewed as a measurement instrument. Rather, performance appraisal should be future-oriented whereby the organizational goals can be realized through performance appraisal. In seeking organizational goals, our discussion is confined to profit maximization that businesses have been focusing on. Given that profit maximization is their main goal, the nature of competitive advantage thus means a lot as deciding performance criteria. This article thus attempts to make the linkage between competitive advantage and performance criteria. In discussing the nature of competitive advantage, the linkage is based on the assumption that employees are directed to organizational goals.

The concept of competitive advantage has been widely applied in many business domains. However, little has been found in performance appraisal. This article thus will discuss performance criteria from the viewpoint of competitive advantage. To explicate the concept in this article, we first discuss the three criteria that have been traditionally categorized as well as the concept of competitive advantage in terms of time. How the concept of competitive advantage can be applied is then discussed.

Performance criteria - trait, behavior, and outcome

The criteria used to assess employees' performance are often categorized into three types: trait, behavior, and outcome. Historically there has been a controversy over their importance. For example, some advocate that performance appraisal should be defined in terms of behavior (Murphy & Cleveland, 1995), whereas others argue that outcome is more critical (Bernardin, Hagan, Kane, and Villanova, 1998). Despite different proposition, each criterion has its pros and cons.

Trait. Trait-based criteria address what a person is and are regarded as more enduring (Boudreau, Boswell, Judge, and Bretz, 2001). Although being criticized as ambiguous, they may be measured validly and reliably measured (Hofrichter and Spencer, 1996). In practice, some businesses, Microsoft and Southwest Airlines for example, have the inclination to recruit employees based on personality traits (Behling, 1998). In behave of seeking support, some researchers have been engrossed in finding the relationship between personality trait and firm performance. In particular, the Big Five factors-extroversion, emotional stability,agreeableness, conscientiousness, and intellect-have been substantiated to positively influence performance in some respects (Caligiuri, 2000; Barrick and Mount, 1991; Riggio & Taylor, 2000; Tett, Jackson and Rothstein, 1991). However, trait has been deemed inferior than either behavior or outcome (Roush, Curtis, Dershem and Lovrich, 1991).

Behavior. Behavior-based criteria attempt to discern what a person does at work. Their tangible nature makes them more legally defensible than trait (Bowman, 1999). Some argue that focusing on behaviors is more conducive in the long run (Bergen & Barlow, 1996). …