Academic journal article Public Personnel Management

Effects of Introducing A Performance Management System on Employees' Subsequent Attitudes and Effort

Academic journal article Public Personnel Management

Effects of Introducing A Performance Management System on Employees' Subsequent Attitudes and Effort

Article excerpt

A longitudinal evaluation was conducted on the effects of introducing a performance management system (PMS), which featured merit-based bonus pay, on subsequent employee attitudes and self-reported work effort in a small, government organization. Additionally, employees' targets of blame for receiving lower-than-expected ratings were explored. A significant change in employees' organizational commitment occurred over the time that the PMS was implemented, with a substantial increase occurring within the performance planning/goal-setting phase, followed by a slight decay over the following year, but still ending higher than the pre-PMS baseline level. Substantial increases in ratings of satisfaction and cooperation with one's supervisor were found with the introduction of the PMS for low performers (particularly following the performance planning/goal-setting phase). In contrast, however, high performers had high base-line levels of these attitudes toward supervision, followed by substantial drops immediately after receiving appraisal and bonus pay distributions. As anticipated, most participants in this study had expected a performance rating higher than they actually received, and most of these individuals made external attributions for the rating discrepancy, blaming either their supervisor, the organization, or the PMS itself. However, neither having received a lower-than-expected appraisal rating nor having made external attributions for a lower-than-expected rating were related to changes in attitudes or self-reported effort.

Compensation surveys in the United States have consistently reported that pay-for-performance systems are used in the vast majority of private firms.1,2,3,4,5 While the prevalence of pay-for- performance in public organizations is considerably less, public sector use of these systems has been on the increase.6

From a measurement perspective, a pay-for-performance system, which relies exclusively on objective indices of performance, would be preferable. However, for many (particularly white-collar) jobs, at least some aspects of performance cannot be adequately captured with only objective measures, and so the most commonly used individually-based system to link pay with performance appears to be merit pay,7,8 a system which relies on subjective appraisal ratings, typically made by one's manager.

Merit pay is frequently implemented for professional and managerial jobs as a component of a larger performance management system (PMS), which typically involves the following cyclic activities. First, employee and supervisor first agree on key result areas (or broad accountabilities) for the employee's job. Then, on a regular basis (typically a yearly cycle), they jointly set results-type objectives for the employee within those key result areas, and identify how progress toward achievement of those objectives will be measured. During the PMS cycle, the employee and manager track performance against objectives, with the manager providing support and coaching as necessary. At the completion of the cycle, performance against objectives is measured, and the employee receives feedback on performance and an overall appraisal rating, which is translated into a merit-based pay increase or bonus payment. At this same time, the next cycle is started, with the setting of new performance objectives.

The primary focus of this investigation is on the associated attitude and motivational effects of introducing a PMS in a public sector organization. Specifically, the present study, employing data from four different time periods, has the following exploratory objectives:

1. to investigate the effects of two major components of a performance management system (i.e., goal-setting and appraisals) on work-related attitudes and effort;

2. to determine if receiving a lower-than-expected appraisal rating results in a drop in work-related attitudes and effort, and

3. to explore "blame targets" for the receipt of a lower-than-expected performance rating, and their relationship to subsequent attitudes and effort. …

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