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Annual Review of Organizational Psychology and

Organizational Behavior

The Evolution of Performance

Management: Searching for
Value
Annu. Rev. Organ. Psychol. Organ. Behav. 2019.6. Downloaded from www.annualreviews.org

Elaine D. Pulakos,1 Rose Mueller-Hanson,2

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and Sharon Arad3

1
PDRI, Washington, DC 22209, USA; email: [email protected]
2
Community Interface Services, Carlsbad, CA 92054, USA; email: [email protected]
3
PDRI, Minneapolis, MN, 55401, USA; email: [email protected]

Annu. Rev. Organ. Psychol. Organ. Behav. 2019. Keywords

6:1.1–1.23
performance ratings, performance management processes, PM
The Annual Review of Organizational Psychology and
Organizational Behavior is online at streamlining, behavior change, PM innovation, PM implementation
orgpsych.annualreviews.org
Abstract
https://doi.org/10.1146/annurev-orgpsych-
012218-015009 This article reviews the history of performance management (PM), begin-
Copyright  c 2019 by Annual Reviews. ning with performance evaluation. We discuss various strategies that have
All rights reserved been used to enable accurate ratings as well as cognitive processes and con-
textual factors that have been shown to significantly impact ratings. We
raise questions about the concept of true performance and whether raters
can be enabled and motivated to make accurate ratings. We progress to
discussing more structured and comprehensive PM processes that typically
involve cascading goals, goal setting, competency modeling, evaluation of
behavior and results, and implementation. These systems have proven to
be tedious and low-value, resulting in unprecedented, wide-spread exper-
imentation with innovative practices to move companies away from heavy
PM processes to simpler, cost-effective strategies that actually drive per-
formance. These have ranged from abandoning ratings to implementing
innovations in goal-setting, real-time feedback, coaching, and PM behavior
change. Directions for future research and practice are discussed.

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INTRODUCTION
No other talent management system has been the subject of such great debate, change, and emotion
as performance management (PM). Many strategies have been attempted to extract value from
PM processes, ranging from simple rating scale changes to complex behavior change initiatives.
Although many of these have seemed promising initially, they have yielded disappointing outcomes
and significant dissatisfaction with PM processes in organizations. The challenges inherent in PM
coupled with many unsuccessful attempts to fix it have given rise to what are viewed as trendy
PM practices and a well-earned reputation as the Achilles’ heel of talent management practice
(Pulakos et al. 2012). No matter what has been tried over decades to improve PM processes, they
continue to generate inaccurate information and do virtually nothing to drive performance.
PM is challenging because it is a complex, multifaceted, and multilevel process that draws on
theory and research from many different areas, including measurement theory and motivation
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theory; cognitive, clinical, social, and behavioral psychology; neuroscience; organizational devel-
opment; and change management. It has been heavily influenced by practice as well, with business
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leaders and PM practitioners offering rating schemes and evaluation strategies they believe will
drive higher performance. Research has generally focused on specific aspects of the PM process,
such as the effects of different types of rating scales on ratings or the role of human information
processing in evaluating others (DeNisi & Murphy 2017). Only a few studies have focused on
the impact of different PM practices on performance and which features play the greatest role in
driving business outcomes; thus, we have relatively few evidence-based insights about the impact
and return on investment (ROI) of PM in organizations.
Over time, PM has become increasingly complex, requiring many hours of manager and
employee time and costing organizations millions annually. CEB (2012) estimated that the average
manager and employee spend 210 and 40 hours, respectively, on PM activities, which translated
into costs of 30 million USD annually for a company of 10,000 people. As another example,
Deloitte, found that they were spending 2 million hours annually on PM activities (Buckingham &
Goodall 2015). Not only have time investments and costs skyrocketed, but complaints have become
increasingly vocal and emotional, especially concerning performance reviews. Culbert & Rout
(2010) described the performance review as a “pretentious, bogus practice” that should be put out of
its misery. A Washington Post headline read, “Study finds that basically every single person hates per-
formance reviews.” (https://www.washingtonpost.com/news/on-leadership/wp/2014/01/27/
study-finds-that-basically-every-single-person-hates-performance-reviews/?utm_term=
.03749c8f8b7d).
Most concerning, however, is that the few studies that have evaluated the impact of PM pro-
cesses on performance and business outcomes have shown virtually no positive impacts. For exam-
ple, based on 23,339 performance ratings from 40 organizations, CEB (2012) found that business
units with highly rated employees were no more likely to be profitable than those with low-rated
employees. So much cost and time, yielding so much dissatisfaction with no discernable perfor-
mance impact, has led to a recent wave of sweeping, revolutionary reform, and experimentation
with new-in-kind PM practices. These range from greatly simplifying or even eliminating formal
PM processes to driving behavior changes that research has shown positively impact performance,
such as providing regular informal feedback and setting agile, shorter-term goals (Mueller-Hanson
& Pulakos 2018).
In this article, we briefly review the evolution of PM, which began with a much narrower focus
on performance ratings. We trace its development from research evaluating the impact of rating
format and training on ratings to that aimed at understanding how human information processing,
rater-ratee interpersonal relationships, and political and contextual factors affect ratings. We then

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discuss how performance evaluation evolved into more comprehensive PM processes that included
goal-setting, formal feedback, multirater reviews, etc., and we discuss how these practices have
become misguided over time. Finally, we discuss current directions in PM, taking stock of what
we have learned to date and suggesting directions for the future.

PERFORMANCE EVALUATION
The early history of PM was focused on performance evaluation, the goal of which was to obtain
accurate ratings of individual performance. The first large-scale use of ratings in work settings
dates back to the late 1800s, with use of efficiency ratings in the US Federal Civil Service (Lopez
1968) and trait assessments (e.g., punctual, assertive) of officer performance during World War I
(Scott et al. 1941). The first rating scale, the Graphic Rating Scale (Patterson 1922), used verbal
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and numerical anchors to improve the accuracy of trait ratings. Although this was a significant step,
the anchors used were ill-defined (e.g., “Excellent,” “Good,” or “Poor”), leaving raters to impose
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their own interpretations on what these anchors meant (Landy & Farr 1980, Borman 1977). Raters’
applying their own idiosyncratic standards to defining different rating levels remains a persistent
challenge today.
The emergence of scientific management theories in the early twentieth century (Taylor 1911)
led to an increased focus on productivity and the corresponding use of ratings to control and drive
higher performance (Grote 1996, Murphy & Cleveland 1995). The civil rights movement of the
1950s and 1960s brought attention to inequalities based on race and prompted more rigorous
evaluation practices in organizations. The Civil Rights Act of 1964 and subsequent legislation
prohibited discrimination in employment practices, prompting extensive work in the area of rating
format design to ensure ratings were based on job-relevant factors and to mitigate bias (Dunnette
1963, Guion 1961). One idea that gained popularity was to anchor different rating levels with work
behaviors to help managers match their observations of employee performance to an appropriate
rating level (Smith & Kendall 1963, Blanz & Ghiselli 1972, Latham & Wexley 1977). Many
variants of behavioral rating formats were designed and evaluated over the next 20 years, until
Landy & Farr (1980) called for a moratorium on rating format research, concluding that no rating
format yielded substantially more accurate or less biased ratings than any others (Murphy et al.
1982, Saal & Landy 1977).
Although rating format research largely ceased with Landy & Farr’s (1980) moratorium, a
new forced choice rating format was introduced in the early 2000s that has been shown to yield
improved rating reliability, validity, and accuracy (Borman et al. 2001, Bartram 2007, Schneider
et al. 2003). This format asks managers to choose which behavior is most true (or most and least
true) of each employee’s job performance from a set of equally desirable behaviors. Using item
response theory (IRT) information for each item, raters’ judgments are converted to an interval
scale; specifically, choosing one behavioral statement over the others provides information about
the placement of each employee on the underlying dimension at the interval-scale level. Although
research has shown this format to yield higher quality ratings, its adoption has been rare in practice.
One reason is that advanced IRT concepts are difficult to explain. Forced choice formats also
require large item banks with associated item parameters that can be prohibitive for organizations
to develop and maintain. Finally, the main advantage of forced choice ratings is also likely its main
disadvantage, namely that managers cannot easily manipulate their ratings to ensure employees
receive certain reward outcomes; hence, forced-choice scales are not well received by managers.
A parallel path to improve ratings focused on rater training (Borman 1975, Latham et al.
1975). On the basis of the assumption that ratings are normally distributed, training programs
were developed to teach raters to avoid common rating errors that would result in non-normally

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distributed ratings, such as leniency (most employees are rated at the high end of the scale). To
reduce leniency, for example, raters were taught that most employees should be rated in the
middle of the scale and equal but smaller proportions should be rated at each the high and low
ends. Subsequent research showed that error training did not increase accuracy and may actually
reduce it (Murphy et al. 1993). Years later, O’Boyle & Aguinis (2012) provided evidence that
performance is not normally distributed in many cases, which explains why training to produce
normally distributed ratings would decrease accuracy.
A paradigm shift occurred in the early 1980s that influenced performance rating research
for the next two decades. Landy & Farr (1980) argued that more holistic theories were needed
to understand the interactive effects of different factors on ratings, and they proposed the use
of human information-processing theories and models to guide future research. Ratings were
conceptualized as a special case of human information processing that includes attention, cat-
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egorization, recall, and information integration (Feldman 1981). Extensive research leveraged
information-processing theories to understand rating behavior and develop interventions to im-
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prove rating accuracy. These focused on helping raters develop and use job-relevant mental cate-
gories in observing and evaluating employee performance (Ilgen & Feldman 1983). For example,
rater training shifted from a focus on reducing rating errors (e.g., halo, leniency) (Cooper 1981,
Murphy & Balzer 1989, Murphy et al. 1993) to helping raters create job-relevant mental categories
that would direct their attention to relevant performance information and store it with related
performance information to facilitate accurate recall (McIntyre et al. 1984; Pulakos 1984, 1986).
Although information processing theories provided insights into the mental processes that impact
how ratings are made, this research yielded few practical implications for evaluating performance
more effectively in organizations.
Mounting concerns over discrimination and legal challenges in the 1970s and 1980s brought
implementation of more structured evaluation processes. For example, management by objectives
(MBO; Drucker 1954) provided a way to define, communicate, and evaluate employees against
job-relevant performance objectives. Although MBO systems were widely adopted, they were
eventually abandoned because they proved to be time-consuming and administratively burden-
some for their value ( Jamieson 1973, Strauss 1972). However, ideas stemming from MBO, such
as setting objectives and measuring results remain a common feature in PM processes today.
A popular rating method to emerge in the early 1980s was the forced distribution, introduced
by former General Electric CEO Jack Welch. Known as GE’s “rank and yank” system, employees
were slotted into categories based on how their performance stacked up to other employees,
with small proportions (10–15%) identified as top and bottom performers and the remaining
∼80% slotted in the middle. The top and bottom groups often defined those to be promoted and
separated, respectively. The practical problem forced distributions posed is that the top 10% in
a low performing group may be performing with the same effectiveness as the bottom 10% in a
high performing group, introducing both fairness and accuracy concerns if the groups are blindly
combined. This issue is typically mitigated through calibration sessions in which employees are
discussed and recategorized to ensure that the top and bottom 10% are accurately identified
across all employees. However, this is a time-consuming process that becomes less informed as
calibration rolls up through higher organizational levels and individual employee performance at
lower levels becomes less well known. Although forced rankings remained popular for more than
30 years, their use is now on the decline, falling from 49% in 2009 to 14% in 2011—GE being
among those to abandon this rating method (i4cp 2011).
Another rating strategy that emerged about this same time was gathering multisource or
360-degree ratings from peers, customers, or direct reports in addition to managers. The idea
was that those with different role relationships to an employee observe different aspects of

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performance (Borman 1974). For example, customers will have unique insights into one’s cus-
tomer service effectiveness, whereas direct reports will be best equipped to evaluate a manager’s
feedback and mentoring performance. 360-degree ratings gained popularity in the 1980s and are
still widely used today (Bracken et al. 2001, Smither et al. 2005). They are primarily used to pro-
vide developmental feedback, but they can also support decision making, if the rating information
from the different sources is appropriately integrated and interpreted by the person’s manager
or a coach (Bracken et al. 2001). One caveat, however, is that decrements in the quality of mul-
tisource ratings are often observed when they are used for decision making versus development
only (Greguras et al. 2003).

Performance Evaluation Challenges

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Underlying performance rating research are three assumptions that are worthy of further explo-
ration:
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 Everyone has a stable level of true performance that reflects their effectiveness on the job.
 Raters are able to rate others accurately.
 Raters are motivated to rate others accurately.
Regarding the first, we assume that each individual has a “true” level of performance that
they consistently exhibit on the job. We then use the extent to which different raters agree on
their ratings of an individual as an indicator of how well the ratings are capturing a person’s true
performance level, with higher agreement giving us more confidence we are accurately measuring
the person’s true performance level. Rater agreement is hard to achieve, however, in part because
raters bring their own standards to any rating situation, based on their past experience, personal
rating tendencies, and idiosyncratic views about what constitutes good or poor performance (Landy
& Farr 1980, Feldman 1981). However, rating disagreement can also stem from raters viewing
different aspects of performance or, importantly, real differences in how employees actually behave
in the presence of different raters. An individual may be highly responsive with managers but
disregard peers—or the person may help only some peers but not others. These realities explain
why interrater reliabilities are typically only in the .50 range (Viswesvaran et al. 1996), and they
also raise questions about the extent to which true performance can be agreed upon among raters,
or even exists.
The second assumption is that raters can make accurate ratings with proper rating instruments
and training. The reality is that most managers can identify who is doing a job capably, who is
failing, and who is performing above and beyond. However, the ratings managers are asked to
make are sometimes so nuanced and detailed that they are beyond their information-processing
capabilities. Managers see thousands of performance examples in a year-long rating cycle—far
too many to recall, weight, and summarize with a high degree of accuracy for each employee.
Furthermore, managers do not see performance in some areas (e.g., how employees engage with
their direct reports) and may not have the subject matter expertise to judge some of what they do
see (e.g., general managers rating highly technical performance), causing them to rely on biased
impressions, what others say, or stand-out examples of obviously exceptional or poor performance
(Landy & Farr 1980). Rating scales that contain many rating levels or factors that require highly
nuanced judgments are asking for rating precision that managers cannot realistically provide
(Pulakos & O’Leary 2010). Many overengineered rating formats and processes have been devel-
oped that do not align well with raters’ information-processing capabilities.
The third assumption is that raters are motivated to evaluate others accurately. However, several
studies question this assumption by showing that various contextual factors undermine rating

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accuracy (Tziner & Murphy 1999, Murphy et al. 2004). Murphy & Cleveland (1995) suggested
four competing goals that managers must negotiate and balance when they evaluate employees:
 Task performance goals, which entail using ratings to influence subsequent performance.
 Interpersonal goals, which entail using ratings to maintain or improve relationships with
employees.
 Strategic goals, which entail using ratings to increase the manager’s or workgroup’s standing
in the organization.
 Internalized goals, which reflect raters’ personal beliefs about how they should evaluate
performance.
It has been proposed that political, social, and practical factors carry so much weight in man-
agers’ rating behavior that rating accuracy and employee differentiation are simply not relevant
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drivers of ratings (Adler et al. 2016). It has similarly been argued that managers have few if any in-
centives to rate employees accurately (Pulakos & O’Leary 2011). Unless an employee is a problem
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performer, many managers take the pragmatic approach of playing to employees’ strengths and
assigning them work they can do well (Mueller-Hanson & Pulakos 2018). They realize that all
employees are imperfect and each brings different capabilities to a job. If employees—especially
experienced employees—are making solid contributions, managers often overlook weaker areas
for which there is little chance of change or growth. Experienced managers understand the prac-
tical realities and costs of replacing staff and onboarding new staff that will also be imperfect.
Finally, they understand that employees want to be recognized and praised, which creates a strong
incentive for them to rate their key, albeit imperfect, employees above the midpoint of any scale
in order to keep them motivated and engaged.
Managers also take a pragmatic approach to how they use ratings in pay and reward decisions
(Pulakos et al. 2015). Instead of using the rating process to arrive at an evaluation and then translate
this into a pay decision, managers are more likely to retrofit their ratings to align with the reward
decisions they want to make at a given point in time. The practical considerations that drive pay
decisions include mitigating attrition risk, managing internal or external equity, and even whose
turn it is to get a larger increase—a phenomenon that results from the relatively small (2–3%)
raise pools that most organizations have today. To the extent that ratings align with pay increases,
it is often the latter driving the former.
Given that a manager’s job is to get the highest performance out of his or her team, a key
part of the job is using all available levers to keep the collective group engaged, productive, and
performing. Managers also have their own motivations and advancement goals that the percep-
tion of a high performing and engaged team helps them achieve. Although rating everyone at
the high end of a rating scale may not yield accurate evaluations, it can be argued that this is
rational behavior, especially when today’s managers are being asked to do more with less, they
want their teams and themselves to look good, and they want access to rewards and future op-
portunities (Mueller-Hanson & Pulakos 2018). Context factors thus have profound impacts on
ratings and their implications need to be better understood and accounted for in the design of PM
processes.

Summary and Next Steps for Performance Evaluation Research and Practice
What we have learned over decades of research and practice is that performance ratings bring sig-
nificant challenges. Employees behave differently with different raters due to role and relationship
differences. Managers bring their own standards, levels of sophistication, and expertise to evalu-
ating others. They are swayed by their own biases, differences in the quality of their relationships

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SUMMARY: PERFORMANCE EVALUATION

Below is a summary of our current conclusions regarding performance evaluation based on research and practice
to date:
 Ratings are inherently limited in their value as performance measures.
 Rater-rate relationship differences yield actual performance differences, which raises questions about
whether a “true” performance level exists that can be reliably captured across raters.
 Raters can accurately place others into general categories but cannot make nuanced performance judgments
accurately.
 Political and social factors have very strong impacts on ratings.
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 Properly selected, performance measures beyond ratings may mitigate challenges with ratings.
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with different employees, and their rating preferences. They also see only a slice of each person’s
work behavior and may or may not have the expertise to accurately evaluate what they see. These
factors make true performance impossible to define and rating accuracy impossible to evaluate.
The cognitive processes humans naturally use to process performance information leave raters
with summarized impressions rather than detailed performance information. Although heavy re-
quirements for precise and nuanced ratings may inspire more confidence that we are closer to
ground truth about an employee’s performance, this is a false sense of confidence, because there is
no evidence that more complex ratings improve accuracy or fairness. An important consideration
is how much rating differentiation and accuracy is actually needed, especially when ratings have
been shown to have no impact on performance. Unless highly nuanced differentiation is required
to distribute significant rewards, complex rating processes are unlikely to yield ROI commensurate
with their costs. Simpler judgments that align with the overall judgements raters naturally make
are likely sufficient and most practical for the majority of evaluation needs (see sidebar Summary:
Performance Evaluation).
Given the challenges inherent in ratings, performance evaluation can benefit from leveraging
measures other than ratings. In some jobs, a great deal of performance information is readily
available beyond ratings, such as customer surveys, sales data, production data, efficiency indices,
and billable hours. Although these measures also have limitations (e.g., they can be deficient or
contaminated), they can provide a more well-rounded picture of performance that goes beyond
ratings. When collected on a regular basis, such measures can be used to signal performance
issues early and drive real-time feedback to course-correct. An added benefit is that nonrating
measures lessen the pressure on managers as their role can shift from judging employees to helping
them understand and respond to different performance measures. The use of multisource ratings
combined with attention to performance measures that exist in the environment may reduce
the impact of political and social factors on ratings. With the level of digital transformation
that is occurring in organizations coupled with the increasing focus on analytics, we will see
increasing availability of and focus on performance measures that are automatically and frequently
generated. The questions for future performance evaluation research are (a) how to leverage
and combine available performance information (e.g., various metrics, ratings, etc.) data into
meaningful, sensible, valid, and fair performance assessments and (b) what role humans will play
in future performance evaluation processes. The answers to these questions will almost certainly
result in new performance measurement strategies and practices that may mitigate the limitations
of ratings but will also need to be carefully evaluated for their potential consequences.

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Employee prepares
year-end review

Others provide
360 degree feedback

Manager prepares
year-end review

Company sets Employee prepares Manager calibrates

annual goals mid-year review ratings

Goals cascaded to Others provide Manager conducts

business units 360 degree feedback year-end review

Employees draft Manager prepares Pay and bonus

initial goals mid-year review decisions made
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Manager Manager conducts Manager conducts

approves goals mid-year review year-end review
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Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Figure 1
Typical performance management process used in organizations.

PERFORMANCE MANAGEMENT
With flatter, leaner organizations and pressure to do more with less, performance evaluation
eventually evolved into more comprehensive PM processes that included a fuller array of activities
to drive performance, such as cascading goals, expectation setting, and interim feedback reviews
(Smither & London 2009, London & Mone 2014). These processes became fairly standard over the
past 15–20 years, especially as organizations began acquiring automated PM systems to improve
its efficiency (Aguinis 2013, London & Mone 2014). In these systems, employees are usually
evaluated on behavior and results (Pulakos 2009). The idea is that both “how” employees perform
(behaviors) and “what” they deliver (results) are considered important aspects of their performance.
Behavioral ratings are more useful for course-correcting than results, which come after the fact.
Behavioral ratings are notoriously attenuated, however, with most people rated above the midpoint
of the rating scale, reducing their usefulness (Pulakos 2009). Results capture what some argue is
most important—the outcomes one achieves—although results measures can break down when
goal attainment is outside an employee’s control or results from team performance rather than
individual performance, which is often the case today (Locke & Latham 1990, Ployhart et al.
2009). A typical automated PM process is shown in Figure 1.
Most PM processes begin by setting goals and objectives for each employee—a practice rooted
in goal-setting research, which shows that employees perform more effectively when specific goals
are set (e.g., Locke et al. 1981, Locke & Latham 1990). Cascading goals are often used to link
the organization’s strategic goals down to each employee (Rodgers & Hunter 1991). The idea
is that these linkages will help employees understand how their work aligns with the organiza-
tion’s strategy and goals (Hillgren & Cheatham 2000, Schneier et al. 1991). Leveraging principles
from MBO, objectives state the outcomes each employee is expected to achieve in sufficient de-
tail to judge whether the objective has been met. Employees and managers are often trained
to set SMART (Specific, Measurable, Aligned, Realistic, and Time-Bound) goals as part of this
process.
Although the idea of linking individual and organizational goals makes sense, Pulakos &
O’Leary (2010) noted the following practical challenges:

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 Cascading goals take time and can be difficult for managers who are not accustomed to
linking goals between levels.
 As goals are cascaded, they often become disconnected from organizational goals and ob-
scured, akin to the game of telephone, in which retelling a story can alter it in ways not
intended.
 Even with training, the quality of the objectives varies greatly from manager to manager,
and objectives are rarely comparable across similarly situated employees (Pulakos & O’Leary
2010).
 Even when jobs are predictable, goals set at the beginning of the year cannot account for
unexpected events during the year. This challenge is exacerbated in fluid situations in which
priorities change frequently (Cascio 1998, Pulakos & O’Leary 2010). Although guidance is
given to update objectives as the situation changes, this is rarely done in practice.
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 It can be difficult to assess the relative contributions different employees make when their
objectives are not comparable (Pulakos 2009). Achieving an easier goal fully may yield much
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less contribution than partial delivery of a challenging goal, yet the former will typically be
rated higher than the latter.
 Finally, goal attainment is often based on available rather than optimal measures, which can
sacrifice important criteria, for example, measuring quantity rather than quality.
Although extensive research has been devoted to goal setting, most has been conducted in
laboratory rather than field settings, leaving several questions unanswered in work situations.
For example, little research has evaluated the extent to which measures of goal achievement are
reliable, valid, and fair measures of performance (O’Leary & Pulakos 2017). Questions have also
been raised about the motivational impacts of goal setting over long time horizons, with research
showing that shorter time spans are better for driving performance (Latham & Locke 2007).
However, performance objectives typically cover year-long timeframes, which are likely too long
to maintain strong motivational effects. Finally, rewarding goal attainment can change its dynamics
dramatically. If employees know they will be rewarded by achieving a goal, they will angle for highly
attainable goals to guarantee rewards, which is why goals in performance evaluation contexts tend
to be less aspirational and challenging than goals in learning contexts (Winters & Latham 2006).
The above factors raise questions about the extent to which goal setting in a PM context as it is
accomplished today is actually useful in driving high performance.
A common feature of PM processes is the use of competency models as the basis for behavioral
ratings. David McClelland is credited with introducing the idea of a competency (Dubois 1993),
and competency-based talent management practices have developed rapidly ever since, although
there has been significant debate about what exactly competencies are and how to most effectively
measure them, with some critical views. Boyatzis (1996) defined a competency as a combination
of a motive, trait, skill, attribute, or a body of relevant knowledge; in other words, a competency is
any individual characteristic that is related to successful job performance. Klein (1996) differenti-
ated competencies from psychological constructs, defining them as related, observable behaviors
representing common themes that differentiate effective from ineffective performance. Compe-
tency models today typically consist of several behaviorally defined performance factors, following
Klein’s concept. Competency models provide a useful mechanism to articulate an organization’s
strategy, values, culture, and priorities. Over the years, more rigorous approaches to competency
modeling have evolved that have a job-analytic backbone to better support their use in evaluation
and decision making (Schippmann 1999). In a PM context, ratings are made on competencies that
are relevant for each employee’s role. However, similar to the rating format research discussed
above, competency-based rating formats have proven to be no more accurate or unbiased than
any other rating formats.

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In spite of considerable investment in designing and automating PM processes, automation

did not yield improvements in PM quality, effectiveness, or impact, which prompted increased
attention to implementation activities such as building leadership support and employee buy-in
and developing effective communication, training, and change management strategies (Rodgers
et al. 1993). Large-scale survey research studies began examining the impact of PM processes
on employee engagement and performance (CEB 2004, Harter et al. 2002). Concerns raised
by this research, which showed PM processes to have little if any impact on performance, led
initially to the development of more elaborate processes. PM steps were broken down into more
specific, structured, and scheduled PM activities, based on the idea that more prescribed steps and
time devoted to PM would translate into improved outcomes. This resulted in more burdensome
PM requirements for managers and employees that became increasingly disconnected from what
managers actually need to do to manage performance on a daily basis, such as ensuring employees
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know what they need to do and coaching them to overcome barriers in real time. Pulakos &
O’Leary (2011) have argued that automation has exacerbated the schism between formal PM and
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how managers manage performance day to day, by turning an inherently human and fluid process
into intermittent, automation-enabled administrative steps.
Negative attitudes toward PM, especially formal review sessions, reached fever pitch in the
late 2000s, with emotional calls to eliminate them (Culbert & Rout 2010, Culbertson et al. 2013).
Neuroscience research provided compelling evidence of brain changes that initiate automatic
defensive reactions to formal performance reviews, showing physiological mechanisms that make
these aversive for even high performers (Rock 2008, Rock & Jones 2015). Further fueling negative
affect toward formal PM processes were ROI analyses showing millions of dollars in costs and
excessive time devoted to PM activities that are uniformly viewed as low value and have no impact
on individual or organizational performance (CEB 2012). The combination of these factors has
led to a massive movement to reinvent PM. There has never been a time when so many companies
have experimented with disruptive change to a major talent system, which speaks volumes about
the dissatisfaction with PM (Adler et al. 2016).

New Approaches to Performance Management

The past five years have brought novel ideas for how to gain more value from PM that are different
in kind from traditional practices. Rather than continue to add more formal PM steps and processes,
an overwhelming number of companies have begun stripping down their formal processes and
focusing more on informal, unscheduled behaviors that have been shown to matter most in driving
performance (CEB 2004, Bryant 2011). A plethora of case studies have been published over the
past few years describing how different companies approached their PM reform. For example,
Deloitte’s PM transformation was highlighted in the Harvard Business Review (Buckingham &
Goodall 2015) as well as numerous online articles (Baldassarre & Finken 2015, Mosley 2015,
Rock & Jones 2015). Interest has been so high that mainstream media outlets such as the New
York Times and Washington Post (Cunningham 2015, Kantor & Streitfeld 2015) have featured
articles about PM reform at Accenture, Amazon, Deloitte, General Electric, and Microsoft, among
others.
The number of companies working on PM reform simultaneously has generated considerable
debate about which changes will add the most value, resulting in two primary approaches. The
first approach is to change aspects of the formal system to reduce unnecessary, low-value steps and
processes that yield high costs with no clear ROI. This strategy to fix PM aligns with general trends
to reduce talent management process complexity, which Effron & Ott (2010) argue has become too
heavy, burdensome, and costly for its value. The second major approach to improve PM focuses

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on the day-to-day manager and employee behaviors that have been shown to drive performance,
such as providing real-time feedback that helps employees perform better or overcome challenges
and implementing agile goals that are nearer term and easier to adjust as the situation changes.
Some organizations have focused their efforts on the first strategy (streamline the process), others
have focused on the second strategy (drive more effective PM behavior), and some have made
changes that leverage both approaches in tandem.

Streamlining the Formal Performance Management System

The design of new PM processes needs to start with careful consideration of the purpose(s) for
PM, which can include development, administrative (e.g., decision making around pay, bonuses,
promotion, etc.), or other (e.g., legal defensibility) goals. The primary purpose(s) of PM in a given
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organization must be clearly defined, because PM processes that try to serve too many purposes
often end up serving none well (Pulakos 2009). Clarity of purpose helps in two key ways:
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 It enables organizations to avoid PM goals that fight each other, for example, a longstanding
finding is that evaluation goals can interfere with effective development. When rewards
are in the mix, employees are reluctant to focus on development and ratings become more
corrupt, which we discuss in more detail below.
 It provides an important benchmark against which potential PM features can be evaluated
to avoid including peripheral features and complexity that do not add incremental value.
Although organizations have experimented with streamlining their goal-setting processes, for-
mal reviews, and rating process, they have become most fixated on whether to retain ratings,
which has become the subject of considerable debate (e.g., Adler et al. 2016). Many high-profile
companies (e.g., Accenture, Deloitte, Microsoft, GAP) have abandoned or substantially reduced
their use of ratings (Culbert & Rout 2010, Cunningham 2015), whereas others have held firm
that ratings are important to keep. If the debate about ratings concerned questions about rating
quality or accuracy, the answer would be simple. Nearly a century of research shows longstanding
problems with ratings, including inaccuracy, questionable fairness, and low value (Bernardin &
Beatty 1984; DeCotiis & Petit 1978; DeNisi 2006; Ilgen & Feldman 1983; Landy & Farr 1983;
Murphy & Cleveland 1991, 1995). However, the issue of whether to keep ratings is more complex
and goes beyond issues of psychometric quality and utility.
Proponents of ratings have articulated valid concerns about the need to document performance
to meet the legal and regulatory requirements that exist in some countries. They have argued
that evaluation occurs irrespective of whether ratings are recorded and that there is value in the
transparency ratings provide. Opponents alternatively argue that it is worse to provide ratings
that are almost always inflated but at the same time, maintain nontransparent sources of more
accurate performance information. For example, designations of who is high potential are not
often shared with employees. The most compelling rationale supporting ratings and PM processes
in general is that while these are ineffective in driving performance, they at least help ensure that
some performance information is communicated to employees (Adler et al. 2016). Supporting this
notion is recent CEB (2016) research, which shows that employees in rating-less organizations
report less engagement and perceived fairness than employees who received ratings. However,
a cautionary note in interpreting these results is that CEB’s research did not separately evaluate
organizations that replaced ratings with regular check-ins, coaching, and feedback from those
that simply eliminated ratings. Thus, although CEB’s findings suggest negative attitudes may
be associated with no ratings, these may be more a function of poor practices that remained
unaddressed when ratings were removed. It is not recommended that organizations remove ratings

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DESIGNING PERFORMANCE MANAGEMENT PROCESSES TO DRIVE

PERFORMANCE

Performance management (PM) practices should be designed to drive performance in support of the organization’s
overall strategy and goals. Taking a strategic approach to PM design requires answering questions like the following:
 What business problem(s) need to be solved?
 What must be evaluated to achieve our business goals?
 How much pay is at risk?
 Will a common process work, or do we need different processes for different work and units?
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without adding other mechanisms or processes to ensure employees receive clear expectations and
regular feedback.
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Although the question of whether to retain ratings has spawned great interest and lively debate,
this is not the most important or first question to ask in considering PM transformation (Adler
et al. 2016). More important questions concern the critical performance outcomes an organization
wants to drive and how employees can be best enabled to deliver these. From this view, there is no
right answer to the question of whether an organization should have ratings. The answer depends
on the organization’s strategy and goals, reward structures, maturity, openness to change, and
management philosophy, among other contextual factors (see sidebar Designing Performance
Management Processes to Drive Performance). Pulakos et al. (2015) argued for taking a strategic
approach to PM in which PM goals emanate from strategic goals and then choices about system
design are made based on these criteria. Taking a more strategic view versus a narrow view that
overemphasizes the question of ratings will help organizations think through how to best drive
performance in their given context. To the extent that organizations have different job levels,
work requirements, and outcomes across different units, different PM features or processes may
be needed to optimize performance versus a one-size-fits-all model (Church et al. 2015).
Much of the evidence to date on the efficacy of PM transformation efforts is based on individual
case studies. However, the Center for Effective Organizations (CEO) recently conducted research
that begins to provide insights on the effectiveness of different innovative practices. Three new
practices, rating-less reviews, ongoing feedback, and crowdsourced feedback that leverages social
media, have been adopted by enough organizations in the past several years that CEO was able
to begin evaluating their impact (Ledford et al. 2016). On the basis of survey feedback from 244
companies, CEO found that almost all (97%) had adopted ongoing feedback, fewer (51%) had
adopted rating-less reviews, and the least number of companies (27%) had adopted crowdsourced
feedback. Interestingly, these new practices did not necessarily replace legacy practices, as many
companies continued use of cascading goals, 360-degree feedback, competency assessment, and
rating calibration, along with at least one of the cutting-edge practices. However, the use of
ongoing feedback and rating-less reviews in combination was associated with decreased use of
more traditional PM practices.
The results of CEO’s research showed that the combination of all three innovative practices
yielded the most impact on several criteria of interest, including strategic alignment, motivating
and developing employees, and rewarding top talent. The combination of ongoing feedback and
crowdsourced feedback was more impactful than either ongoing feedback alone or ongoing feed-
back plus rating-less reviews. Responses to the survey of innovative practices compared to the
responses from prior survey research on PM practices suggested that the new practices are more

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effective than traditional practices. These results are encouraging and suggest promise for the
direction companies are taking to improve their PM practices. The important question is whether
the increased effectiveness associated with the new practices will sustain over time.

Driving More Effective Performance Management Behavior

The second strategy organizations are using to improve the value of PM is through changing
manager and employee behavior. The importance of manager behavior and employee-manager
interpersonal relationships on employee attitudes and performance has been widely recognized and
is supported by decades of research. For example, studies have shown that effective relationships
and open communication are associated with perceptions of fairness and procedural justice (Beer
1981, DeCotiis & Petit 1978, Wexley & Klimoski 1984) as well as higher performance (Daniels
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2000, Beer 1981). Best practice survey research has similarly shown the importance of effective
communication and solid manager-employee relationships as levers for engagement and high
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performance (CEB 2004, Harter et al. 2002).

The importance of feedback, in particular, has consistently been highlighted in the research
literature (Bernardin & Beatty 1984, Ilgen et al. 1979, Maier 1958), because of its potential to
positively impact performance (Ilgen et al. 1979, Kluger & DeNisi 1996) and job attitudes (Ilgen
et al. 1981, Pearson 1991). Although researchers have invested considerable energy in determining
how to most effectively conduct formal performance feedback sessions (e.g., Burke et al. 1978,
Cederblom 1982, Pearce & Porter 1986, Nathan et al. 1991), it is now widely understood that
informal feedback provided in real time is most impactful in driving performance and engagement
(e.g., Aguinis 2013, CEB 2004, Kirkland & Manoogian 2007, Gregory et al. 2008).
Effective PM behavior goes beyond informal feedback, however (see sidebar Key Performance
Management Behaviors for Managers). CEB (2004) showed that several key manager behaviors
are associated with higher performance and engagement: setting clear expectations, providing
regular informal feedback, and helping employees develop and succeed at work. Google’s Project
Oxygen (Bryant 2011) identified eight habits of highly effective managers that confirmed CEB’s
findings. These included meeting individually with employees, helping them solve problems, and
coaching and developing them. Google managers who demonstrated these behaviors had teams
that performed better, stayed longer, and had better attitudes about work. Google began teaching
the eight habits in training programs, as well as in coaching and performance review sessions with
individual managers. These efforts yielded significant improvement in 75% of Google’s least effec-
tive managers. Taken together, these studies demonstrate the strong effects of manager behavior
on employee performance, engagement, and bottom-line results, and they support the idea that

KEY PERFORMANCE MANAGEMENT BEHAVIORS FOR MANAGERS

Below are the key behaviors research has shown that managers need to exhibit to drive high employee performance
and engagement.
 Set clear expectations, priorities, success criteria, and standards.
 Revise expectations in real time, so employees know what to do.
 Provide informal feedback daily to praise, coach, and course-correct employee performance.
 Check in regularly with employees to stay in touch and provide guidance.
 Coach employees and help them solve problems to enable success.

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KEY PERFORMANCE MANAGEMENT BEHAVIORS FOR EMPLOYEES

Below are the key behaviors employees need to exhibit to do their part on driving high performance.
 Clarify their performance expectations to ensure they understand priorities and standards; revisit expecta-
tions when necessary.
 Set expectations with peers about who is doing what, and by when.
 Ask for and accept feedback openly and nondefensively.
 Use feedback to course-correct and continuously improve own performance.
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key behaviors can be learned with proper training and coaching. When the significant impact of
manager behavior is compared to the low impact formal PM systems have on performance (CEB
2004, Bryant 2011, Pulakos et al. 2015), it is not surprising that PM reform today focuses heavily
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on behavior change.
Although research has primarily focused on critical manager behaviors, it is important to re-
member that PM is an interactive process between managers and employees in which employees
also have responsibilities for enabling performance. The aspiration of PM behavior change is to
fundamentally shift how PM is viewed and carried out. This requires managers and employees to
make both mindset and behavioral changes so that PM is transformed from a formal HR system
of prescribed steps that are cued by an automated system to managers and employees engaging to-
gether on a continuous basis to drive high performance and achieve important business outcomes
(see sidebar Key Performance Management Behaviors for Employees). Figure 2 illustrates the de-
sired change, which is rooted in developing productive working relationships that are characterized
by open communication and trust, which in turn enable openness to real-time feedback, coaching,
continuous learning, and development to occur naturally as part of daily work. In essence, a new
mindset and climate need to be created about how PM is enacted on a regular cadence through
key manager and employee behaviors (Bryant 2011, CEB 2004, Pulakos et al. 2015).
Creating a climate for PM that is characterized by effective PM behavior is no easy task. Many
approaches oversimplify what is required, which risks yet another set of failed PM interventions
(Mueller-Hanson & Pulakos 2018). For example, some companies have attempted to drive infor-
mal feedback by simply requiring more frequent scheduled check-ins between managers and em-
ployees. Others have implemented formal training programs but have done too little, or virtually
nothing, to enable the deep learning and change that needs to transfer into the work environment.

Where PM is today Where PM needs to be tomorrow

Formal
Goal feedback Pay
setting review decision
High Ongoing expectations,
feedback, and development
Activity

Low
Begin PM cycle End PM cycle Begin PM cycle End PM cycle

Figure 2
Performance management transformation to improve its effectiveness and value.

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Behavior change needs to go beyond passive methods, such as e-learning, classroom learning, and
even more active methods such as simulated practice (e.g., role plays). Meaningful change requires
viewing the concept of PM differently, engaging differently, and reacting differently over time and
across contexts until new behavioral patterns are formed and embedded.
Experiential learning on the job provides a platform for behavior change (DeRue et al. 2012,
Ericsson et al. 1993), because work inherently contains several important drivers of deep learning
(Davache et al. 2010), as follows:
 Work tasks inherently capture learners’ attention and have built-in relevance and ownership,
which are important to hardwire learning.
 Practicing new concepts as part of real work helps learners see how these play out across
people and situations, providing contextualization, personalization, and varied learning ex-
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periences that are essential for deep learning.

 Work provides natural opportunities for spaced practice that solidifies learning.
 Learning through real work incorporates important social elements, such as learning gen-
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eration by participants, connectedness, and opportunities for feedback.

Pulakos et al. (2015) offered an experiential on-the-job learning approach to PM behavior
change that prompts learners to practice target behaviors, assists them in extracting learning
through reflection, and reinforces repetition to hardwire learning over time until new behaviors are
performed successfully and nearly automatically, that is, without significant cognitive or emotional
strain (Fitts & Posner 1967). This approach was shown to result in positive behavior change as
judged by those with whom trainees interacted on the job (Mueller-Hanson et al. 2016). However,
in some situations in which this intervention was attempted, there was insufficient attention and
staying power to drive meaningful change.
Future research is needed to continue evaluating different approaches to large-scale PM be-
havior change. As one example, Boyatzis et al. (2015) offered a comprehensive model of change
that may better enable sustained behavior change in organizations. To be successful, individuals
must genuinely care about making a change, engage in self-directed, intentional effort to make a
change, and be aware of the change and the process of change. In the model, change begins by
creating a personal future vision that provides the impetus for change. The personal vision repre-
sents the ideal self, which is then compared to the real self (which is partly a function of how one
is viewed by others) to identify strengths, which is where the ideal and real self is consistent, and
gaps. The gap between the real and the ideal selves creates the agenda for learning and provides
motivation to change. Successful change is more likely to occur when individuals adopt a learning
versus performance orientation to arouse positive belief in one’s capability to change and maintain
focus on what the individual wants to become. By contrast, a performance orientation that focuses
on success, proving oneself, and getting praise arouses anxiety in the wrong parts of the brain to
promote learning and development. The idea is that individuals must become intrinsically moti-
vated to change, driven by the emotional part of their brains, versus feeling obligated to change
because others told them to change. Also important are trusting and supportive relationships to
enable the change process. Boyatzis (2016) cites several studies in which this approach yielded
more successful behavior change outcomes than use of more traditional learning approaches.
Effective PM behavior may also be facilitated by mindfulness practices that are gaining in-
creasing attention in organizations to enable higher performance, satisfaction, and resilience,
among other positive work outcomes (Gelles 2012, Dane 2011, Dane & Brummel 2013). The
key tenants of mindfulness include the practice of being present, aware of what is happening in
the moment, pausing to control fight-or-flight reactions, and using this awareness to make bet-
ter decisions. Mueller-Hanson & Pulakos (2018) have hypothesized that these practices should

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help managers be more in tune with the extent to which they are setting meaningful expectations
that are well-understood by employees and help them naturally pause and check on how expec-
tations and feedback are being received. They may also help increase managers’ awareness of
the impact they are having on employees and develop more effective coaching skills. Mindfulness
practices should help employees become more attuned to feedback cues and take in feedback more
openly by avoiding automatic defensive reactions, separating the message from their reaction to
it, and processing information more effectively to enhance learning. One potential challenge is
that developing mindfulness requires engaging in a set of practices over time that enable it. Future
research is needed in organizational settings to determine whether these practices can in fact drive
more effective PM behavior and if so, how they can best be implemented to yield the intended
results.
There are three cautionary notes about successful behavior change to bear in mind. The first is
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that many companies have unrealistic expectations about how long and what it takes for meaningful
change to occur, which includes intentionality from learners, a learning orientation, and repeated
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practice (Pulakos et al. 2015). The second caution is that PM behavior change (e.g., real-time
feedback, agile goal setting, coaching, etc.) is unlikely to be successfully embedded without context.
This is because concepts such as agile goal setting, real-time feedback, and effective coaching are
elusive ideas that cannot be well understood and do not gain sufficient meaning to be learned until
they are practiced in the actual work context. The third caution, which is related to the first two,
is that new PM behaviors will be most successfully embedded by intentionally applying them in
support of achieving an important performance goal (Davache et al. 2010, Mueller-Hanson &
Pulakos 2018), because this enables them to be learned as they will be used—as enablers of high
performance. A case study from Alcoa in which new, keystone habits were successfully developed
to improve safety illustrates the importance of attaching learning to concrete, well-understood
outcomes that have high relevance to individuals and the business (Duhigg 2012).
PM behavior change should thus start with identification of a concrete performance goal (e.g.,
improve collaboration within the team, serve customers faster). Employees and managers would
need to have honest conversations about what is getting in the way of achieving optimal perfor-
mance today, and real-time feedback would need to be given when instances of poor and effective
performance occur. Although individual manager-employee pairs can select a performance goal
on which to practice and learn effective PM behaviors, the impact of behavior change interventions
will be most powerful when whole teams or organizations develop a meaningful shared vision and
engage in learning and behavior change together, as this increases the likelihood of developing
the momentum and sustainability that is needed for real change to occur (Boyatzis 2016). Com-
bining behavior change interventions with other strategies discussed above may be important to
achieve maximum performance impacts, for example, incorporating natural feedback methods
(e.g., crowdsourcing), leveraging relevant performance metrics that are available in the environ-
ment, and focusing on team rather than individual outcomes and performance criteria where this
makes sense.

Successful Implementation of Performance Management Processes

Although we touched on the topic of implementation above, PM transformation is a major orga-
nizational change effort, and established change management models provide insights about how
to orchestrate change effectively (Kotter 2007, Bridges & Bridges 2016, Heath & Heath 2010,
Cohen 2005). As with any change effort, success requires developing a business case, engaging
stakeholders, gaining buy-in and support, communicating effectively, enabling and empower-
ing the workforce to embed the change, and managing expectations. An important aspect of

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implementation, however, is ensuring that the PM approach fits the organization’s strategy and
culture, and that it can be successfully implemented within the given context.
More so than any other talent management system, PM is characterized by almost blind adop-
tion of new trends that frequently underdeliver on expectations (Pulakos & O’Leary 2011). This
happens because insufficient consideration is given to how well a new practice actually fits with the
organization’s strategy, culture, appetite, and resources. An example provided by Mueller-Hanson
& Pulakos (2018) illustrates this point. In Work Rules, Bock (2015) describes how Google’s practice
of rating and paying high and low performers very differently fits with Google’s culture—which is
highly data-driven, offers big rewards, and has tolerance for lengthier processes that are required
to make more nuanced distinctions in pay (Bock 2015). However, in other organizations, pay-for-
performance systems have been abysmal failures, when performance has not been differentiated
historically, the culture is more egalitarian, and insufficient variable pay exists to make meaningful
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differentiated rewards. The point is simply that every aspect of a PM process needs to fit well
within the specific organizational context in which it is implemented to be successful.
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PM change that requires thinking and behaving differently takes more time than changing
the mechanics of a process. The former can take years, whereas the latter can often be done in
weeks. Behavior and culture change that builds incrementally over time—starting small, proving
the concept, and using success to build momentum—tends to be more successful in achieving
long-term change (Mueller-Hanson & Pulakos 2018). Employees need to be actively engaged in
creating a vision for their personal change, which is essential for building the motivation to try out
and use new behaviors (Boyatzis et al. 2015). Repetition, reinforcement, and patience are important
in attitude, behavior, and culture change. It is important to be realistic about what outcomes can
be achieved in a given context, as well as context factors that shape what should be attempted and
can be accomplished. This means realistically assessing political, social, and motivational factors
that will enable or undermine change, as these are often given insufficient attention. Although
some contextual factors can be effectively mitigated, others may be intractable barriers to success.
Very significant barriers to success need to be addressed before change is attempted.

Summary and Next Steps for Performance Management Research and Practice
Over almost a century, PM has evolved from a narrow focus on performance evaluation to the
design of comprehensive annual PM processes. What was initially conceived of as a relatively
simple problem of how to define rating criteria that would enable managers to make accurate
ratings has turned into a much more complex challenge of understanding and studying a vast array
of multifaceted political, social, motivational, environmental, and practical factors that drive PM
behavior and outcomes. This metamorphosis of research and practice over time raises questions
about whether PM processes can add value in organizations or will continue to be plagued by
intractable challenges. Most of the many attempts to improve PM outcomes and attitudes have
focused on implementing formal steps, tools, and processes to align goals, improve rating accuracy,
address performance gaps, and make better decisions about employees. Unfortunately, this focus
on the formal PM system has yielded largely disappointing results in terms of driving important
performance outcomes—which should be the ultimate purpose of PM processes.
Thought leaders have successfully argued that attention needs to be directed to informal pro-
cesses and behaviors that facilitate performance day to day rather than overengineering formal
systems that sit outside daily work. Specific behaviors that have been suggested as most important
include setting agile goals so that expectations can be adjusted as needed to remain clear and
relevant, providing real-time feedback that contributes to learning and achieving more effective
results, and removing barriers to help employees accomplish their goals. We acknowledge that

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behavior change is difficult—on par with the difficulty and complexity of any major organizational
change that requires substantial resource and time investments to achieve. Thus far, effective, sus-
tainable behavior change in organizations has largely eluded us, although several behavior change
strategies from the clinical, medical, and neuroscience domains appear to hold promise for driving
more effective PM. Although wholesale behavior and culture change to drive performance may be
the aspiration, recall that positive impacts can be achieved with lesser interventions. As Ledford
et al. (2016) have shown, even one or two well-considered changes to streamline the formal system
or add new features such as rating-less reviews and crowdsourced feedback can add value and result
in positive outcomes.
An important area for future research to assess is the extent to which interventions to streamline
formal PM systems and drive more effective PM behavior will yield sustained improvements
in managing performance. This is important because historically, PM has been susceptible to
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implementation of new trends that yield initial benefit but fizzle over time. Questions remain
about whether the latest efforts to reduce process and drive effective behavior will finally move
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the needle in delivering more effective PM practices or will simply end up as the next PM trend
that ultimately falls short. Several authors, but most notably Murphy & Cleveland (1995), have
convincingly argued that strong political and social drivers of manager behavior are often at
odds with what managers are asked to do in formal PM processes. These systems can thus be
counterproductive for managers and interfere with their ability to get work done, which adds
further insight into why PM has likely been so challenged in producing value.
Although these conflicts have been well articulated in the literature, relatively little work has
been directed at addressing them head-on. Toward this end, it may be useful to consider new
models that focus on playing to employee strengths and accepting that everyone has limitations
within bounds rather than imposing requirements to provide developmental feedback and im-
prove performance areas that may not be easily addressed. Similarly, we know that organizations
are becoming flatter and more work is being executed collaboratively through matrixed, cross-
functional teams (CEB 2012). Although the importance of teams in executing work has been
discussed extensively, relatively few organizations have implemented team-based PM processes.
However, it may be more productive for managers to start thinking in terms of the collection of
skills and characteristics they need to execute their work programs and strategies for managing
performance that are more team-based. These ideas are not to suggest that individual performance
be forgotten or poor performance be tolerated, but there may be room to shift our thinking to
models that would better support the human and practical realities of the imperfect performers
in the workplace that collectively need to get a job done. Pink (2009) and Rock (2008) have both
offered several ideas that may hold promise for reducing conflict between PM requirements and
how managers and employees naturally engage in work.
A final area that seems promising for future work is more rigorous definition of the context in
which PM occurs and identification of which context factors matter most for effective PM process
and practice. Beyond political, social, and practical factors that impact ratings, Church et al. (2015)
have gone a step further in suggesting that different PM processes may be required to account for
the different contexts that exist within an organization. For example, differences in work require-
ments, complexity, goals, and levels, among many other factors, may have important implications
for PM design. Designers of talent management systems are beginning to use context factors
directly to fine-tune talent management practices and decisions. In the leadership area, for exam-
ple, defining the context in which leaders need to perform enables matching leaders to different
roles with substantially higher predictive accuracy than when context factors are not considered
(CEB 2017). Thus, a final area for future research is to define and test the impact of a fuller set
of contextual factors on PM effectiveness and potentially leverage these insights directly to more

1.18 Pulakos
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 OP06CH01_Pulakos ARI 28 June 2018 11:55

SUMMARY: PERFORMANCE MANAGEMENT

Below is a summary of our current conclusions regarding performance management (PM) based on research and
practice to date:
 Formal PM processes disengage employees, cost millions, and have no impact on performance.
 Formal systems can be streamlined but should not be eliminated without robust informal processes.
 Informal day-to-day PM behaviors enable performance but take time and effort to embed.
 Future research should investigate new PM models that leverage neuroscience, are strength-based, and
focus on team performance.
 The impact of context factors on the design and effectiveness of PM should be further evaluated.
Annu. Rev. Organ. Psychol. Organ. Behav. 2019.6. Downloaded from www.annualreviews.org

systematically design future processes that are best fit to the contextual factors that are most impor-
Access provided by University of Reading on 07/14/18. For personal use only.

tant in a given situation. Key conclusions regarding the current status of performance management
research and practice are summarized (see sidebar Summary: Performance Management).

DISCLOSURE STATEMENT
The authors are not aware of any affiliations, memberships, funding, or financial holdings that
might be perceived as affecting the objectivity of this review.

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