Evaluating the Effectiveness of Performance Management

1 INTEGRATIVE CONCEPTUAL REVIEWE valuating the Effectiveness of Performance Management :A 30-Year Integrative Conceptual ReviewDeidra J. SchleicherTexas A&M UniversityHeidi M. BaumannBradley UniversityDavid W. Sullivan and Junhyok YimTexas A&M UniversityThis integrative conceptual review is based on a critical need in the area of Performance Management (PM), where there remain important unanswered questions about the Effectiveness of PM that affect bothresearch and practice. In response, we create a theoretically grounded, comprehensive, and integrativemodel for understanding and measuring PM Effectiveness , comprising multiple categories of evaluativecriteria and the underlying mechanisms that link them. We then review more than 30 years (1984 2018)of empirical PM research vis-a`-vis this model, leading to conclusions about what the literature has studiedand what we do and do not know about PM Effectiveness as a result.

2 The final section of this articlefurther elucidates the key value chains or mediational paths that explain how and why PM can addvalue to organizations, framed around three pressing questions with both theoretical and practicalimportance (How do individual-level outcomes of PM emerge to become unit-level outcomes? Howessential are positive reactions to the overall Effectiveness of PM?andWhat is the value of a performancerating?). This discussion culminates in specific propositions for future research and implications : Performance Management , Performance appraisal, evaluation, integrative conceptual reviewDespite the popularity of Performance appraisal (PA) and per- formance Management (PM) in both research and practice, there isa great deal yet to know about theeffectivenessof these , for example, the following systems constitute a human resource Management paradox andtheir Effectiveness an elusive goal (Taylor, Tracy, Renard, Harrison,& Carroll, 1995).

3 (Nurse, 2005, p. 1178)The formula for effective [PM] remains elusive. (Pulakos & O Leary,2011, p. 146)There is no shortage of recommendations in the practitioner literatureabout what makes for effective PM is thatfew studies support the many claims about the actual contributions ofvarious practices to the overall Effectiveness of PM systems. (Haines& St-Onge, 2012, p. 1171)It is not clear that [PM] will lead to more effective how (if at all) the quality and the nature of performanceappraisal programs contribute to the health and success of organizationsis a critical priority. (DeNisi & Murphy, 2017, p. 429)The lack of clear and compelling evidence for the effectivenessof PM (defined as a continuous process of identifying, measuring,and developing the Performance of individuals and teams andaligning Performance with the strategic goals of the organization, Aguinis, 2013, p. 2) has given rise to recent debates about whetheror not formal PM is even necessary ( ,Adler et al.)

4 , 2016;Pulakos& O Leary, 2011). Addressing these sorts of issues, as well as makinginformed judgments about PM research and practice in general, re-quires a fuller articulation of the evaluative space of PM than avail-able in the extant literature. This is the primary purpose of this article,which identifies a particularly pressing need based on our extensivereview of the PM literature: a theoretically grounded, comprehensive,and integrative framework for PM thank, and agree with, a reviewer who pointed out that this issuewithin PM is actually a more specificinstance of an issue that has beenaround a long time: the criterion problem (seeAustin & Villanova, 1992).This article was published Online First January 24, J. Schleicher, Department of Management , Texas A&M Univer-sity; Heidi M. Baumann, Department of Management and Leadership,Bradley University; David W. Sullivan and Junhyok Yim, Department ofManagement, Texas A&M wish to express our sincere appreciation to Murray Barrick, WendyBoswell, and Matt Call for their very helpful comments on earlier versionsof this concerning this article should be addressed to Deidra , who is now at Ivy College of Business, Iowa State University,2167 Union Drive, Ames, IA 50011-2027.

5 Document is copyrighted by the American Psychological Association or one of its allied article is intended solely for the personal use of the individual user and is not to be disseminated of Applied Psychology 2019 American Psychological Association2019, Vol. 104, No. 7, 851 8870021-9010/19/$ need for such a framework is highlighted by recent discus-sions within practice. For example,Pulakos and O Leary (2011, ) ask whether PM systems provide a sufficient return to justifytheir use. Related, there has been a push to simplify PM bystreamlining its low value aspects (seeEffron & Ort, 2010; andBuckingham & Goodall s, 2015discussion of Deloitte s changesin this regard). More generally,Lawler and McDermott (2003)find little research data to establish the impact of the manypractices recommended in the writings on PM (p. 50). One keychallenge is that there are myriad ways to define what terms like return, value, and impact mean in this context.

6 Indeed,different research streams historically have argued (implicitly orexplicitly) for different evaluative foci. For example, an ability-based or cognitive perspective on PA privileges the rating task andargues for an emphasis on psychometric criteria ( ,Cardy &Dobbins, 1994); a motivational view privileges PM as a vehicle forimproving employee Performance and argues that the employee behavior on the job (DeNisi &Pritchard, 2006); and strategic views privilege unit-level outcomesand argue for firm Performance as the ultimate criterion (DeNisi &Smith, 2014).Importantly, our review of the PM literature reveals no previousattempts to systematically and comprehensively map (let aloneintegrate) the full evaluative criterion space of PM implied bythese disparate research streams. This is likely one of the keycontributors to some of the issues noted above. Specifically, ourreview suggests that cumulative and actionable knowledge aboutPM Effectiveness has been significantly hindered by lack of atten-tion to articulating and studying the multiple types of PM evalu-ative criteria, how they interrelate ( , how do more proximalcriteria such as reactions accumulate to create value for the orga-nization?)

7 , and how they are differentially relevant for differentquestions. Both empirical research and conceptual models histor-ically have focused on a disappointingly small number of PMcriteria ( , rating errors and accuracy, ratee reactions;Cardy &Dobbins, 1994;Levy & Williams, 2004; seeTable 1, whichprovides a summary of earlier work). There exist very few modelsof how multiple types of PM criteria are likely to interrelate, andno such models that are comprehensive. In response, as part of thisintegrative conceptual review, we created a comprehensive theo-retical model for the criteria underlying PM Effectiveness . Thismodel combines empirical and theoretical work in multiple areasto identify the types of criteria that have been or should be used to evaluate the Effectiveness of creation of this comprehensive model and subsequent re-view of the literature vis-a`-vis this model are our primary contri-butions, representing a significant step forward compared to priorwork in several ways.

8 We integrate PM Effectiveness criteriarelevant to both research and practice, a longstanding need in thisarea (Bretz, Milkovich, & Read, 1992; Ilgen, Barnes-Farrell, &McKellin, 1993). Moreover, although we incorporate extant mod-els, we go beyond these to add concepts from other literaturescritical for understanding the mechanisms underlying PM effec-tiveness. Specifically, PM literature to date has either (a) had avery micro focus, not attempting to link individual criteria likerating quality or reactions to unit-level constructs (see earlierreview byLevy & Williams, 2004); or (b) has adopted an exclu-sively macro focus ( ,DeNisi & Smith s, 2014discussion ofPM and firm Performance ). In contrast we argue that progress inunderstanding PM Effectiveness requires incorporation ofbothmicro and macro constructs as well as specification of the pro-cesses that link them (Ployhart & Moliterno, 2011).

9 Doing soallows us to articulate how the various criteria are interrelated,including a mapping of the key mediational paths (or what we term value chains ) underlying PM model (seeFigure 1) in turn has several important impli-cations for both research and practice. First, regarding implicationsfor PA/PM researchers specifically, our review uses this model todistill cumulative knowledge from the empirical PM literature, interms of what aspects of PM exert the biggest influence on whichevaluative criteria. This allows us to synthesize what is currentlyknown about the Effectiveness of PM while simultaneously iden-tifying a number of limitations in the extant literature, which inturn provides an important foundation for charting a specific andfruitful course for future research. Second, regarding implicationsfor practice, the distilled knowledge from our review conciselyidentifies which aspects of PM make the biggest difference forspecific evaluative criteria.

10 This enables organizations interested ina particular outcome ( , improving employees reactions to PM)to understand what levers are likely to be most impactful in thatgoal. Our model and review of relationshipsamongcriteria alsohelp organizations identify the more proximal criteria that lead tomore distal outcomes. It is often the latter ( , firm Performance )in which organizations are most interested, but identifying a directlink between these and PM can be very difficult, given the manyalternative , regarding implications for literatures beyond PA/PM, wecontribute to the strategic human resources (HR) literature, whichhas emphasized the importance of better understanding the blackbox linking HR practices to organizational Performance (Becker& Huselid, 2006;Messersmith, Patel, Lepak, & Gould-Williams,2011, or what macro researchers would label the microfounda-tions of organizational Performance ,Coff & Kryscynski, 2011).