Organizational Culture and Strategic Performance
har412
5singaporemanagers.pdf
Linking strategic HRM, performance management and organizational effectiveness: perceptions of managers in Singapore
Pauline Stanton a * and Alan Nankervis
b
a Victoria University, Australia;
b RMIT University, Australia
Strategic human resource management (SHRM) theory is predicated on the assumption that effective human resource management (HRM) processes have the capacity to contribute significantly to organizational effectiveness, expressed in terms of productivity, flexibility, effectiveness, efficiency, return on investment, competitive- ness, and ultimately, profitability. Earlier research studies have explored the overall value-adding potential of HRM processes as a whole. Few have focused on the links between strategic HRM, performance management systems and organizational effectiveness, and even fewer have examined these relationships in Southeast Asia. This paper addresses this gap in the literature by examining the perceptions of a split sample of senior managers in Singapore. It reveals an interesting gap between their rhetoric and the realities of their performance management systems, and suggests future research directions.
Keywords: Asian management; organizational effectiveness (OE); performance management; Singapore; strategic human resource management (SHRM)
Introduction
This paper reports on a research study exploring the links between strategic HRM,
performance management systems (PMS) and organizational effectiveness through a
survey of the perceptions of senior managers in Singapore. The paper focuses on three key
areas. First, the adoption and implementation of performance management systems as a
primary component of strategic HRM approaches in organizations in Singapore. For
example, linking the organization’s performance management system to its mission and
vision, its strategic objectives and its values. Second, the nature of performance systems and
the various techniques that are utilized within these organizations. Third, managerial
perceptions of the contributions of such performance management systems to overall
effectiveness. The study builds on an extensive literature on the links between strategic
human resource management, performance management, and organizational effectiveness
(Lepak and Snell 1999, Cascio 2005, Losey et al. 2006, Becker and Huselid 2006, Bartram
et al. 2007, Cascio and Boudreau 2009, Boudreau and Ramstad 2009, Stanton et al. 2010);
the nature of performance management systems (Nankervis and Penrose 1990, Nankervis
and Leece 1997, Nankervis and Compton 2006); and their contributions to such indicators
of organizational effectiveness as customer care, quality, flexibility, competence, financial
awareness, working relationships, and overall productivity (Ulrich and Smallwood 2005,
Cascio and Boudreau 2009, Fitz-Enz 2009, Boudreau and Ramstad 2009). This study
focuses on Singapore and hence provides an Asian management dimension to these debates.
ISSN 1360-2381 print/ISSN 1743-792X online
q 2011 Taylor & Francis
DOI: 10.1080/13602381003790382
http://www.informaworld.com
*Corresponding author. Email: [email protected]
Asia Pacific Business Review
Vol. 17, No. 1, January 2011, 67–84
Previous related studies have been conducted by the authors of this paper in relation to
the generic nature, uses, and effectiveness of performance management systems in
Australia, Singapore and throughout Southeast Asia. Between 1990–2007 four
consecutive surveys of primarily human resource professionals (1990, 1995, 2004 and
2007) were conducted to determine the nature, characteristics, usage, strategic
applications, and perceived effectiveness of performance management systems in
Australian and Southeast Asian organizations (Nankervis and Penrose 1990, Nankervis
and Leece 1997, Nankervis and Compton 2006, Nankervis and Stanton 2008). The last two
iterations of this research have been conducted in conjunction with, and partially funded
by, the Australian Human Resources Institute (AHRI), the Singapore Human Resources
Institute (SHRI), the Asia Pacific Federation of Human Resource Management
(APFHRM), and the Performance Management Institute of Australia (PMIA). Key
research findings from these studies include:
. Narrow conceptions of the meanings and applications of performance management;
. Minimal strategic linkages between performance management systems, other human resource management (HRM) programmes, and firm effectiveness;
. General dissatisfaction with the outcomes of performance management systems, even by their designers; and
. A lack of performance management training for both managers and their employees.
Whilst there were many similarities between the findings in Australia and Asia (for
example, narrow perspectives of performance management, few links with other HRM
systems, relatively low levels of satisfaction with PMS) there were also noticeable
differences, especially in the types of systems employed (Asian respondents used rating
scales and ranking techniques more frequently) and their minimal use of performance-
based pay mechanisms.
This study builds upon these earlier research projects by including the perceptions of
senior managers (rather than specialist HR professionals) of the relationships between
SHRM, performance management systems and organizational effectiveness in
organizations in Singapore. In this paper we first review the literature on strategic HRM
and performance management, second we briefly outline the Singaporean context, third,
we describe the methodology, fourth we outline the results, and finally we discuss the
findings and draw conclusions. We argue that, although contemporary organizations in
Singapore appear to be linking their performance management systems to their visions,
missions, values and strategic objectives, and that managers across organizational
hierarchies are aware and generally supportive of the strategic contribution of performance
management, it is questionable whether these ideal conditions are reflected in their HRM
practices and contribute to organizational effectiveness.
Literature review – theory
Performance management systems, strategy, human resource and organizational effectiveness
Corporate performance management has been a crucial aspect of HRM and business
imperative for many years, as the linkages between individual, section, division, and
overall outcomes have been perceived as the key to effectiveness and global
competitiveness (Ulrich and Smallwood 2005, Losey et al. 2006, Fitz-Enz 2009, Cascio
and Boudreau 2009, Boudreau and Ramstad 2009). Research suggests that organizational
68 P. Stanton and A. Nankervis
performance can be enhanced, particularly through increased productivity and employ-
ment flexibility, by aligning aggregated employee performance outcomes with broad
strategic business and HRM imperatives. Thus, the management of individual employee
performance, and their combined contributions to overall effectiveness, has become
arguably the most important contemporary HRM function in all organizations. Literature
suggests that broad HRM strategies and processes derive from an organization’s values
and objectives (Beer et al. 1985, Lepak and Snell 1999, Cascio and Boudreau 2009,
Boudreau and Ramstad 2009), and determine the nature of an organization’s performance
management system. In turn, performance management systems (theoretically) then both
measure the efficacy of HRM programmes at the micro-level, for example, the outcomes
of job design, staffing, learning and development, remuneration, and career management
systems and processes, and at the macro-level contribute to the achievement of such
business effectiveness measures as compliance, efficiency, productivity, return on
investment, and ultimately profitability.
The paradox of theory and practice in performance management is multi-causal, and in
many ways reflects the inherent contradictions in strategic human resource management
theory and practice as a whole. Conceptually, there is a natural desire and logic to suggest
that SHRM generally, and performance management specifically, should be aligned with
organizational objectives and outcomes, whether formally in large companies or
informally in small ones. However, as Guest et al. (2003, p. 296) have suggested, there is
‘no general theory about performance per se (employee or organization), but a number of
approaches and models, often built on specific disciplinary perspectives’. They observe
that different approaches have highlighted three identifiable foci – the content of
performance and its outcomes; the measures and types of performance data (employee and
organization); and causal links between individual and organizational performance.
This conceptual deficiency has arguably both contributed to, and is reflective of, the
definitional problems associated with performance management. Thus, definitions of
performance management either encompass all organizational performance indicators or
merely refer to individual employee performance outcomes; and may be equated to
performance appraisal, measurement, review, and development activities, or may be
perceived as an integrative umbrella term which includes job design; staffing; learning and
development; rewards and remuneration; employee counselling, discipline, and even
termination. As Yeo (2003, p. 200) suggests:
. . . performance management should not be treated as a separate isolated system. Instead, measurement should be considered at the individual, process, and organizational levels . . . [and] . . . can facilitate the achievement of goals of all individuals, teams, departments and processes with the strategic aims of the organization.
Perceptual issues of performance management are necessarily associated with these
conceptual and definitional problems, as managers attempt to implement performance
management systems which align individual and organizational performance goals and
outcomes. These conceptual, definitional, and perceptual issues have been exacerbated by
the lack of empirical studies or associated research evidence which has been produced to
support or challenge the presumed and anticipated links between individual and
organizational performance (Nankervis and Compton 2006).
However, research has produced a range of evidence that links broad HRM practices to
improved business performance (Cascio 2005, Boxall and Macky 2007, Fitz-Enz 2009).
These practices, often described as High Performance Work Systems (HPWS), include staff
selection, human resource development, performance appraisal, reward and compensation,
Asia Pacific Business Review 69
teamwork and communication (Boxall and Macky 2007). There are various definitions of
HPWS however, Boxall and Mackey (2007, p. 262) suggest a common thread is that
HPWS‘aresystems ofmanagerialpracticesthatincreasethe empowermentofemployees and
enhance the skills and incentives that enable and motivate them to take advantage of this
greater empowerment’. Much of the evidence of HPWS is based onlarge quantitative surveys
across industries and organizations and is criticized in that it does not explore the ‘black box’
of how exactly the HRM architecture of ‘systems, processes, practices and competencies’
at the organization level actually links to improved performance (Lepak and Snell 1999,
Becker and Huselid 2006). A number of recent reviews have tried to identify which HR
systems and practices are linked to individual and organizational performance (Cascio 2005,
Cascio and Boudreau 2009). However, as Harris et al. (2007, p. 452) argue ‘there is
insufficient evidence to suggest that any one element of HRM may be superior to another in
terms of its impact on performance’ suggesting ‘a confusing picture in the HR performance
literature regarding which practices, policies and or systems are linked to performance’.
Few of these studies extend to measures of particular HRM functions such as
performance management, and adding to the problem of determining the links between
performance management and organizational effectiveness, measures of ‘effectiveness’
are confused and often imprecise. Thus, effectiveness may merely be restricted to an
organization’s financial outcomes (the business ‘bottom line’), or it may include ‘the goal
model, the system model, the internal process model, the human relations approach, and
the political approach . . . the multiple constituency model . . . the interpretation system
model . . . and the contradiction model’ (Ahmed 1999, p. 544–545). These models range
from relatively simple quantitative outcomes and process-based measures – the
achievement of desired organizational objectives and targets, or system efficiency –
‘budgets, assets, operations, products, services, and markets’ (Yeo 2003, p. 199), through
to the (qualitative) perceived satisfaction of employee needs, and more complex measures
of multiple and conflicting stakeholder interests.
A focus on Singapore
Research on HRM and performance management in Asia often questions the transference
of Western management models and the associated assumptions about human behaviour in
Asian business environments (Chew and Goh 1997, Chew and Sharma 2005, Chatterjee
and Nankervis 2007). Such authors suggest that an understanding of context and culture is
vital to understanding behaviours. This includes not only history, politics and government,
economic development, and features of the workforce such as age and skill levels, but also
individual versus collective mindsets and philosophies (Hofstede 2007) that can influence
attitudes and guide behaviours.
Singapore is one of the most successful Asian economies and perhaps the closest to
western values (Hampden-Turner 2003). Influenced by UK educated Lee Kuan Yew and the
People’s Action Party Singapore, went from Third World to First World status in less than
30 years in a process that Hampden-Turner (2003, p. 171) describes as ‘facilitated develop-
ment’ rather than command economy.Leggat (2007) describes three stages ofdevelopment –
from colonial administration to regulated pluralism (1960–1967); from regulated
pluralism to corporatism (1968–1978) and from corporatism to corporatist paternalism
(1979–1886). Leggat (2007, p. 646) argues that Singapore is driven by a ‘political
pragmatism’ that has transformed its industrial relations system into ‘manpower planning’.
Choo argues that Singapore’s governance and development shares many Asian
cultural characteristics including a collective entrepreneurial spirit and ‘a comforting
70 P. Stanton and A. Nankervis
focus on people, a high duty consciousness, professional obedience amongst employees’
as well as basic trust (cited in Chatterjee and Nankervis 2007, p. 244). However, he also
suggests that Singapore is managed like a big corporation which puts significant value on
‘strong leadership, meticulous planning and discipline’ (p. 247). He argues that this leads
to a control-based managerial approach with highly bureaucratic organizations
emphasising a significant focus on micro level operational details, and high value placed
on the efficient performance of routine decisions and tasks. If Choo is correct we might
expect to see performance management systems that are focused on control and monitoring.
On the other hand, Wan (2005, p. 149) argues that since the Asian crisis, human capital
has become a key issue for the Singapore government and multinational enterprises
(MNEs) operating in Singapore, leading to a focus on better utilization and development
of the domestic workforce and a search for overseas talent. This is illustrated by recent
government initiatives such as the Service Excellence Workforce Skills Qualification
(SEWSQ) and the Employability Skills System (ESS), amongst others (Ministry of
Finance 2008). Better labour utilization means a move from lifelong jobs and predictable
pay increases and a need to ‘segregate the revenue earners from the non-performers’,
hence Wan (2005, p. 154) suggests that performance-based pay and promotion based on
merit will become the norm. In these circumstances organizations might need to look
beyond performance management systems focused on monitoring to ones based on human
resource development.
Our study
The innovative focus of this research project lies in its exploration of the experience of
performance management systems in Singapore from the perspective of a range of senior
managers (including a proportion of HR managers). Research studies suggest that although
senior managersclaim to be committed to strategic human resource management, the practice
within the organization might not live up to these claims – suggesting significant
discrepancies between the rhetoric and the reality (Bartram et al. 2007, Stanton et al. 2010)
These include studies throughout Southeast Asia, including Singapore (Nankervis and
Compton 2006). However, the links between strategic HRM, performance management
and organizational effectiveness have seldom been studied in detail in Singapore amongst
both public and private sector organizations, and the analysis of the linkages between these
two variables has been a significant deficiency in current academic and industry research.
Research questions
This study provides a ‘snapshot’ that can add to the debates around two key research
questions:
(1) What are the characteristics, components, and features of performance
management systems in Singapore? and
(2) How well are they integrated with strategic HRM imperatives, other HRM
functions and to broad organizational goals and objectives, from the perspective of
senior managers?
Methodology
The study was conducted by means of a structured questionnaire comprised of six sections –
organization and participant details; strategies, values and culture; general views on
Asia Pacific Business Review 71
performance management; specific aspects of the current PMS; links between PMS and
other HRM processes; and the perceived effectiveness and business outcomes of
performance management. It included 27 questions, all of which involved either multiple
choices or Likert Scales, based upon a ‘forced choice’ of four or five dimensions.
The questionnaire was constructed using a combination of items derived, with permission,
from a similar survey conducted by the UK Chartered Institute of Personnel Development
(CIPD 2005) and from earlier Australian performance management studies
(Nankervis and Compton 2006). Whilst ‘performance management’ was not explicitly
defined in the questionnaire, the descriptors utilized in each question ensured a shared
understanding of its meaning, and were consistent with the descriptors used in the earlier
CIPD study. Data were analysed using SPSS software. No personal identifiers were
included in the survey, and the research study received formal ethics approval from one of
the researchers’ institutions. It must be emphasized that the findings reflect only the
perceptions of senior managers (and some HRM professionals) and not necessarily
the realities of their firm’s operations. However, such perceptions are valuable in revealing
overall satisfaction (or otherwise) with the effectiveness of the performance management
systems, and provide reflective qualitative data.
The survey was conducted in two parts; firstly, as an e-survey on the Singapore Human
Resources Institute (SHRI) website; and secondly, through the auspices of a statutory
infrastructure authority in Singapore. In total, there were 40 responses from the e-survey
(each from a separate organization), and a further 51 responses from managers within the
latter organization (85% of total managers). The statutory authority differs in both
structure and management from Singaporean government departments, and whilst it
adheres to government imperatives, it has a degree of responsibility not shared by the
latter. As the e-survey was voluntary, it was not possible to attempt an estimation of the
total sample. However, as the website is only available to members of the Singapore
Human Resources Institute (SHRI), it is more likely that many of the respondents
represent Singaporean organizations rather than merely Singapore-based multinational
enterprises. The statutory authority is of course a Singaporean organization. Whilst there
are differences in the demographics of the two samples which might limit the
generalizability of the research findings – for example, the e-survey (sample A) included
both private and public sector managers from a variety of largely Singaporean
organizations, whereas the statutory authority sample (sample B) was comprised entirely
of Singaporean public sector managers in a single agency – it is argued that the aggregated
sample provides an interesting snapshot of the views of public and private sector managers
in Singapore. The difficulty of obtaining large research samples in Singapore is well
known.
Research findings and data analysis
The findings are presented according to the structure of the survey questionnaire. Those
from the e-survey (A) are combined with those from the statutory authority (B), and then
averaged.
Organization and participant details
As indicated, data was derived from two distinct but related sources in Singapore. The
total number of responses was 91, comprised of 40 from A and 51 internal responses from
B. Seventy percent of the A sample were private sector firms, whilst B is a publicly-owned
72 P. Stanton and A. Nankervis
organization with over 1000 employees. Table 1 shows the respondent types in both
samples.The samples were somewhat similar in relation to their managerial roles with
significant representation from generalist (rather than HR professionals), but with
differences in their gender distributions, ages, and organizational sizes. The statutory
authority sample was thus older, largely male, and represents the views in one large
organization. However, in combination, the profile of the respondents is more balanced.
Strategies, values and culture
Several questions were asked about the existence of mission/vision statements, business
strategies, and written core values; and then about their inclusion in performance
management systems (Table 2).
In both cases, the communication of mission statements, business strategies, and core
values was undertaken by a variety of methods, including employee seminars or
workshops, firm newsletters, the website, and the PMS.
Overall the responses show that a large number of private firms claimed to have their
mission/vision and core values incorporated into the PMS. This could be due to the self
selection of the private respondents who filled in the survey. Whilst there are similarities in
the findings between samples A and B, it is clear that managers believed that the Singapore
statutory authority has taken significant steps to establish its mission statement (98%
versus 88%), business strategies (88% versus 77.5%), and core values (92% versus 80%).
Similarly, its communication of these aspects appears more effective than in some other
organizations (mission statement – 86% versus 74%; business strategies – 88% versus
72%), and there is more conscious incorporation of all of these features within the PMS
(mission statement – 96% versus 74%; business strategies – 100% versus 81%; core
values – 92% versus 78%). The strength of this response most likely reflects the conscious
strategic intentions of the (single) statutory authority, as compared with the diverse range
of organizations represented in sample A.
General views on performance management
This section of the survey sought respondent perceptions of the important features of
performance management systems. A series of broad statements concerning PMS elicited
some interesting findings (Table 3).
Table 1. Sample characteristics.
e- Survey (A) Statutory authority (B) Total/Average
N 40 51 91 Generalist managers 29 (72%) 31 (61%) 60 (66%) HR professionals 11 (28%) 20 (39%) 31 (34%) Male 18 (45%) 40 (78%) 58 (64%) Female 22 (55%) 11 (22%) 33 (36%) " 36 26 (65%) 24 (47%) 50 (55%) # 36 14 (35%) 27 (53%) 41 (45%) Large (501–1000) 22 (55%) 51 (100%) 73 (80%) Medium (201–500) 14 (35%) 0 (0%) 14 (1.5%) Small (less than 200) 4 (10%) 0 (0%) 4 (4.4%)
Asia Pacific Business Review 73
A large majority of respondents in sample A agreed both that ‘performance-related pay
is an essential part of performance management’, and that PM should be ‘a continuous and
integrated part of the employee-line manager relationship’. A further strong majority
agreed that PM requires ‘the setting of challenging and stretching goals’ and that PMS is
based upon ‘an integrated approach’ to human resource management. There was similarly
strong support for developmental PM goals; the alignment of individual and
organizational goals, and line manager ‘ownership’ of PMS, but only minimal agreement
that ‘performance management is a chore’. Sample B respondents were even more
effusive in their support for ‘challenging and stretching goals’, a developmental PM focus,
performance-related pay, integrated approaches and the alignment of individual with
organizational goals, and line manager ‘ownership’, reflective of the single organization’s
strategic imperatives. These findings support Wan’s (2005) observation that labour
utilization is changing in Singapore. Surprisingly, 70% of sample B respondents agreed
that PM is a ‘chore’. This may reflect the fact that there are more managers in this sample
who are closer to the performance management process.
A further set of general statements on PMS elicited the following responses (Table 4).
In sample A, respondents strongly agreed that PM should be accompanied by
‘extensive communication’, that PM is ‘an essential tool in the management of firm
Table 2. Integration of strategic elements into PMS.
E-survey A (n ¼ 40)
Yes we have them Yes they are widely supported
Yes they are incorporated into the PMS
Mission/Vision 35 (88%) 30 (74%) 30 (74%) Business strategies 31 (77.5%) 30 (74%) 32 (81%) Core values 32 (80%) 29 (72%) 31 (78%)
Public Sector Org B (n ¼ 51)
Yes we have them Yes they are widely supported
Yes they are incorporated into the PMS
Mission/Vision 50 (98%) 44 (86%) 49 (96%) Business strategies 45 (88%) 45 (88%) 51 (100%) Core values 47 (92%) 42 (82%) 47 (92%)
Table 3. Manager’s perceptions of performance management.
A (n ¼ 40) B (n ¼ 51)
Performance related pay is an essential part of PM
38 (95%) 46 (90%)
PM should be an integrated part of the employee-line manager relationship
38 (95%) 45 (88%)
PM requires the setting of challenging and stretching goals
35 (87.5%) 49 (96%)
PMS is based on an integrated approach to HRM
35 (87.5%) 45 (88%)
Support for development PM goals 34 (85%) 48 (94%) Alignment of firm and individual goals 33 (82.5%) 45 (88%) Line manager ownership 33 (82.5%) 44 (86%) PM is a chore 6 (15%) 36 (70%)
74 P. Stanton and A. Nankervis
culture’, the need for broad PM training, the inclusion of quantifiable performance
measures, and a motivational PM focus. Considerably less support was given to statements
suggesting that ‘PM distracts people from more important core activities’ and that PM
should be ‘distanced as far as possible from payment systems’. Again, sample B is more
strongly supportive of a motivational focus for performance management, the role of PM
in managing firm culture, broad PM training, and the greater importance of quantifiable
performance measures. Surprisingly again, more than half of sample B respondents agreed
that PM ‘distracts from more important core activities’ and that PM ‘should be distanced
as far as possible from payment systems’, in contrast to sample A respondents. Again this
could be due to the nature of the respondents – more managers who see PM as yet another
task on already busy schedules.
In summary, whilst there are similarities in the responses of both samples, there are
subtle differences in both samples concerning performance-related pay (sample A had
95% support, with only 12.5% agreement that performance and pay should be ‘distanced’;
compared with 90% support in sample B, but 58% in agreement that the two should be
separated). As in other parts of the survey, sample A and B respondents were similarly
supportive of an integrated approach between PMS and other human resource
management strategies (87.5% versus 88%), line management ‘ownership’ of the PMS
(82.5% versus 86%), the alignment of individual and firm goals (82.5% versus 86%); but
differed with respect to their degree of support for the setting of challenging performance
goals (87.5% versus 96%), the need for developmental performance goals (85% versus
94%), and their belief that performance management is a ‘chore’ (15% versus 70%).
There are further similarities concerning the need for ‘extensive’ communication
about the PMS (sample A – 97.5%; sample B – 96%), and the use of quantifiable
performance measures (77.5% versus 80%); but differences in relation to the links
between PMS and firm culture (87.5% versus 95%), the need for training in performance
management processes and techniques (82.5% versus 94%), a motivational PMS focus
(75% versus 94%), and the belief that ‘performance management distracts from more
important core activities’ (15% versus 58%). The latter difference is consistent throughout
the survey, most likely reflecting the realities of statutory authority middle and line
managers directly responsible for the ongoing ‘burden’ of performance management,
despite the more positive rhetoric of their more senior colleagues.
Specific aspects of the current PMS
This section describes the current system, and 85% of sample A (n ¼ 40) respondents
reported that they had a formal PMS in place. Whilst none included all employees, the
majority encompassed line managers (82%), senior managers (79%), professional staff
Table 4. Further perceptions about performance management.
A (n ¼ 40) B (n ¼ 51)
PM should be accompanied by ‘extensive communication’ 39 (97.5%) 49 (96%) PM is ‘an essential tool in the management of firm culture’ 35 (87.5%) 49 (95%) The need for broad PM training 33 (82.5%) 48 (94%) The inclusion of quantifiable performance measures 31 (77.5%) 41 (80%) A motivational PM focus 30 (75%) 48 (94%) ‘PM distracts people from more important core activities’ 6 (15%) 30 (58%) PM should be ‘distanced as far as possible from payment systems’ 5 (12.5%) 30 (58%)
Asia Pacific Business Review 75
(76%), administrators (70%), and technical specialists (64%), less than half (48.5%)
covered semi-skilled employees. By far the most common review mechanism is individual
annual appraisal (77.5%), with considerably less support for self-appraisal (47.5%),
competence assessment (35%), 360 degree appraisal (27.5%), subordinate feedback
(25%), peer appraisal (17.5%), and team appraisal (15%). However, only 52.5% of
respondents felt that individual appraisals were ‘very’ or ‘mostly’ effective, with stronger
support for the other methods, where used. The most common features of current PMS
include objective-setting and review (62.5%), performance-related pay (60%), personal
development plans (52.5%), employee discipline (45%); coaching and/or mentoring, and
career management and/or succession planning (42.5%). Employee counselling,
contribution-related pay, competence-related pay, and team pay, were only minimally
reported. Review training is given to team leaders (80%), HR staff (62.5%), department
heads (60%), and direct appraisers (55%).
Although 68% of sample A (n ¼ 40) report that they consciously attempt to align
individual, section, team, and firm goals, the primary systems used to do so include
(in order) Management by Objectives (MbO – 73.5%), SMART (71%), statutory
compliance (62%), financial frameworks (59%), project-based frameworks (56%), the
Balanced Scorecard (47%), quality systems (44%), and Six Sigma (35%). It appears that
performance goals are primarily set by senior managers (50%), line managers (40%),
employees (35%), middle managers (20%), and HR staff (5%). By contrast, in sample B,
in the same organization only 84% of managerial respondents (n ¼ 51) thought that the
organization had a formal PMS, which included (in order) technical specialists (85%), line
managers (74%), senior managers (67%), professional staff (67%), semi-skilled staff
(64%), and administrators (61.5%). Similarly to sample A, individual annual appraisal
(76%–59% considered effective) is the most common review mechanism; but little
significant use of other methods, such as 360 degree appraisal, peer appraisal, and team
appraisal (17%), and self-appraisal (14%). Common features of these PMS include
objective-setting and review and performance-related pay (59%), with some support for
career/succession planning and personal development (31%); but considerably less use of
competence assessment, competence-related pay, coaching or mentoring (28%), or team-
based pay (10%). Respondents report that review training is given to direct appraisers,
team leaders and some department heads. What is interesting here is that many managers
have different views of the same system.
It is not surprising then, in this confusion with respect to the alignment of individual,
section, team and firm goals, that only 63% of respondents agreed, and 26% disagreed.
MbO is the authority’s chosen PMS technique.
Again, there are both similarities and differences in the findings here between sample
A and B respondents. A majority of both samples have formal PMS (85% versus 84%),
with MbO based upon annual individual appraisals (77.5% versus 76%) as the dominant
review technique; and little use of self-, peer-, team-, 360 degree, or subordinate,
assessment mechanisms. The primary feature of their PMS is objective-setting (62.5%
versus 59%), with differences regarding its linkages to performance-related pay systems
and personal development plans. The conscious alignment of individual, section, team and
organizational goals is emphasized in both samples (68% versus 63%), but with relatively
little use of SMART, statutory compliance, the Balanced Scorecard, Six Sigma, financial
or project-based frameworks for such purposes.
There are discernible differences in the groups covered by the PMS, with senior
managers included in 79% of sample A but only 67% of sample B; 82% of line managers
in sample A compared with 74% in sample B; 76% of professionals in sample A versus
76 P. Stanton and A. Nankervis
67% in sample B; 81.5% of administrative staff in sample B contrasted with70% in sample
A; and only 48.5% of semi-skilled employees in sample A compared with 64% in sample
B. PMS goals are primarily set by senior managers and line managers in sample A,
compared with mainly senior and middle managers, and HR professionals in sample B.
Links between the PMS and other HRM processes
Table 5 shows the perceived links between PMS and other significant HRM processes, as
reported by both Singaporean samples.
With respect to the perceived links between PMS and specific HR processes, higher
levels of support were reported by sample A than sample B to integration with the overall
people management strategy, the association of individual and firm goals, the employee-
line manager relationship, and human resource development. Sample B provided stronger
support for links with performance-based pay systems, employee counselling,
disciplinary, job design and human resource planning processes, possibly as a result of
the homogeneity of the PMS used in the statutory organization. However, whilst both
samples felt that their PMS helped to ‘express the value of the people in the firm’, neither
reported strong connections between PM systems and staffing strategies or HRM
evaluation systems.
Perceived effectiveness and organizational outcomes of the PMS
The data from sample A (n ¼ 34) reveal that there were considerable perceived
differences between management levels regarding the extent of ‘buy-in’ to the PMS. Thus
they report that approximately 69% of senior managers (45% ‘actively in favour’, 24%
‘generally accept’) supported their system, compared with 53% of middle managers,
and only 18% of line managers. In contrast, sample B respondents (n ¼ 51) reported
Table 5. Perceived links between PMS and other HRM processes.
A (n ¼ 40) B (n ¼ 51)
PM is an integral component of the people management strategy
38 (94%) 39 (76%)
PM integrates the goals of individuals with those of the firm
37 (91%) 37 (72%)
PM is an integrated part of the employee-line management relationship
34 (85%) 40 (78%)
Performance reviews result in learning and development outcomes
34 (85%) 40 (78%)
Performance reviews result in reward and remuneration outcomes
34 (85%) 42 (82%)
Pay contingent on performance is an essential part of the PMS
34 (85%) 49 (96%)
PM helps to express the value of the people in the firm
31 (77%) 37 (72%)
Line managers own and operate the PMS 30 (73%) 26 (51%) Employee counselling 24 (59%) 36 (70%) Disciplinary processes 22 (55%) 39 (76%) Job design and human resource planning 21 (53%) 32 (63%) Staffing strategies 15 (38%) 21 (41%) HRM evaluation systems 14 (35%) 16 (17.5%)
Asia Pacific Business Review 77
that the levels of support were as follows – 72.5% senior managers, 39% middle
managers, and only 10% of line managers. Given that line (and middle) managers are most
commonly charged with the responsibility for implementing PM systems, it seems
unlikely that the positive organizational rhetoric is matched by actual performance
management practice.
The final survey questions attempted to ascertain the most important criteria applied in
the measurement of individual performance, and the major perceived outcomes of their
PMS. In sample A, respondents considered the achievement of objectives (98%); quality,
and productivity (97%); competence, and team contribution (88%); customer care (86%);
business awareness (85%); skills/learning targets, and aligning personal and firm goals
(82%); flexibility, working relationships, and financial awareness (79%), as the crucial
criteria for performance measurement. With respect to sample B, the most significant
measurement criteria were skills/learning targets, working relationships, aligning personal
and firm goals, and the achievement of objectives (86%); customer care, and quality
(84%); productivity (83%); competence (82%); flexibility (78%); business awareness
(72.5%); and financial awareness (69%).
Finally, the major firm outcomes from the PMS were the quality of goods and services
(85%); efficiency (82%); profitability, and the quality of the workforce (79%); return on
investment (71%); innovative capacity, cost, and market share (68%). Major outcomes
from sample B systems included efficiency (76%); quality of the workforce, and quality of
goods and services (74%); innovative capacity, and cost (71%); market share (63%); and
return on investment (60%).
Thus, both samples had somewhat similar views on the extent of senior managers’
‘buy-in’ to their PMS (A – 69%; B – 72.5%), but differences with respect to that of
middle managers (53% versus 39%) and line managers (18% versus 10%). There were
also significant differences in the perceived significant criteria for the effectiveness of
PMS. Sample A placed more importance on overall firm goals such as achieving overall
objectives, quality, productivity, competitiveness, and business and financial awareness,
whilst sample B focused more on employee outcomes such as skills/target achievement,
and improved working relationships. Both strongly supported (82% and 86%) the role of
PMS in ‘aligning personal and firm goals’.
The primary outcomes of effective PMS were perceived somewhat differently by both
samples, but there were similarities with respect to firm efficiency (82% versus 76%),
innovative capacity and cost (68% versus 71%), market share (68% versus 63%),
and workforce quality (79% versus 74%). They differed regarding the importance of
the quality of goods and services (85% versus 74%), and return on investment (71%
versus 60%).
Discussion
Strategic performance management systems
If the presence of a corporate mission statement, clear business strategies and core values
provides evidence of strategic positioning, then both Singapore research samples suggest
that their firms have adopted such approaches. Further, both samples report that these
strategic elements have consciously been imbedded in their PMS. The reinforcement of
these elements to employees is transmitted by a variety of communication techniques
including seminars, workshops, the intranet and corporate newsletters. The extent of
respondent support for (and communication of) these strategic features is strong in
both samples, but remarkably high in the responses from the statutory authority sample.
78 P. Stanton and A. Nankervis
This suggests that overt and sustained attempts have been made by its management to link
corporate and employee goals, objectives and outcomes, a clear foundation for potentially
significant contributions to firm effectiveness. These findings are also reflected in some of
the later research findings.
For example, there is considerable agreement from both samples with respect to the
most important components of ‘high performance’ work cultures – namely, customer
care, business awareness, both quality and productivity goals, team contribution,
working relationships, skills/learning targets, employee competence, flexibility, and
financial awareness – which if closely linked to PMS can contribute significantly to
firm effectiveness. Interestingly, both samples appear to balance firm and employee
aspects, with more emphasis on the latter from sample B. Whilst both data sets may
have been influenced by Singapore’s unique socio-cultural context, they suggest that the
statutory authority is more seriously attempting to weigh both its corporate and its
employee obligations. This finding is supported in the subsequent discussion of the
research data.
In response to a series of general statements about PMS, which reflect the respondents’
driving principles, there were considerable similarities. Thus, both sample A and B
respondents were highly-supportive of such strategic linkages as performance-based pay,
PMS as a ‘continuous and integrated part of the employee-line manager relationship’, and
the notion that performance management should be based upon an ‘integrated approach’ to
human resource management. They also agreed with the need for developmental
performance goals, the alignment of firm and individual objectives, and line manager
‘ownership’ of the PMS. Perhaps reflecting the views of managers charged with the
responsibility for operating a particular in-house PMS, sample B responses differed
considerably from those of sample A with respect to performance-based pay and the onus
imposed by their involvement in the PMS. A majority of sample B respondents agreed that
it was a chore, that it ‘distracts from more important core activities’, and that it should be
distanced from payment systems, despite earlier support for the latter. This finding
demonstrates the likely differences in opinion between managers in a variety of different
firms with diverse performance management systems, in contrast to managers’
experiences of the same system. It undoubtedly also indicates gaps between perceptions,
intents and realities.
Both groups agreed with the need for ‘extensive’ communication concerning PMS,
and a preference for quantifiable performance measures; but differed in relation to the
need for links between PMS and firm culture, the need for performance management
training, and a ‘motivational’ focus for PMS. Again, the statutory authority respondents
were more supportive of the latter three aspects, possibly reflecting the permeation of the
rhetoric (and/or reality) of their current PMS. Both samples however were strongly
supportive of all of these factors, compare positively with the findings from previous
surveys, and conform closely to the principles of the associated literature.
In summary then, both research samples illustrate broad similarities and some
differences with respect to the ‘strategic’ elements of PMS and hence their contributions to
firm effectiveness. The findings suggest that, whilst the (predominantly) private sector
managers concur with the statutory authority managers in relation to the need to link
corporate and employee goals, to incorporate mission statements, business strategies, and
core values in PMS, and to ensure horizontal and vertical alignment between PMS, HRM
processes, and business strategies; there are also differences with respect to theory versus
practice, and their applications of diverse and common systems, within the esoteric
Singaporean culture.
Asia Pacific Business Review 79
Strategic PMS – theory in practice
With respect to the usage, nature and features of their present PMS, there are significant
similarities in both research samples, and they are relatively consistent with the findings
from earlier research studies (for example, Nankervis and Leece 1995, Nankervis and
Compton 2006). Thus, the majority of respondents use formal systems (as in most other
studies) and primarily of the MbO variety, a finding which is at odds with more recent
research (Nankervis and Compton 2006) which reports a predominant use of more hybrid
systems including the Balanced Scorecard in a conscious effort to strategically align
individual employee and firm goals. This suggests a gap between performance
management theory and practice, which appears to be further supported by the differential
coverage reported by both samples. Thus, sample A’s system includes the large majority
of (but not all) line and senior managers, professionals and administrative staff; a smaller
majority of technical specialists and less than half of their semi-skilled employees, whilst
in sample B senior and line managers are less involved, but semi-skilled employees have
greater coverage.
Both samples utilize individual performance appraisal extensively (despite relatively
low levels of reported effectiveness), with little use of arguably more strategic review
mechanisms (for example, 360 degree, competence assessment, peer and team appraisal).
Similarly, although both samples moderately agree with the importance of aligning
individual, section, team and firm goals, the outcomes of their PMS are largely operational
or administrative (objective-setting, performance-related pay) rather than more strategic,
and appraisal training is by no means comprehensive.
Contributions of PMS to organizational effectiveness
It has long been argued that strategic human resource management theory is best reflected
(and implemented) through the dual alignment of human resource management strategies,
processes, and functions (horizontal); and of these with overall firm strategies (vertical),
and it is these linkages which have the greatest potential to contribute to organizational
effectiveness. This section explores the first aspect, whilst the following section examines
the second. Several parts of the survey requested respondents’ views on the links between
performance management and all other HRM processes, in accordance with the theoretical
proposition that ‘horizontal’ alignment is one of the two most significant components of
the strategic management of human resources. Thus, whilst a large majority of
respondents from both samples strongly supported theoretical notions of horizontal
alignment (an ‘integral component’ of the HR strategy, individual-firm goal alignment,
strengthens the employee-line manager relationship; learning and development, reward
and remuneration outcomes; performance-based pay), only 66% of sample B and even less
sample A respondents (53%) agreed that, in practice, they were ‘satisfied with the links
between performance review and other HRM functions’.
A disappointing finding of this part of the survey was the relatively low support given
by respondents from both samples for links between performance management and
staffing, human resource planning, and HRM evaluation systems. Without such strong
links, it is difficult to conceive how effective strategic horizontal alignment can be
established. Whilst input linkages (human resource planning, job design, recruitment and
selection) to performance management systems are undoubtedly seminal to horizontal
alignment, outcome linkages (human resource development, rewards and remuneration,
employee counselling and discipline, retrenchment, HRM evaluation and accountability
etc.) are arguably of more significance in cementing these relationships towards more
80 P. Stanton and A. Nankervis
strategic firm goals. Interestingly, however, respondents from the statutory authority
expressed more support than the general sample for the notions that PMS should be
used to ‘manage firm culture’, and the reverse was (marginally) true for PMS helping
to ‘express the value of people’. This may be attributed either to wishful thinking, or
the deliberate intention of the statutory authority to inculcate cultural aspects in its
chosen PMS.
With respect to vertical alignment – the linkage between the inputs and outcomes of
performance management systems, towards enhanced firm effectiveness – once again,
respondents’ views are mixed. For a start, whilst there was majority support (or ‘buy-in’)
for strategic PMS from senior managers in both samples, the extent of support from middle
and line managers – arguably the most crucial links in the chain – was considerably less
amongst middle managers, and minimal from line managers in both samples. The lower
levels of ‘buy-in’ from middle and line managers in the statutory authority are especially
concerning, as its PMS appears to have been consciously crafted to align individual and
firm goals, and to ‘manage firm culture’. The findings contrast with earlier expressions of
support for such theoretical notions, but is buttressed by the relative lack of enthusiasm
expressed for their present PMS. It can be implied that, whilst many respondents
appreciate the potential contributions of their systems to firm effectiveness, there is a clear
gap between the rhetoric and realities of performance management systems.
It is clear (and perhaps not surprising) that the individual performance measurement
criteria differ in emphasis between the two samples, especially as sample A primarily
reflects the views of private sector and sample B of public sector managers. Thus, whilst
both samples generally include both dimensions, sample A emphasizes organization-based
factors (achievement of objectives, quality, productivity, customer care, business
awareness, aligning personal and firm goals, flexibility), whilst sample B focuses on
employee factors (skills/learning targets, working relationships). With respect to the major
outcomes of their PMS (and the principal indicators of the performance management –
organizational effectiveness link), the quality of products and services, efficiency,
profitability, the quality of the workforce, return on investment, innovative capacity, cost
and market share received higher levels of support from sample A respondents. Whilst
sample B respondents also supported some of these factors as well, if to a lesser degree,
innovative capacity was of greater importance, given the statutory authority’s charter,
and return on investment was less crucial. Both samples recognized the importance of
workforce quality as an investment in their firms’ future effectiveness and competitiveness.
Implications for theory and practice
This study has important implications for both SHRM theory and practice. It sits within a
stream of similar international studies which have sought to establish empirical evidence of
substantial linkages between strategic HRM, performance management systems and
organizational effectiveness (for example, Ulrich and Smallwood 2005, Losey et al. 2006,
Cascio and Boudreau 2009), consonant with SHRM theory, but adds value to the literature
in its exploration of the specific contribution of performance management to organizational
effectiveness. It further suggests that SHRM theory might be refined to delineate the precise
relationships between specific HRM processes (for example, job design, staffing, human
resource development, performance management, career development and remuneration)
and organizational effectiveness, within the strategic HRM framework. Future research
might be conducted on these relationships in other contexts, industries or particular
organizations, together with the use of innovative research techniques (for example,
Asia Pacific Business Review 81
personal interviews, focus groups, sponsored surveys, workshops) in order to increase
sample sizes.
Its focus on Singaporean organizations raises other contextual issues, including the
influence of different socio-cultural environments on the linkage between performance
management systems and organizational effectiveness. For example, do government
imperatives contribute to enhanced organizational strategic HRM systems and in
particular, strategic performance management; are different approaches to performance
management-organizational effectiveness required in non-Western settings, and how
might they be designed; and how can the rhetoric of the theory be translated into practice?
Future studies might compare and contrast our findings with those in other contexts.
Finally, HR professionals might utilize the findings – in particular the apparent disconnect
between rhetoric and reality in PMS – as a foundation for designing more integrated and
user-friendly systems. This study suggests that the links between performance
management and organizational effectiveness are most likely to be established and
reinforced through such means as the incorporation of business goals and imperatives in
all facets of performance management systems (PMS); clear linkages with overall HRM
outcomes; consultation with managers and employees in the design of PMS; ongoing and
inclusive PMS measurement and evaluation; thorough communication and training in the
significance, competencies and demonstrated outcomes of PMS, to all stakeholders;
strategic and operational, rather than merely administrative, emphases; and a focus on
their potential and actual benefits to both the organization and its employees.
Conclusion
Overall, it may be concluded that findings from this study both conform with and differ
from the findings from earlier studies exploring the links between performance
management and organizational effectiveness. With respect to the former, responses from
both samples demonstrated strong support for the theory of strategic HRM and the desire
for vertical alignment between performance management and organizational effective-
ness, reflected in the incorporation of mission statements, business strategies, and
corporate values in their PMS. They also suggested that business outcomes such as
productivity, financial awareness, product and service quality, employee competence and
flexibility should be clearly factored into the evaluation of such systems. Encouragingly,
they recognized the crucial importance of the employee-line manager relationship in
performance management, as well as the value of the horizontal alignment with all other
HRM processes. These characteristics are no doubt reinforced by the recent Singapore
government emphases on human capital management described by Wan (2005) and the
Ministry of Finance (2008), and by the broader socio-cultural features suggested by Choo
(2007).
On the other hand, the study shows both limited conceptions of the meanings and
applications of performance management in their current PMS; a lack of performance
management training for all levels of managers and their employees; reactive and
administrative PMS (Nankervis and Leece 1997, Nankervis and Compton 2006, Bartram
et al. 2007, Stanton et al. 2010); a lack of effective links between performance reviews,
employee motivation, productivity, and retention; and general dissatisfaction with the
nature and outcomes of their systems. These views were evident in both research samples,
with arguably less positive responses from the statutory authority, which possesses a
custom-made system. Some interesting findings include the comparatively strong support
from private (but not public) sector managers for performance-based pay systems and
82 P. Stanton and A. Nankervis
merit-based promotion; limited practical links between PMS and other strategic HRM
elements such as staffing, human resource planning, and HR evaluation; and disappointing
levels of ‘buy-in’ from middle and line management, most notably within the statutory
authority.
It might be argued that the unique business culture of Singapore – described by Choo
(2007) as control-based, managerial, highly bureaucratic, and aligned with overriding
government imperatives – has resulted in similar private and public sector management
styles, in ways that are unparalleled in most other regional countries. Wan’s (2005)
observations reinforce this observation within the current economic climate
Thus, the study suggests that, whilst there is evidence of a change in the perceptions of
senior managers in Singapore with respect to the potential contributions of performance
management systems to organizational effectiveness – possibly associated with recent
government imperatives – (Ministry of Finance 2008), the rhetoric does not appear to be
always matched by the realities of HRM practice. This is perhaps unsurprising given the
non-strategic nature of many contemporary PMS. Future researchers may find it useful
to explore these issues by means of in-depth case study analysis or more comprehensive
surveys.
Notes on contributors
Pauline Stanton is Professor of Management at Victoria University Australia and Head of the School of Management and Information Systems. Her research interests are HRM and organizational performance, employee performance management and international employment relations.
Alan Nankervis is an Associate Professor of HRM at RMIT University Australia and Discipline Head of Employment Relations. His research interests include the relationship between performance management systems and firm effectiveness, Asian management and vulnerability analysis in the services sector.
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