24 Part I • Strategic and General Considerations

Finally, there is an obvious relationship between performance management and

compensation systems. Compensation and reward decisions are likely to be arbitrary in
the absence of a good performance management system.
In short, performance management is a key component of talent management
in organizations. It allows for assessing the current talent and making predictions
about future needs both at the individual and organizational levels. Implementing a
successful performance management system is a requirement for the successful
implementation of other HR functions, including training, workforce planning,
recruitment and selection, and compensation.

1.8 PERFORMANCE MANAGEMENT AROUND THE WORLD

Performance management is a global phenomenon and organizations all over the world
are implementing various types of performance management systems. We will discuss
examples of how systems are implemented in different countries. As a preview and to
highlight the increasing importance of performance management globally, consider the
following results from recent research relating to 10 specific countries:61

• Performance management in Mexico. Performance management has become

increasingly popular since the 1970s. For the most part, systems in Mexico are
similar to those implemented in the United States. For example, the measurement
of results (as discussed in Chapter 5) is quite pervasive. However, more research is
needed for us to gain a better understanding of what types of systems would
work best in Mexico.
• Performance management in the United Kingdom. Performance management in
the United Kingdom has been affected by several factors, including an emphasis
on cost effectiveness and the developmental purpose of performance manage-
ment. Performance management is gaining increased stature and significance
given the more recent emphasis on talent management and total rewards manage-
ment. As noted earlier, performance management provides critical information
regarding the identification of top performers, which helps talent management,
and critical information to be used in administrative decisions, including the
allocation of rewards. Performance management in the United Kingdom is an
established organizational practice and is clearly influenced by broader societal
issues such as socioeconomic, political, and legal trends.
• Performance management in France. Performance management in France faces
unique contextual issues such as legal requirements to invest in employee training
and development and the need to emphasize individual accountability. Once
again, performance management systems are not implemented in a vacuum, and
it is important to consider the broader environment when designing and imple-
menting a system.
• Performance management in Germany. Performance management in Germany
has been affected by the established practice of long-term employment relation-
ships. Thus, performance management systems emphasize long-term goals and
usually do not have a short-term focus. In spite of this unique feature, systems
share some similarities with France given their membership in the European
Union, which provides a common legal framework for many labor-related issues.
 Chapter 1 • Performance Management and Reward Systems in Context 25

• Performance management in Turkey. Performance management in Turkey is

evolving rapidly given its official candidacy for European Union membership.
Negotiations began in 2005, and it is likely that Turkey will become a European
Union member by around 2015. Turkey’s unique contextual issues involve
being a democratic and secular state—yet ruled by a single-party government.
Performance management is a fairly novel issue in Turkey, but almost 80%
of firms in Turkey are using some type of system. Because personal relation-
ships play an important role in Turkish culture, an important challenge is the
implementation of systems that ensure valid, reliable, and fair performance
measurement.
• Performance management in India. The India economy has been on “overdrive”
since the early 1990s and there is intense international business activity, including a
significant increase in foreign direct investment going into India as well as India
firms going abroad. The intense international business activity is leading to a
change in traditional values, at least in work environment, from more collectivistic
to more individualistic and short-term. Nevertheless, the traditional paternalistic
values do not seem to be changing, and they pose a challenge for the implementa-
tion of performance management systems in which the supervisor serves as a coach
instead of as a “boss” (see Chapter 9).
• Performance management in China. From the founding of the socialist state in
1949 until the 1980s, performance management systems in China emphasized
mostly attendance and skills. However, since the 1980s, the view of performance
management has expanded to consider broader sets of behaviors as well as the
relationship between performance management and other organizational systems
(e.g., compensation). Important issues to consider for successful implementation
of performance management systems in China include respect for age and senior-
ity and the emphasis on social harmony.
• Performance management in South Korea. Work relationships in South
Korea are hierarchical in nature and emphasize the importance of groups over
individuals. More recently, the establishment of a democratic government in
1987 and the Asian financial crisis of 1997 affected organizational practices
substantially. Specifically, the financial crisis led many organizations to adopt
what in Korean is called Yunbongje (i.e., merit-based systems). The current
challenge is how to reconcile a merit-based approach with more traditional
cultural values.
• Performance management in Japan. Although Japanese firms relied on lifetime
employment and seniority as key organizational practices, more recently firms
also consider the importance of new knowledge acquisition. For example, com-
petency modeling, which is discussed in Chapter 8, has become increasingly
popular. In general performance management systems in Japan tend to empha-
size behaviors to the detriment of results (this distinction is discussed in detail
in Chapter 4).
• Performance management in Australia. The Australian economy has made an
important shift from manufacturing to service, and there are important demo-
graphic changes in the workforce including an increased presence of women and
members of ethnic minority groups. The legal framework in Australia is similar to
that in the United States and the United Kingdom (see Chapter 10). So, much like
26 Part I • Strategic and General Considerations

the United States and the United Kingdom, performance management systems
tend to include documentation of performance, considerations regarding equal
opportunity, and due process issues.

This brief overview provides us with some information regarding performance

management systems around the world. Although there is a common challenge to align
individual and organizational goals and enhance the performance of individuals and
groups, the way these goals are achieved is influenced by both organizational and
societal contextual issues. Thus, these issues should not be ignored when implementing
performance management systems.

Summary Points
• Performance management is a continu- perspective of managers, good systems
ous process of identifying, measuring, allow them to gain insight into employ-
and developing the performance of ees’ activities and goals, allow for more
individuals and teams and aligning fair and appropriate administrative
performance with the strategic goals of actions, allow them to communicate
the organization. organizational goals more clearly, let
• Although many organizations have them differentiate good and poor per-
systems labeled “performance manage- formers, help drive organizational
ment,” they usually are only perform- change, encourage voice behavior, and
ance appraisal systems. Performance improve employee engagement. Finally,
appraisal emphasizes the assessment of from the perspective of the HR function,
an employee’s strengths and weaknesses a good system provides protection from
and does not include strategic business litigation and can also help minimize
considerations. Also, performance employee misconduct which can have so
appraisal systems usually do not include many negative consequences for the
extensive and ongoing feedback that an organization.
employee can use to improve her per- • Poorly designed and implemented per-
formance in the future. Finally, perform- formance management systems can
ance appraisal is a once-a-year event that have disastrous consequences for all
is often driven by the HR department, involved. For example, employees may
whereas performance management is a quit, those who stay may be less moti-
year-round way of managing business vated, and relationships (e.g., supervi-
that is driven by managers. sor–subordinate) can suffer irreparable
• Implementing a well-designed perform- damage. Also, poorly designed systems
ance management system has many can be biased, resulting in costly law-
advantages. From the perspective of suits and wasted time and resources. In
employees, a good system increases the end, low-quality or poorly imple-
motivation and self-esteem, helps mented systems can be a source of
improve performance, clarifies job tasks enormous frustration and cynicism for
and duties, provides self-insight and all involved.
development opportunities, and clarifies • Reward systems include all mecha-
supervisors’ expectations. From the nisms for determining and distributing