The effectiveness of performance management systems: antecedents and impact on work-related attitudes

The thesis examines the effectiveness of Performance Management Systems (PMSs), examining the influence of specific antecedents on PMS effectiveness and the subsequent impact on employee work-related attitudes (job satisfaction and Employee Organisational Commitment). Data was collected through a survey questionnaire of 190 senior level managers from Australian financial and legal service organisations. The thesis employs the “thesis by publication” format and comprises three academic papers. Paper One examines the effectiveness of PMSs in respect to the achievement of organisational process outcomes (performance-related and staff-related) and the subsequent impact on job satisfaction and Employee Organisational Commitment (EOC). The results indicate a positive association between PMS effectiveness with both job satisfaction and EOC. Specifically, the performance-related outcomes were found to be associated with both job satisfaction and EOC, while the staff-related outcomes were associated with job satisfaction. Further analysis revealed that a PMS which motivates performance and assists in the development of individual’s skills and knowledge (performance-related outcomes) to a greater extent contributes to greater job satisfaction. The results also indicate that job satisfaction can be enhanced when the PMS rewards talented staff and manages poor performing staff to a greater extent, while EOC can be enhanced when the PMS effectively motivates performance, assists in the achievement of goals and provides an accurate assessment of business performance. Thus the study highlights the importance of the effective functioning of PMS processes due to their influence on individual work-related attitudes. Paper Two examines the influence of the use of multidimensional performance measures on the characteristics of the PMS and the subsequent impact on PMS effectiveness. The findings indicate that the use of multidimensional performance measures exhibits a negative association with the subjectivity of performance evaluations, and a positive association with the link of performance to non-financial rewards and the focus on short-term targets. Furthermore, the results reveal that three PMS characteristics (the link to financial and non-financial rewards and the short-term focus of targets) and employee empowerment exhibit a significant positive association with PMS effectiveness, whilst subjectivity in performance evaluations exhibited a significant negative association with PMS effectiveness. These findings highlight the importance of objective approaches to performance evaluation, rewards systems which link performance to non-financial rewards and the emphasis on the achievement of short-term targets as mediators of the association between the use of multidimensional performance measures with PMS effectiveness. The findings also demonstrate the important role of the use of multidimensional performance in facilitating PMS characteristics, and subsequently contributing towards PMS effectiveness. Paper Three examines the influence of information characteristics (scope, timeliness, aggregation, and integration) and on the use of PMSs (diagnostic and interactive) and the subsequent impact on the effectiveness of the PMS. The results indicate that PMS use (both diagnostic and interactive) fully (partially) mediates the relationship between information scope (integration) and PMS effectiveness for both performance-related and staff-related outcomes. In addition the interactive use of PMSs fully mediates the relationship between multidimensional performance measures and PMS effectiveness (both performance-related and staff-related outcomes), while information aggregation exhibits a positive direct association with PMS effectiveness (performance-related outcomes).In conclusion, the study contributes to the performance management literature by highlighting the significant role of information characteristics and the use of the PMSs in enhancing the overall effectiveness of the PMS. The thesis contributes to the performance management literature by providing a unique insight into PMS effectiveness, examining it from the perspective of the achievement of process outcomes, and subsequently examining the impact of the achievement of such outcomes on two employee work-related attitudes, job satisfaction and EOC. In addition, the findings provide practitioners with an insight into the main contingency factors that they should focus on in order to enhance the effectiveness of PMS processes. Such findings have important implications for practitioners responsible for the design and the ongoing functioning of the PMS.