PERFORMANCE MANAGEMENT IN CONTEXT Arup Varma and Pawan S. Budhwar CHAPTER LEARNING OBJECTIVES * Understand how the concept of work has evolved over the years © Understand the critical role of the performance management process in managing work © Understand why PM can and should be modified but not eliminated CHAPTER SKILL OBJECTIVES * Learn how to tell the difference between PM and PA Learn why rater training is a critical part of an effective PMS Learn about the different components of an effective PMSMENT SYSTEMS > 2 & PERFORMANCE MANAGE! INTRODUCTION Ever since the first hu : them what to do, how to do it mans decided to lift and move stones, there were other and sometimes, why they were doing what ¢h Celi, doing. Of course, there were others ready to critics how the work was being a In other words, while performance ‘management (PM) may have emerged a5 af, ‘Nisi & Murphy, 2017), we beli ' iscipli ly in the last century (see Del clic swe of PM has een around forever. OF course, PM has evolved over the cent tri and continues to evolve — over the decades, ot example, we have seen the empl is, shift from manual work to knowledge work, reflecting the shift from a manufrs my to a knowledge economy, etc. Similarly, for some time nov, ve h the discussion has centered around how some human beings will soon be Teplaced fy, robots in the workplace, and how human resource (FIR) systems need to catch ro make required adjustments accordingly. onically, if robots did start to popu the workplace in large numbers, PM would be the key HR system that would have to be vastly re-engineered along with employee relations, since robots would si] have some human supervisors, subordinates, and colleagues. What is ironic, however, is the fact that with almost amazing regularity, one reads in the popular pres thr some well-known organization has decided to get rid of its PM system, replacing it vith one-on-one feedback and supervisor-subordinate conversations. Of couse, what the organizations are unintentionally admitting is that they don’t do a good job of PM, and that this is what led to the decision to get rid of it, or modify it substantally- such as, getting rid of the numerical scales, and replacing those with some other form of evaluation, such as ranking. We believe that there are numerous problematic issues with this approach. But, fis, it is worth noting that the constant re-evaluation and critical commentary is typcil aimed at and restricted to PM systems and processes, not other HR. activities, such 3s recruitment and selection, or compensation, etc. To us, this is clear evidence of he importance of PM over the other HR. systems and processes. Not surprisingly, mam erganizations have managed to successfully outsource all or parts of the other pies at - such as recruitment and selection, or compensation, etc. Next, since PM is the critical process through which organizations can mange their employees’ work ~ settin lenl prea seeributils . g goals, assigning and evaluating work, and a\diseributns punishment/rewards (Fletcher, 2001) — it is i eee aphasize this process and pay close attention to th We oat ongantzatio®™ sa 7 Schuler and Jackson (1987) have noted, PM nnn pp ge ole est cessful implementation of organizational enn play an important role in O°") rganizational business strategy. Yet, it seems otential it is ei poten impact of Pil either not understood filly, or ignored de to its come cedures of uscment that in spite of Svell- documented poste cals for disbanding accounting pang nAO® Organizations one rarely if eve or income sttements and the like yo sO Betting tid of audits and balane® ee In the same vei eth vein, nobody seems to recom” ing econo:PERFORMANCE MANAGEMENT IN CONTEXT & = 3 these be replaced by mere conversations. What we find quite disappointing is that quite often, HR. professionals themselves seem to join this chorus, calling for the aboli- tion of PM systems. It is our contention that this is a result of two major factors: (i) a lack of proper rater training (see, e.g., Roch, Woehr, Mishra, & Kieszczynska, 2012), and (ii) the tendency of many practitioners, and some academics, to confuse PM and performance appraisal (PA). While PA is a critical part of the PM process, the other pieces (e.g,, goal setting) are important pre-requisites, and the failure to properly incorporate them into the PM process is a major reason for the dissatisfaction with, and overall failure of, the PM system. THE PRESENT VOLUME This is where this book will make a major contribution, since it is designed to address these very issues. First, we cover the whole gamut of performance manage- ment, from goal setting to evaluations to discussing the key issues involved in implementing a PM system. Next, we emphasize the practice of PM, by adopting an experiential approach. This method will allow the reader to apply the theoret~ ical learning through experiential exercises, so as to gain a deeper understanding, Farther, we also provide practitioner experiences to help bring alive the material discussed in each chapter. Tn support of these goals, this book includes several unique features that help distin- guish it from other similar volumes. These include: © Leaming and Skill Objectives —in addition to the usual learning objectives, the intro- duction of distinct skill objectives and individual skill boxes populated throughout the text provides integrated skills development. © Developing Key Skills? baxed feature - these recur throughout chapters and highlight a particular skill that is relevant to the surrounding chapter content and are mapped against the skills objectives. © PMS in Praaice’ boxed feature — these appear in every chapter and highlight real-world examples, drawing on practitioner experiences with PM, and PM-related happen- ings, from around the world. © Highlighted Key Terms ~ we provide a glossary of key terms at the end of this text. «End of Chapter Summary — each chapter concludes with a summary that helps link the content covered to the objectives listed at the beginning of the chapter. This is specifically designed to help reinforce the content. © Review Questions — we provide review questions that are focused on actual analysis, not rote learning. In addition, we provide a dedicated section of self-review ques- tions for self-directed study. © Case Studies — each chapter includes a case study, with application-oriented ques- tions, designed to help the reader apply the materials learned in that chapter.4 A PERFORMANCE MANAGEMENT SYSTEMS. . ‘enti - rc rent! Exercise — each chapter also includes an experiential exercise, which jg — er to encourage active learning. ie ‘A Reading ~ at the end ofthe chapter, we provide a recommended reading lis, which includes journal articles, book chapters and relevant websites: STRUCTURE OF THE BOOK ntroduction section includes two ‘The book is divided into three main sections. The # chapters, and outlines the context and setting for PMS. Here, the authors discuss the underlying concepts which are core to the interpretation and operation of PMS. In Chapter 1 (this chapter), Arup Varma and Pawan Budhwar (also the book editors) pres- ent the logic behind the volume, and discuss the structure of the book. In Chapter 2, uss the connection Subhash Kundu, Atchana Mor, Naresh Khatri, and Hoa Do disc between PM and business strategy. As we noted earlier, effective use of PM can help organizations implement their business strategy successfully. Keeping this in mind, Kundu and colleagues discuss the import of aligning PMS with the strategic plan of the organization. Purthes these authors also emphasize the importance sf customizing PM systems to match and reflect the organization's culture. In addition, the authors discuss the process of writing ‘effective mission statements and help the reader understand how to align goals with strategy ‘The second section covers the core componen’ of PM systems, and describes each in detail. First,in Chapter 3, M. Haris ‘Minai, Shailendra Singh, and Arup Varma discuss goal setting, a key pre-requisite OF PM, as proper goal setting can ensure that fndividual employees know exactly what is expected of them along with relevant deadlines and standards. “The authors help the reader understand the process of goal setting and its logical place in PM systems, and farther explain the theories behind goal setting, In addition. this chapter is designed to help the reader learn to identify goals that can help to moti vate employees towards superior performance, The chapter is also geared t an understanding of the various formal processes of goal setting and emphasizes the importance of cascading goals from the organizational level to the individual level From a skills perspective, the authors guide the reader through the process of selecting goals for behaviors, developing goals through a participative process so both supervisor aed subordinate may contribute, and finally guides the reader to understanding how t0 create a developmental goal versus 4 performance or task-related goal. In Chapter 4, Pete Norlander and Arup Varma address a critical piece of PM that 5 often ignored or glossed over in other ‘books on the subject ~ performance information Here, these authors start by helping the reader ‘understand the critical role of information in the effective administration and practice of PM systems. The chapter also helps the veades understand that information systems can assist en PM, and also discusses a varie of models for capturing and using performance information. The authors are aso cH—_— PERFORMANCE MANAGEMENT INCONTEXT & 5 to remind the reader that performance information isn’t perfect and that it is up to the organization and its managers to develop strategies to combat bias and paralysis. fn terms of skills objectives, the chapter helps the reader learn the role played by organizational HR, and employee relations strategies and task requirements, in shap- ing information processing in the organization. In the same vein, the reader is guided through the process of creating an information gathering strategy for his/her organization. An important part of the information gathering and use process is the ability to critically assess the strengths and weaknesses of different sources of infor- mation in the organization, as well as learning to effectively interpret and analyze performance information and create new knowledge about drivers of individual and organizational performance. These topics are covered at some length in the chapter. Next, in Chapter 5, Caitlin Sockbeson and Angelo DeNisi address the twin topics of performance definition and measurement. These authors address the key learning objectives of (}) understanding how to define performance at different levels in the organization, (i) identifying different purposes of measurement, (ji) understanding diferent types of measures, and (jv) exploring the measurement of performance beyond the individual level, e.g.,at the team level. This chapter also addresses key skills objectives including (j) learning to consider the goals of the organization when defin- ing and measuring performance at all levels, (ji) recognizing the dangers of focusing exclusively on outcome measures, (ii) learning to differentiate between different meas- mement techniques and their pros and cons and, finally, (iv) recognizing the characteristics of effective performance measures. ‘As the authors note, in order to determine how well an organization is doing, as well as the degree to which individuals and teams in that organization are perform- ing acceptably, it is important that organizations determine and define performance standards in other words, it should be clear what acceptable performance levels are, and appropriate measures should be developed to measure performance accurately. Following this, in Chapter 6, Sockbeson and DeNisi tackle the issue at the core of the PM system ~ evaluating performance. Ironically, both practitioners and academi- cians sometimes confuse PM and PA as being the same thing. As we noted earlier, while PA is a critical part of PM, the other pieces are very important to both PM and PA.To help the reader better understand how to evaluate performance, the authors identify and address the following key learning objectives: ()) exploring performance evaluations from both objective and subjective measures, (ii) understanding why we need to evaluate performance and the possible actions taken in response to positive oor negative evaluation, (ii) understanding how people make attributions for behavior and the role this plays in managing performance, and finally (jv) understanding the potential biases that infiltrate performance evaluations, and how to address these. "To supplement these objectives and help the reader acquire the skills to evaluate performance effectively, this chapter aso covers the following key topics: () the pur- poses and complexity of evaluation, (i) the attributional tendencies that may affect evaluations, and (iii) how to recognize potential biases clouding evaluations.——————_—_ ee |ANAGEMENT SYSTEMS 6 PERFORMANCE M ve nis volume, We have included key moderating Varad, i a In the fin seo re of the PM process, yet are often glossed over of inc} that can alter the outcom + example, motivation is a key determi onstrated and delivered by in mt only as a line item on tikely dem of the level and quality of likely to treat it as an irritant rather - vidual employees, "Many managers have been know, a i formance: ee a useful tool to a improve performant enough?” Clearly, this is a topic thy say ‘we are paying them, along with the related topics of feedback, coaching an deserves close attention, counseling. . Arup Varma address the all-important subject ae he aaa tal + through a list of key topics eat to motiva.. ing individual employees, including (i) the role of motivation in performance, (ij) th, key theories and models of motivation, (ii) the components and links in the motiy,. tion model based on expectancy theory, (iv) the importance of performance management techniques to understanding how to motivate employees, and (v) under. standing why people are motivated differently and why people in different cultures are motivated by different things. Following these knowledge objectives, the author, address a series of skills objectives including learning (i) how to motivate employees, (iii) how to provide feedback to Gi) how to appropriately assign tasks to employees, how to reward/punish employees. In addition, the authors alo employees and (iv) address the issue of motivation across cultures. Given that most organizations around the world now have their footprints beyond their home country, and many of thee countries around the world, it is important that manag- operate in numerous different ers learn how to motivate employees in different cultures. The authors also discuss the related topics of coaching, and counseling, as these are key to ensuring that the appro- priate motivational techniques have the desired effect on the individuals. In Chapter 8, Chun Hsiao Wang and Arup Varma address the complex subject of a ‘clatonships with special emphasis on interpersonal affet eee Te zs 1986), i other words, liking. Research (e.g,,Varma, DeNis.& 1s, 1996;Varma, Budhwar, Katou, & Mathew, 2016) shows that supervisors te to give higher ratings to those subordinates wh i eal ta bine higher matings (0 thove:s whom they like more, and lower coe rod rt - ve subordinates whom they like less. Clearly, this finding 0% bined ratings Un their charter Whe ang, as interpentonal afect rest and then addzess the geanset Wang and Varma start by defining interpersom! afi. subordinate relationships ply in ne that intervening factors, such as supervisor” dd: 1 me e performan: Cnc ete te might impact the ‘ ‘onship. related im BODE i i " el aed fe, transfer decisions) and sor subo te relationship? Final the authors adéres the sable mans, Cromotions ed le nuances of supervisor-sub0 in ‘0 hel; i interpersonal affect, especially in dlobal one eader better uaderstand thé subject zations.PERFORMANCE MANAGEMENT IN CONTEXT A 7 Further, to help the reader better understand and develop the necessary skills for understanding and managing supervisor-subordinate relationships, the chapter also dis- cusses (i) how to avoid creating in-groups and out-groups among one’s team members/ subordinates, (i) the potential dangers of focusing exclusively on outcome measures, (ii) how raters can Tearn to differentiate between liking/disliking someone because of their work and liking/disliking someone because of who they are and, finally, (iv) learning to train others to avoid the pitfalls of personality-based like and dislike. In Chapter 9, Arup Varma and Rosalie Tung address the important issue of perfor- mance management for expatriates. In their 2008 chapter on expatriate selection and evaluation, these authors (Tung & Varma, 2008) had noted the paucity of research on the subject and argued that multinational organizations needed to create separate PM. systems for expatriates, rather than simply using existing systems. They had also pre- dicted that use and need of expatriates would actually continue to grow, rather than subside as some scholars had begun to suggest. Given the continuing increase in expatriates, and the increasingly complex demands on expatriates, it is critical that dedicated PM systems and processes be created for them so as to address the unique contextual issues faced by them on their assignments. In this chapter, the authors address several key issues, including (i) understanding the importance of creating unique and dedicated PM systems for expatriates, (ii) understanding the issues associated with simply adapting domestic PM and PA systems for use with expatriates, and (iii) recognizing how the unique context of the expatriate’s (new) location can affect his/her ability to perform the job(s). In addi- tion, the authors help the reader (i) learn how to identify the key contextual differences between the expatriate’s home and host locations, (ii) learn how to design systems and instruments specifically for managing the performance of expatriates, Gii) learn how to train managers to manage and evaluate expatriates differently from home country employees, and (iv) learn how to train expatriates to record relevant performance information and share the same with their supervisor(s) at the time of evaluation. Finally, in Chapter 10, Arup Varma and Pawan Budhwar summarize the key issues covered in the book, and present a model for implementing a PM. system. These authors briefly trace the evolution of the performance management field, and then recap and summarize the key learnings from the previous chapters. "The ten chapters are followed by an appendix which includes a case that discusses the innovative human resource practices of National Technologies Limited (NTL), the software division of NIIT, a global information services company headquartered in New Delhi, India. The authors (Arup Varma, Pawan Budhwar, Shaun Pichler, Michael Moote, & S. Viswanathan) take the reader through the journey of NTL, with particu~ lar focus on their innovative HR practices and high performance work systems (HPWS:). Taking a unique approach, the authors synthesize the details of the case with a discussion of the relevant literature on HPWSs. The book concludes with a glossary of terms used throughout the book.-d, the manager needs: i) to indicate where the employee or team stands performance; and ii) to help focus attention and efforts on the desired scio, 2006). ting a well-designed PMS can serve multiple purposes such as identifica- ning needs, performance feedback, and salary administration. Broadly ese purposes or diverse objectives can be strategic, administrative, and/or tal (Noe, Hollenback, Gerhart, & Wright, 2015). Each of these objectives below: ic: Effective PMSs aid the organization in achieving its objectives. It links the yees’ goals and behaviors with the organizational goals. PMSs can enable ers and employees to jointly set goals that stem from the organizational ry. This signals employees about favorable attitudes and behaviors that can tially contribute to achieving these objectives. By continuous review and18 & PERFORMANCE MANAGEMENT SYSTEMS WHY PMS? Employers now tend to pay more attention to deploying performance management f four main reaons! changing nature of work, need for better collaboration, neod attract and retain talent, and need to develop people faster (Rock & Jones, 2013) yp now turn to discussing the reasons in detail. oe The changing nature of work “The world we live in is dynamic and constantly changing, and thus goals cannot be set for 12 months in advance. Relatedly, employees need more of monthly or weekly goals, and job duties seem to be more complex and challenging that need to have mote than one head to deal with such jobs. Teamwork therefore becomes an effective team player in any kind of job more than ever. Employees are part of multiple teams and are not restricted to just one type of work. Employees now need a more in-the-moment and future-oriented type of goal setting and feedback, where they can continuously take corrective actions and improve their performance accordingly. To sum up, standard performance reviews, delivered once at the end of the year, may not be relevant to the changing nature of work anymore. The need for better collaboration Following the traditional performance ratings, managers are required to rate a percentage of their employees as below average. Thus, in a team of five hardworking employees 3 manager will only be allowed to rank one or two of them as top performers. This puts employees in direct competition against each other to receive high ratings and inhibits collaboration, thereby making a business less development oriented and agile. The need to attract and keep talent By modifying old rating systems, firms are focusing more on frequent check-ins between managers and employees. This allows for building a culture that promos communication, recognizes and rewards growth, engages employees, and fosters devel- opment. More frequent communication helps build a high performing and engaged workforce which is considered as one of the greatest challenges firms are facing today The need to develop people faster os Companies are also focusing on PMSs to develop the workforce faster. Converse are shifting (between managers and employees) from justifying a rating at the ont the year concerning the past performance of the employee to thinking about ¢ growth and development together. The end result is development of employees a the board.PERFORMANCE MANAGEMENT AND BUSINESS STRATEGY & 19 WHY ARE PMSS INEFFECTIVE? Despite all the benefits derived from PMSs, there are several studies that demonstrate that firms are incapable of managing employee performance very well. In fact, a study by Watson Wyatt conducted in a human resource consulting firm shows that only three out of ten employees believe that their organizational review systems assist them in improving their performance, With this in mind, some questions or concerns arise: How effectively are PMSs implemented within firms? What are the missing links in implementing firms’ PMSs? Most organizations view performance management through a narrow lens. The administrative and bureaucratic aspects of performance management often overshadow its strategic side. This narrow perspective restricts the role of performance management as a tool that only assists the organization in administering certain HR practices such as salary adjustments and other rewards, In order to recognize the power of perfor- mance management as a business management tool, organizations need to realize the importance of aligning PMS with their business strategies. The degree to which the PMS is driven by the business strategy of the organization has a direct impact on its effectiveness. From a logical standpoint, no matter how advanced the review system is, the organization cannot excel in enhancing the performance without understanding the strategy. Without the knowledge of strategic direction of the organization, PMSs may facilitate individuals and teams in developing competencies and skills that are not required for successful implementation of the strategy and attainment of organizational goals. To sum up, alignment is the key to successful implementation of PMS. ALIGNMENT: HOW IMPORTANT IS IT? Alignment is conceptualized as ‘the extent to which employees are similarly con- nected to or have a consistent line of sight to the vision and direction of the organization and its customers, often encapsulated within its current strategy’ (Schiemann, 2009: 47). This means that the development and implementation of PMSs alone cannot guarantee that the organization will be successful in accomplish~ ing the set goals and creating a source of competitive advantage. To achieve this goal the organization must ensure that the utilization of performance management must be aligned with the strategy the organization chooses to gain competitive advanta, from. In particular, the organization must ensure that business strate Be : ‘ gies are linked to individual and team performance. For instance, if an organization emp! ¢ / hasizes deliver. ing superior customer services, its PMS must reinforce this business strategy by sety the corresponding goals: defining the kind of behaviors requited to contribure ne good customer services; measuring the performance of employees, to based i involvement in these behaviors; and providing relevant feedback. on theirwy 20 A PERFORMANCE MANAGEMENT SYSTEMS A PMS that is not aligned with the strategy of the organization has a neg, impact on all the actors, Consequently, employees believe it to be a waste of ne money. Therefore, they do not consider it as a HR process that supports oo mance improvement or career development. Managers who are not satisfied weg PMS often avoid giving feedback. As such, organizations may miss the oppor to capitalize on the human resources and generate economic value. In summa pont implemented PMS makes lite sense and has a bigger cost atached to it when” paid by everyone in the organization. In particular, Schiemann (2009) summarn the negative consequences of misalignment of PMSs with the busines stureqy Table 2.1. ied With the Table 2.1 Negative consequences of misalignment of PMSs with business strategies Confusing brand promise Employees are unclear of the expectations from them and their role in achieving business goals. This confusion is reflected in their decisions thereby generating a confusing brand promise. Many urgent but not Falls to take into account the differential decision making across various important activities activities. Non-competitive costs Emanates owing to low efficiency resulting from misdirected activites and talent. Burnout Employees work hard, but not smart, to achieve their goals as time is divertad to low- or no-value added activities resulting in stress, feeling of being ‘overloaded and burnout. Overstaffing To compensate with the time lost on low- or no-value added activites. Slow strategy execution Cascading goals and objectives throughout the organization aids in successtul execution of any strategy as all the actors involved share similar values anc vision, whereas misalignment with the goals slows down the execution process Low teamwork Misdirections or no directions result in high conflict across teams and interdependent units. Loss of talent Lack of communication of the vision creates employee dissatisfaction wnch drives low satisfaction levels of customers. PROCESS OF ALIGNING PERFORMANCE MANAGEMENT WITH THE BUSINESS STRATEGY ‘As we noted above, one of the most important steps for effective development a implementation of PMS which has largely been neglected is alignment of the P formance management with the strategy of the organization. An effective P business strategy with the performance of individuals and teams. The mere of strategies does not ensure that this information will be employed effective * ry of PMS. As a matter of fact, numerous organizations spend a lot of time 4 a reviewing and approving the strategies which do not generate intended a agit" Organizations therefore need to ensure that these strategies are cascadlPERFORMANCE MANAGEMENT AND BUSINESS STRATEGY 21 the organization. This view is upheld by Boselie (2011), who claims that consistent efforts should be made by the organizations in order to translate the strategies into concrete and measurable goals for all those involved in and, ultimately, into desired individual and team perfo1 ievi is ali isd i ces performance. There are four steps to achieving this alignment as L ae clear, and agreed upon key success factors, organization structure, strategy 2. Business strategy driven goals, and translation of objectives 3. Clear business strategy driven team and individual job descriptions 4, Developing, maintaining, and reviewing the required KSAQs (knowledge, skill,and abilities, and other characteristics) and behaviors of individuals and teams to achieve the strategy driven goals ‘These four steps are described in detail in the following section employing the useful framework developed by Aguinis (2013) and Srinivasa Rao (2007) that summarizes the process of converting the organizational strategies into desired behaviors and results of individuals and teams, and relative succinct functions to foster alignment between these steps. Essentially, the model highlights the imperative alignment of organizational strategy with the departmental strategy, job descriptions, and individual and team performance. It also highlights fanctions/responsibilities vital to facilitate this alignment. One of the most important features of this model is the involvement of lower echelons of management at all levels, especially in the strategy formulation (often avoided and overlooked). This ensures greater understanding and acceptance and better implementation of the strategy which thereby delivers broader organizational alignment (Ferreira & Otley, 2009). Drawing on the works of Aguinis (2013), Ferreira and Otley (2009), and Srinivasa Rao (2007), we propose a strategy and performance management systems framework. We therefore now look at each component of the framework (shown in Figure 2.1) in derail. Assess the internal and external environment ‘The process of strategy formulation begins with the assessment of the organization's current situation. Two aspects of the organization’ situation are especially important: i) ‘The competitive conditions in which the ozganization functions i.e, its external envi- ronment; and ii) the organizational resources and capabilities, i.e., its internal environment (Thompson, Strickland, & Gamble, 2014). Understanding the broad issues related to both external and internal environment enables the organization to forecast the aids and barriers that can foster or hinder the achievement of desired results. ‘Analyzing the external environment includes identification of the strategie oppor- tunities and threats in the organization's operating environment. The characteristics of external environment that can aid the organization in achieving its desired state are called opportunities. These are external factors that cannot be controlled but canPERFORMANCE MANAGEMENT AND BUSINESS STRATEGY Subhash C. Kundu, Archana Mor, Naresh Khatri, and Hoa Do CHAPTER LEARNING OBJECTIVES © Understand the meaning and purposes of PMSs Understand the importance of alignment in developing and implementing effective PMSs Understand why PMSs should be customized according to the culture . . CHAPTER SKILL OBJECTIVES * Learn how to develop and write effective mission statements Learn how to align goals with strategy Learn how to give effective and fair rewards to employeesINTRODUCTION In order to remain competitive, organizations need to ensure continuous Measureme, and improvement in their performances in al areas of business including finance ma rials, technology, and human resources. In this regard, scholars have contended that the way in which the performance of human capital is measured and subsequently man. aged is often deemed as its chief source of organizational success (e., Den Harn Boselie, & Paauwe, 2004). The outdated performance appraisal processes that were trie considered to be the best to manage and measure employees’ performances, are no longer on trend. World leading companies like GE, Accenture, Netflix, Dell, Microsof IBM, and Deloitte have scrapped conventional performance appraisals in recent year, Organizations, in order to develop and survive, are implementing formal systems for performance management, especially in the global arena, labelled as ‘performance man. agement systems’ (PMSs). PMSs have come to the fore as a means of providing a more continuous and inte- grated approach of managing and developing performance of individuals and teams, Despite the popularity and worldwide acceptance of PMSs, they are often criticized and poorly implemented. Against this backdrop, the chapter begins by discussing the meaning and purposes of implementing an effective PMS. The next section critically discusses the explicit link between business strategies and PMS and, in so doing under- scores the significance of the alignment of the strategic goals of the organization with the individual objectives. The subsequent segment covers the determinants and pro- cesses of achieving this alignment. The final section illustrates the need to customize the PMSs depending on the cultural context. PERFORMANCE MANAGEMENT: MEANING AND PURPOSES Performance management has drawn much attention from both management scholars and practitioners. It has therefore become today’s management agenda. Most of the modern firms deploy some kind of PMS with a view to implementing their strategies and accomplishing the set goals. Accordingly, performance management has been con ceptualized by scholars in a number of different ways. In this chapter, we conceprulize performance management as a ‘continuous process of identifying, measuring, developing performance in organizations by linking individual’s performance # objectives to the organization’s overall mission and goals’. The two critical component of this definition are that: (i) it is a continuous process; and (ji) there is an aligamen with the mission and goals of the organization (Aguinis, 2013: 2). Because of important role of performance management in the organization's strategy implem*® tation and set goals accomplishment, commentators put it as follows: approaching. Ané Ie’ that time again. The season of annual performance reviews is ad, 5013) if you're not stressing yet, the guy in the next cubicle probably is.