HISTORY OF

PERFORMANCE
MANAGEMENT
GENNA B. LARA
REPORTER
• Employee Performance Management isn’t a new concept. Performance
management has evolved in many ways over the twentieth and twenty-
first century, but some companies are still using antiquated methods to
measure employee performance. In this article, we outline a brief history
of performance management to understand the main drivers of changes
throughout history and some of the main factors that are driving modern
day companies to evolve their current performance management
systems.
• Performance Management became critical during the expansion of
business and industry in the 1920s. With companies' goals to maximize
mass production, operational efficiency became the focal point. As you
would expect, employee development and engagement were
considered less important at this point.
• In the 1950s, personality-based performance appraisal systems started
gaining adoption. Employees would be rated on traits such as job
knowledge, sincerity, and loyalty; however, it was soon realized that
measuring the performance of workers based on inherited traits had
nothing to do with their productivity in the workplace. As a result,
companies began to look for better ways to assess their employees.
• In the 1960s, annual formal appraisals began to focus on what an
individual might be able to achieve in the future. In addition, there was
more focus on goals and objectives, and the term ‘management by
objectives’ became popularized.
• The 1970s was fraught with court cases due to the subjectivity and biases
with performance appraisals, which led to the introduction of psychometrics
and rating scales in performance management. In the 1980-1990s, the multi-
rater feedback system (also termed 360-degree feedback) became
popularized, although it’s worth noting that multi-rater feedback was used prior
to the 1980s by a few companies, including Esso Research and Engineering
Company which was one of the first organizations to use multi-rater feedback
in the 1950s.
• The 1990s and early 2000s saw a shift of focus to employee motivation and engagement.
Many companies have ditched the annual performance reviews and opted for more continuous
feedback-driven practice.
• And while the importance of continuous feedback cannot be overstated (check out our
blog article about the importance of feedback), many critics in this modern day are
saying that continuous feedback is simply not enough anymore for maximizing
employee productivity and increasing retention.
 EVOLVING OUR CURRENT PERFORMANCE MANAGEMENT
SYSTEMS

• There are several drivers that are forcing business and HR managers to
question the effectiveness of their performance management systems.
These include: changes in workforce, the movement toward more agile
structures, and the realization that feedback is a double-edged sword .
1. Changes in workforce
Millennials now comprise the 35% of the workforce and this is expected to be
~75% of it by 2025. While all employees want feedback, Millennials want more of
it. They want recognition for jobs well done, corrective feedback on what they
need to improve, and transparency into their career paths. It's crucial that
managers implement systems that work for them.
2. Deconstruction of Company Hierarchical Structures
Companies no longer operate in the hierarchical structures that once
worked decades ago. Employees are now working in multiple roles, across
different teams, with several managers throughout the year. We need agile
performance management systems that match these agile networks of
teams that organizations are now becoming.
3. Continuous is not enough - feedback has to be constructive
Feedback is a double-edged sword - poorly-delivered feedback is worse
than no feedback. All feedback should be constructive. In most companies,
there isn’t enough training or tools to help employees understand how to
provide and receive constructive feedback. Constructive feedback is action-
based, effort-based, and forward-looking.
 1 PERFORMANCE MOVEMENTS IN THE TWENTIETH CENTURY

The concept of ‘movement’ is analogous to the sociological term ‘movement’. Unlike other
forms of organization, movements are informally organized around a set of thoughts and
practices that form the glue. Members of a performance movement share an agenda of change
with a particular vision of performance, its measurement and management.
• We discuss eight movements that have propagated performance management.
They are clustered into three time segments:
(1) Pre-World War II
(2) The 1950s to the 1970s, which roughly parallels the development of the welfare state and
the related growth of government, and
(3) The 1980s onwards, when welfare states came under pressure from a variety of sources.
• In the list of movements, a distinction between policy movements and
management movements can be made.

• Policy movements mainly focus on performance in terms of the outcomes of

organizations and public programmes.
• Management movements have more of an internal focus on outputs and
efficiency. Yet, there is a grey zone, with management movements taking into
account some elements of outcome and vice versa.
 1.1 1900–1940S

Three performance movements developed at the end of the nineteenth century and the beginning
of the twentieth century:
• The social survey movement
• Scientific management and the science of administration, and
• Cost Accounting
• The Social Survey Movement was a movement of social reformers who needed
facts about social problems (Bulmer et al., 1991). The best-known work of the
social survey movement is Charles Booth’s study Life and Labour of the People of
London (1886–1903) (Linsley & Linsley, 1993).
 THE SCIENCE OF ADMINISTRATION AND
SCIENTIFIC MANAGEMENT

• Scientific management for instance supported distributed management,

• Science of administration advocated a hierarchical executive branch. Although the concrete practices they
developed were sometimes contradictory, the movements share a number of important principles.
• Rationality: the applicability of the rule of reason;
• Planning: the forward projection of needs and objectives;
• Specialization: of materials, tools and machines, products, workers and organizations;
• Quantitative measurement: applied as far as possible to all elements of operations;
• One best way’: there is one single best method, tool, material and type of worker;
• Standards and standardization: the ‘one best’, once discovered, must be made the standard
• Cost Accounting was a joint venture of the public and the private sector. Claims of control and openness echoed
in both the public and the private sector (Previts & Merino, 1979; Rivenbark, 2005). In addition, stronger
information systems were needed in order to manage the increasingly large and complex organizations and
corporations.
 1.2 1950S–1970S

• Performance Budgeting became well established in the 1960s with the introduction of the
Planning Programming Budgeting Systems (PPBS). New programme expenditures had to be
weighed against the marginal benefits of each programme in a systemic way. PPBS inspired
subsequent initiatives such as Management by Objectives (MBO) and Zero-Based Budgeting
(ZBB). Performance budgeting was found in other countries as well. Great Britain introduced it
in the Ministry of Defence in the late 1960s and then extended it to other departments,
particularly in education and science.
1US PERFORMANCE BUDGETING INITIATIVES

Acronym
• PPBS - Planning - PPBS assumed that different levels and types of
Programming performance could be arrayed, quantified and analysed
Budgeting to make the best budgetary decisions. In essence, PPBS
System introduced a decision-making framework to the executive branch budget
formulation process by presenting and analysing choices among long-term policy objectives
and alternative ways of achieving them. (Initiated in 1965 by President Johnson .)
 1. US PERFORMANCE BUDGETING INITIATIVES

MBO Management- MBO sought to link agencies’ stated objectives to

By Objectives- their budget requests. MBO is a process to hold agency
managers responsible for achieving agreed-upon outputs and outcomes.
Agency heads would be accountable for achieving presidential objectives of
national importance; managers within an agency would be held accountable for
objectives set jointly by supervisors and subordinates.
 1. US PERFORMANCE BUDGETING INITIATIVES

• ZBB Zero-Based - ZBB proposed to develop budgets from scratch, rather

Budgeting - than to build them incrementally. In practice, agencies were expected to set priorities
based on the programme results that could be achieved at alternative spending levels, one of
which was to be below current funding. In developing budget proposals, these alternatives were to be
ranked against each other sequentially from the lowest level organisations up through the department
and without reference to a past budgetary base. In concept, ZBB sought a clear and precise link
between budgetary resources. (Initiated in 1977 by President Carter.)
 TABLE 3.2PERFORMANCE MOVEMENTS IN THE
TWENTIETH CENTURY
Performance movement Timescale Characterization
• Social survey movement 1900s Social reformers needed facts about
–1940 social problems
• Scientific management Government needed a scientific approach

Administration Cost accounting Large corporations and government needed insight into costs of
products and services for management and transparency
• Bureau of Municipal Synthesis in practice of previous three
• Research and its offspring
• Performance budgeting
1960s
• 1970s
• Social indicators 1960s
1970s
movements
1950s Shift attention in the budgetary process
from inputs to outputs and objectives
Coincides often with an agenda of executive control
Social engineering of the welfare state
• New Public Management 1980s Public sectors worldwide are under
• (2nd generation 1990s pressure and adopt performance strategies
• performance budgeting) 2000s PB is picked up, at least in rhetoric
• Evidence-Based Policy 1990s Research and indicators rather than
• 2000s ideology and opinion have to undergird policy
• Revisionism 2010s Review and revision of performance management frameworks in
several countries (e.g. Australia, the Netherlands, the United
Kingdom and the United States)
 2 CHANGE AND CONTINUITY IN THE PERFORMANCE MOVEMENTS

1. Conceptual Stability
Concepts are the intellectual artefacts we use to comprehend reality. Williams (2003) demonstrated that most of
the concepts we use today to make sense of the very broad concept of performance were already used by the New
York Bureau of Municipal Research. He argues that by 1912, performance measurement exhibited many of the
features associated with the contemporary practice: measuring of input, output and results; attempting to make
government more productive; making reports comparable among communities; and focusing on allocation and
accountability (Williams, 2003: p. 643).
2 MANAGEMENT AND POLICY MOVEMENTS; COEXISTENCE, NOT A PENDULUM

Each performance movement has either a policy or a management orientation. Some performance movements were mainly
concerned with output and efficiency, while others focused on outcomes and effectiveness.

Policy Movements:
❑Social Survey
❑Social Indicator
❑Evidence based policy movement

Management Movements
❑Scientific management
❑Cost Accounting
❑PPBS
❑New Public Management
• The coexistence of performance movements in policy and management may point to a spirit
of the times that values quantification as indication of both rational policymaking and rational
management. This is in line with Feldman & March’s (1981) argument that the use of
information symbolizes a commitment to rationality. Adopting performance measurement,
being the symbol of rationality, reaffirms the importance of this social value.
 3 ALL PERFORMANCE MOVEMENTS ARE POLITICAL

• All performance movements are political in the sense that they all have a power dimension.
Agendas, hidden or not, are always an ingredient of the movement. Performance movements
have been the subject of tactical manoeuvres between legislatures, and executives, between
politics and administration, between horizontal and vertical departments, and between
political parties.
 4 PERFORMANCE MOVEMENTS HAVE A SIMILAR SET OF CARRIERS FOR
PERFORMANCE IDEAS

Performance management ideas need carriers. A common set of carriers can be

found in most movements.
• Movements need some main proponents that symbolize the movement
• Movements need to be endorsed by organizations and associations promoting the
ideas of the movement
• Movements need their ‘biblical’ texts
• Movements need to influence the curricula of the universities
 5 THE EXPORT OF PRACTICES HAS BEEN A DELIBERATE POLICY

• In the twentieth century, the export of performance practices has become a deliberate strategy of
actors that confess to a performance movement. The NYBMR intentionally exported its work to
other communities through the provision of services and through contacts with agencies and
officials. The PPBS system too was intentionally promoted in other countries as well as in the
private sector.

NYBMR- New York Bureau of Municipal research

 1 TECHNOLOGICAL EVOLUTION ENABLES THE REINVENTION OF OLD
CONCEPTS

•The technological infrastructure for measuring performance has improved significantly. The
most relevant evolutions have been the unparalleled increase in processing power of computers
and the development of networks. Information technology enables better generation, display and
analysis of the performance information, and performance data can be generated more easily
thanks to the automation of administrative record keeping. This is in particular the case for
collecting output data and less so for outcome measures.
 2 INSTITUTIONALIZATION, PROFESSIONALIZATION
AND SPECIALIZATION OF USE

• The use of performance information has gradually been institutionalized. Early twentieth-
century movements such as the social survey and the NYBMR generally operated in the
periphery of government. Although these movements were innovative and influential, the
impact on the government of the day should not be overrated. Davidson (1991) concluded
from a historical analysis that, although senior researchers of the social survey movement
were appointed to positions in the British government, there is little evidence of their impact
(p. 360).
End of Slides