Megan O’Brien

MEGAN O’BRIEN

Examining Performance Management and Its Relationship with Leader Behavior and Employee Engagement

Performance management is notoriously one of the most difficult HR systems to implement in organizations (Pulakos, 2009). Not only is performance management difficult to implement, but it also is consistently viewed negatively by both employees and their leaders (Pulakos et al., 2012). In fact, if one asks employees and leaders about their current performance management systems, over 70% of them will say that it is ineffective in setting goals, providing feedback, and improving performance (Pulakos et al., 2012). However, effective performance management has been linked to increased organizational returns, so it really is in any organization’s best interest to invest time and energy into examining and updating their performance management systems. This proposal will introduce the constructs of performance management, employee engagement, and leader behavior and suggest a proposed research model that explains the relationship between the three constructs.

Literature Review

Case Studies

A case study is a type of research that examines a small set of data in the context of a larger problem (Yin, 2012). This type of research is dependent on the assumption that the context and conditions of a

particular case are essential to one’s ability to understand it. Case studies are useful research methodologies when the researcher is attempting to answer a descriptive or explanatory question, as is the case in this proposal – what is the relationship between performance management, leader behavior, and employee engagement (Yin, 2012)? Case studies, by design, highlight details from the participant’s point of view and utilize multiple sources of data to collect evidence for the study (Tellis, 1997). While the methodology and data collection efforts are still being refined, case studies provide a reliable way to utilize several different methods of evidence to conduct an in-depth examination of a specific question (Yin, 2012).

Performance Management

Performance management has been referred to as the “Achilles’ Heel” of human capital management (Pulakos, 2009). This is because the majority of organizational leaders acknowledge the importance of performance management, but many still fall short in developing effective systems. When surveyed, only 30% of employees felt like their organization’s performance management system helped them improve their performance (Pulakos, 2009). When implemented correctly, performance management is not only about evaluating performance, but it is also strongly rooted in managing the context in which performance occurs (Saks & Gruman, 2011). Effective performance management systems help organizations communicate expectations, encourage goal-oriented employee behaviors, and identify employee development opportunities (Pulakos, 2009).

Types of Performance Appraisals

A huge component of performance management is performance appraisals. Performance appraisals are the formal evaluation processes that help determine compensation, promotions, or training needs (Lunenburg, 2012). While there are dozens of different performance appraisal methods, these methods can typically be grouped into three categories: the judgmental approach, the absolute standards approach, and the resultsoriented approach (Lunenburg, 2012). Judgmental approach. This approach involves comparing employees to one another based on their behaviors and personality traits (Lunenburg, 2012). This type of performance appraisal typically relies solely on the subjective opinion of the supervisor (Lunenburg, 2012). It often does not account for different levels of variation amongst employees, so

employees are either rated higher or lower than usual and the “middle” becomes more obsolete (SHRM, 2020). Absolute standards approach. This approach to performance appraisals involves using job analysis to evaluate employees (Lunenburg, 2012). Supervisors compare employee behavior to the standard of behavior detailed in the job analysis instead of comparing their behavior to other employees (Lunenburg, 2012). This approach is advantageous in that it makes it clear to both employees and managers what employees are expected to do (Cascio & Ramos, 1986). Results-oriented approach. These kinds of performance appraisals examine what the employee is supposed to accomplish versus what they have accomplished based on objectives set earlier in the year (Lunenburg, 2012). This approach removes the consideration of individual traits or behaviors and instead focuses on quantitative and qualitative performance outcomes (Lunenburg, 2012). This provides the most objective way to assess employee performance, especially when multiple performance measurements are taken over the course of the year (Bratton, 2012). One of the most important components of this method is that the criteria used to assess an employee’s performance is directly controlled by the employee (Bratton, 2012).

Leader Behavior

Effective leadership plays a crucial role in the success of a performance management system (Gruman & Saks, 2011). A 2009 study at Google discovered that Google employees cared about having leaders who were even-mannered, made time for one-on-one meetings, helped their direct reports solve problems, and took an interest in their employee’s lives outside of the workplace (Bryant, 2011). Technical expertise, which Google had previously thought was the most important managerial behavior, ranked last amongst all of the behaviors in the survey (Bryant, 2011). Once Google started to place more of an emphasis on training their managers in the eight habits that produced highly effective managers, 75% of their least competent leaders displayed significant performance improvements (Bryant, 2011). They also found that manager effectiveness had the largest impact on employee performance over any other factor (Bryant, 2011). This study implies that effective leadership behaviors directly correlate with effective performance management (Pulakos et al., 2012). Other research studies have been able to draw a direct relationship between leader behavior and employee performance. An Israeli study of law enforcement personnel found that leaders who more frequently performed transformational and transactional leadership behaviors had employees with higher performances (Vigoda-Gadot, 2007). A recent study from South

Korea also found that performance management improvements occurred when transactional leadership behaviors were more frequent (Lee, 2020). Gabris and Ihrke (2000) also examined the role of leadership on performance management and found that while the type of performance management system is incredibly important, the credibility of leaders and their behaviors is equally as important as having employees accept a performance management system.

Employee Engagement

Employees consistently rate performance management systems poorly on employee engagement and satisfaction surveys (Pulakos, 2009). However, the research and literature show that there is a strong relationship between employee engagement and performance (Saks & Gruman, 2011). Research by the Corporate Leadership Council (2004) found that the largest drivers of employee engagement were also drivers of effective performance management systems. These drivers of engagement and performance management included leader behaviors that set clear expectations, helped employees accomplish work, provided frequent feedback, and found new ways to increase training and development (Corporate Leadership Council, 2004).

Recent qualitative research in various organizational roles in a South African organization found that as employee engagement increases, so too do employee and organizational performance (Govender & Bussin, 2020). These employees felt that empowerment and communication were two of the key themes that united engagement and performance within their organization (Govender & Bussin, 2020). Other research on the topics of employee engagement and performance management found that changing some of the social aspects of performance management systems actually improves employee engagement (Smith & Sezer Bititci, 2017). These social aspects include eliminating competition between peers, removing unnecessary time constraints on performance management systems, and implementing a more participative approach to management (Smith & Sezer Bititci, 2017).

Fairness of Performance Appraisal System

Sudin’s (2011) research on employee perception of the fairness of the performance appraisal process found that as employee’s perceptions of the fairness of the system increased, so too did employee satisfaction (Sudin, 2011). Additionally, Swiercz et al. (1993) found that employees were more concerned with fair performance appraisal procedures than they were with the actual outcome of the appraisal. However, other research suggests

that managing employees’ perceptions of the fairness of the system, not the system itself, is the best way to have a successful performance appraisal process (Kim & Rubianty, 2011). Trust plays a large role in an employee’s perception of fairness in the performance appraisal system. When leaders behave in a manner to build trust amongst their employees, the employees are more likely to perceive fair treatment in the performance appraisal process (Pulakos et al., 2012). Reinke (2003) found that trust is the most important predictor of acceptance of the performance appraisal system rather than the type or quality of the system. Additionally, leader behavior greatly affects employees’ perceptions of fairness in the performance appraisal process. Landy et al. (1978) found that employees view the performance appraisal process more fairly when leaders more frequently evaluate performance, are familiar with a person’s job duties and responsibilities before conducting an appraisal, and participate in an ongoing feedback process with the employee.

Insights That Guided Topic Decision

As a current employee at a large corporation, I have had the unique experience of participating in performance management within a large organizational setting. In 2016, my organization changed the performance management system from a ranking-based system to a conversation and goal-based system, which led me to wonder how changes in performance management impact employees. Engagement has always been a passion of mine, as I believe that there are so many antecedents and outcomes of employee engagement that can either help or harm an organization. Examining the effect that performance management has on employee engagement seemed like a natural fit due to my interests and the unique position I am in to conduct a case study within my organization. My professional contact provided a lot of insight and guidance throughout the topic selection and refining process. As a project manager with expertise in the HR field, my mentor has a lot of experience in participating in the performance management process from both a leader and an employee perspective. We discussed adding leader behavior as a construct to the research model since a common theme that arose in our conversations was that leader behavior drastically impacted the implementation and effectiveness of performance management systems, regardless of how well-designed the systems were. Thus, the research model was born from a combination of professional insight, personal experience, and a thorough literature review.

Research Question

This case study will examine the interconnectedness of leader behavior, performance management systems, and employee engagement. A large entertainment corporation will be the organization at the center of this case study.

Constructs

Leader Behavior

Leader behavior is best defined as a combination of a manager’s “perceptions, decisions, and actions” that have an impact on their employees’ behaviors and organizational outcomes (Stahl & De Luque, 2014).

Performance Management

Performance management is an ongoing process that is a combination of all of the organizational policies and practices that interact to set goals, evaluate progress, and improve employee performance (SHRM, 2020; Gruman & Saks, 2011).

Employee Engagement

Employee engagement is the emotional commitment and attitudes an employee feels toward an organization and its goals and values (Jenkins & Delbridge, 2013). Engagement has been linked to increased organizational outputs, so it is generally in an organization’s best interests to emphasize employee engagement (Kruse, 2012).

Purpose

Since performance management systems are consistently poorly rated across all types of organizational settings, this case study will provide more insight into some potential reasoning behind this phenomenon (Pulakos et al., 2012). This case study will examine whether there is a relationship between different types of performance management systems and employee engagement within an organization, and a second aim studies how leader behavior influences the implementation and effectiveness of different performance management systems. The findings of this case study can help determine if the literature accurately reflects actual organizational practices and employee experiences, and it may guide organizational and

HR leaders in where to focus efforts when making changes to performance management systems.

Potential Impacts

I hope that the results of this case study will have a positive impact on the leaders and employees within the organization. This case study should be able to confirm or deny whether changes in the performance management system are having the intended effects on employees and whether or not leader behavior impact the implementation of performance management practices. When large organizations make procedural changes, like those to performance management systems, there is often a disconnect between the proposed system, the leader implementation of that system, and the employee experience; hence, these results should help fill that information gap.

Conceptual Framework

Figure 1 depicts the conceptual framework of the proposed research model. This research will focus on how leader behavior impacts performance management systems, which in turn impacts employee engagement.

Figure 1

Research Model Flow Chart

Leader Behavior Performance Management Systems Employee Engagement

Methods

The proposed methodology should be an embedded, single-case study. This type of case study examines data from a group of employees within a single organization (Yin, 2012). This case study will also integrate theoretical perspectives on the proposed constructs to provide a strong background on the constructs and the previously observed relationships between these constructs (Yin, 2012).

Source of Data

The data in this case study will be collected via interviews with a variety of employees about their experience with performance management and engagement. Specifically, semi-structured interviews will be used to collect data. Semi-structured interviews are those that utilize pre-determined questions that allow the researcher to seek clarification or ask the interviewee to expand on one topic or another (Doody & Noonan, 2013). This is the most common type of interview that is used in qualitative data collection because it allows for flexibility and the opportunity to explore new topics as they arise (Doody & Noonan, 2013). Interview questions will be prepared in advance, but the order of the questions and the ability to elaborate will be left up to researcher discretion, depending on how the interview is going (Doody & Noonan, 2013). These semi-structured interviews will be conducted within the researcher’s organization. Interviews will occur with experts on engagement and performance management as well as with managers and employees who have direct experience with both sides of performance management. It is important to note that while semi-structured interviews have several advantages, there are some disadvantages to using this type of data collection method. Semi-structured interviews are more time-consuming and take a lot more interviewer preparation than other methods (Adams, 2015). Another disadvantage is that it is hard to yield a large sample size of interviews due to the lengthiness and difficulty in scheduling (Adams, 2015).

Reasoning

Despite the few disadvantages to semi-structured interviews, they were chosen for this case study because they allow for more personal conversations that enable the researcher to pull additional information from the interviewees (Whiting, 2008). Semi-structured interviews use closed and open-ended questions, are flexible, and allow for a more natural conversational flow, which are all reasons that make them advantageous to use to maximize the amount of quality information gathered in the interview (Adams, 2015). Additionally, the semi-structured format will allow the researcher to network more effectively with the chosen professionals while also sticking to an interview format and gaining appropriate information.

Interview Insights

There were 11 interviews conducted with organizational employees to gather qualitative information about the constructs of leader behavior, performance management, and employee engagement. The interviewees

were broken up into four different categories: engagement experts, performance management experts, department leaders, and department employees. The interview questions are presented in Appendices A-D and were specifically focused on changes in performance management systems, the role of fairness in performance management, employee engagement, and how leader behavior affect all of these constructs. Table 1 provides key quotes about the research constructs that were obtained via interviews with various professionals within the organization. The data is broken down by the interviewee group to help better communicate which sentiments came from which group of interviewees.

Table 1

Key Quotes from Interviews

Interviewee Group Key Interview Quotes

Engagement Experts  “There are 8 leadership attributes that drive engagement which includes caring about me as an individual, recognition, development, fairness, support, trust, follow-through, and open communication.”  “Performance management should depend on the employee; each employee is individual in their preferences and recipes for success.”  “Recognition is one of the most impactful ways to improve employee engagement.”

Performance Management Experts  “Performance discussions should prepare individuals for how they can work to get to the next level of their career.”  “Making changes to the performance management system meant improving the accuracy of people’s end of year evaluation but decreasing the amount of compensation available to those who are consistently meeting their goals.”  “If an employee feels like they belong in an organization, they’re going to do everything you ask of them.”  “A rating system makes performance management too much about the score and less about the development of the individual.”

Department Leaders  “We’re currently using a one-size-fits-all approach to performance management when the department is not one-size-fits-all.”

 “Goals should be more clearly defined across the department and more clearly aligned with organizational objectives in order to better manage performance.”  “Leadership style is the largest variable in the effectiveness of a performance management system.”

Department Employees  “My performance appraisals are fair, but only because I work really hard to make sure that is the case by spending time with my managers and communicating my successes with them.”  “If I could change one thing about the performance management system, it would be to get more feedback throughout the year rather than having to constantly seek out feedback.”  “Managers should be equal participants in the performance management process.”

Table 2 provides a more thorough summary of the main takeaways from the interviews. Once again, the data is broken down by the interviewee group. A synopsis of their thoughts on the topics of performance management systems, employee engagement, the perceived role of fairness in performance management, the role of leadership in managing performance, and how to better manage employees to improve engagement are provided below.

Table 2

Discussion

Tables 1 and 2 visually represent a large amount of data that was obtained during the interview process. However, in closely examining the tables, a few key themes emerged in all of the discussions. The first of these key themes is that leader behavior truly does influence the implementation and effectiveness of performance management systems. This is consistent with the literature on the topic, which largely shows that leader behavior in regards to the performance management system is just as important as the system itself (Gabris & Ihrke, 2000). A large majority of the interviewees stated that the biggest issues with the current performance management system stem from ineffective or inconsistent application of the system by organizational leaders. This is not completely surprising given that the organization employs thousands of leaders in a variety of departments, but it does suggest an area for further investigation to see how the organization can better support leaders and provide the necessary training or development opportunities that are needed to more consistently and appropriately implement the performance management system. Another theme that emerged from the interviews is that more feedback is needed in order to better manage performance. Employees expressed a desire to receive more consistent feedback, and leaders also expressed a desire to provide and receive more feedback. The experts also

mentioned that providing feedback is a crucial component of performance management and actually a large part of the reason that the system was changed from a ranking-based system to a conversation and goal-based system – to encourage more frequent conversations and feedback. However, there clearly is a disconnect in feedback administration because, while every group of interviewees expressed a desire for more feedback, most also reported that feedback is lacking in the current performance management system. These feedback gaps were proposedly caused by the technological aspects of the performance management system, the tediousness of the paperwork, or the inability of leaders to provide constructive feedback. Whatever the reason, this issue should be further examined to determine how the organization can improve the quantity and quality of feedback that employees receive during the performance management process. The interviewees also provided information as to what role the perception of fairness played in the performance management system. These answers were more dissimilar across interviewee groups than some other answers were; the performance management experts believe that perceived unfairness occurs due to employees not understanding the complicated system while department employees feel like leader subjectivity plays a larger role in their perceived fairness of the system. The engagement expert feels like trust in leadership is a key component to how employees perceive fairness while department leaders feel like individual employee factors, like the length of time with the company, has more to do with the discrepancies in perception of fairness of the system. The literature suggests that trust and leader behavior play the most important role in employee perception of the fairness of systems, even more so than the design or content of the system itself (Reinke, 2003; Landy, Barnes, & Murphy, 1978). An interesting finding from the interviews is that almost every individual has a different idea of what employee engagement is. This suggests that employee engagement is not fully understood in the organizational context and employees view it as a much more personal construct rather than one supported and backed by literature. A final key theme that emerged from the interviews is that individualization is crucial to better managing performance to improve employee engagement. This is a unique finding, as the current performance management system is described by several interviewees as “one-size-fitsall.” This suggests that interviewees feel like department leaders need to take more time to learn about their employees and utilize individualized performance management tools in order to help them be more engaged and achieve better organizational returns. This is definitely an area of research that the organization should examine further, as the fact that the system is designed to be streamlined across the organization appears to dissatisfy

interviewees in terms of not being able to manage performance and engagement as effectively as possible. Overall, the interview insights supported the proposed research framework that is presented in Figure 1, which is that leader behavior affects how performance management systems are implemented, and performance management systems ultimately influence employee engagement. Further examination of these constructs within the organization, looking for areas of improvement to the performance management system, is a value for the company to reap more organizational benefits from the increase in employee engagement arising from improved leader behaviors and the performance management system. Appendix E contains an infographic which can be shared with organizational leaders to summarize the interview findings and convey the importance of further studying the topics of performance management, leader behavior, and employee engagement.

Organizational Recommendations

Based on the literature and interview findings, there are some specific recommendations that this organization can look into following the results of the case study to help improve the performance management process and increase employee engagement. The first of these recommendations is to implement more leadership training. Leaders should be trained on how to effectively conduct performance management in order to reduce inconsistencies in the system’s implementation. There should also be a leader accountability aspect included in the performance management system. Currently, leaders are not being held accountable for their performance appraisals or for their employee’s performance and development. If a leader accountability aspect is added to the performance management system, it would reduce inconsistencies in implementation and ensure that leaders are frequently participating in performance management. The organization should also work to be more transparent with their employees about the performance management and compensation systems. The company is notoriously secretive about organizational practices and policies despite employees wanting to know more about how performance is measured and determined. When employees understand the system and where their appraisals are coming from, they may perceive the fairness of the system differently, which could improve employee engagement. Finally, the organization should work individualization into the performance management system. A more flexible system would allow for leaders to better manage performance at the individual level instead of the

organization level. Figuring out how to motivate individuals or what type of recognition individuals prefer is a great first step to adding a more individualized component to the performance management system and therefore hopefully increasing employee engagement.

Conclusion

While performance management is a notoriously difficult organizational topic, this research proposal illustrated that there are benefits to organizations taking a deeper look into how their performance management systems are implemented by company leaders and what impacts the performance management systems have on employee engagement. A case study research methodology would provide valuable information about the specific organization and would allow for an effective combination of academic literature and employee experiences to provide direction on the future of these constructs in the organizational setting.

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Interview Questions for Engagement Experts

1. How do you define engagement? 2. What types of indicators do you look for to see changes in employee engagement? 3. What are some behavioral indicators of positive employee engagement? 4. Have you noticed a difference in employee engagement as organizational changes occur? 5. What role do you think the perception of fairness plays in impacting employee engagement? 6. Do you have specific examples of teams you’ve worked on with either really high or really low levels of engagement? 7. What are some qualities you look for in a performance appraisal as an employee? 8. What do you need from a performance discussion? 9. What do you believe the role of management is in employee performance? 10. Is there a better way to manage performance to improve engagement? 11. In your opinion, which approach does Disney’s performance management system fall under? a. Judgmental approach b. Absolute standards approach c. Results-oriented approach

Interview Questions for Performance Management Experts

1. What was the driving force behind updating the performance management system? 2. What were the strengths and weaknesses of the previous system? 3. What are the strengths and weaknesses of the current system? 4. What feedback have you received on the current system? 5. Is the current performance management system fair? 6. Did you model this performance management system on any particular research or another organization’s system? 7. What have your external experiences with performance management been like versus your internal experiences? 8. What does engagement mean to you? 9. Is there a better way to manage performance to improve engagement? 10. In your opinion, which of these approaches does your organization’s performance management system fall into? a. Judgmental approach b. Absolute standards approach c. Results-oriented approach

Interview Questions for Department Leaders

1. What do you like about the current performance management system? 2. Are there components of the old system that you miss? 3. Have you noticed a difference in employee performance since the change in performance management systems? 4. Are you having more quality conversations with your direct reports about their performance? 5. Is the current performance management system fair? 6. What have your external experiences with performance management been like versus your internal experiences? 7. What does engagement mean to you? 8. Have you noticed a difference in employee engagement with one system over another? 9. Is there a better way to manage performance to improve engagement? 10. In your opinion, which of these approaches does your organization’s performance management system fall into? a. Judgmental approach b. Absolute standards approach c. Results-oriented approach

Interview Questions for Department Employees

1. Is the current performance management system at your organization fair? 2. Are you treated fairly based on your performance in the organization? 3. What do you like about the way performance is measured in your organization? 4. If you could make changes to the performance management system, what would you change and why? 5. Would you rather receive a performance rating comparing your performance to other people or comparing your performance over time? 6. What have your external work experiences with performance management been like versus your internal work experiences? 7. Are you having quality conversations with your leaders? 8. What does engagement mean to you? 9. Are there ways your performance management system could be improved to increase your engagement? 10. In your opinion, which of these approaches does your organization’s performance management system fall into? a. Judgmental approach b. Absolute standards approach c. Results-oriented approach

Infographic Summarizing Interview Findings and Recommendations

A link to the full infographic is available at https://bellevueuniversitymy.sharepoint.com/:i:/g/personal/anejezchleb_bellevue_edu/EcTxh7wO ZyZEoBXW6pE7F0UBWk5TxZAx_XHXn5CUEqHUTw?e=eukbPM.