The Conceptual framework

In this chapter the findings from the reviewed literature are summarized. The literature summary subsequently informs the construction of a conceptual framework and by this the location of the research questions. Further, the conceptual framework provides the basis for the choice of research methodology.

6.1.1 Synthesis of literature review

Although DEA has become a well-known method for evaluating the performance of organizations or organizational units since it was first proposed in 1978 (Emrouznejad and Yang, 2017) there is very little experience on applying DEA to evaluate employee performance. Further, no study provides empirical data about employees´ responses towards the DEA procedure. Moreover, there is a lack of information about whether DEA´s results are helpful to inform administrative and developmental HRM actions. Both purposes play an important role for the employment and development of people and their individual resources to support the organization achieving its objectives (Chartered Institute of Personnel and Development, 2016a). Although there has been some major criticism considering the role of HRM in general including the question how HRM and HR practices may have contributed to the recent global financial crisis, there is strong evidence in research that evaluating employees´ performance is a worthwhile process, when it is done “right”. Thus, it is crucial to understand the specific requirements under

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which performance evaluation may deliver the promised results and how the whole procedure should be conducted properly (Chartered Institute of Personnel and Development, 2016a).

In this respect, literature holds a variety of recommendations on what constitutes a “good” or “adequate” performance evaluation. Thus, perceived fairness of the process and the results of the evaluation are cited as the most important requirement by most studies (Sudin, 2011). However, it should be noted that the success and the achievement of the intended purposes and benefits of performance evaluation not only depend on a proper design but also on management style, the power relationships between stakeholders and other contextual environmental factors. Further, the review of literature on service management clearly showed that some services place advanced requirements to an evaluation approach.

Especially services that offer a high degree of interaction and customer integration strongly rely on the relationship between employees and their clients. Furthermore, profitability of these services and performance of employees is difficult to ascertain due to variety and choice that is often provided to the customer. Therefore, employee´s knowledge and skills are primary resources for organizational success. To produce a service that meets the customers´ demands for quality, employees may have varying production processes. Further, the production of a service may be influenced by environmental factors that are beyond the employees´ control (e.g. the location of the workplace). Thus, an adequate performance evaluation method needs to consider all these requirements.

6.1.2 Construction of the Conceptual framework

The comprehensive literature review and the subsequent findings build the basis for the conceptual framework of this thesis. The conceptual framework can be viewed as a structure for clarifying research issues and organizing the content of the research by linking concepts and findings from the literature review. Thus, it illustrates the theoretical overview of intended research and provides a set of reference points from which to locate the research questions (Leshem and Trafford, 2007) .

Synthesizing from the literature review, the figure below illustrated the conceptual framework of this research. It also indicates the reference points for the research questions.

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Figure 27: Conceptual Framework

As outlined in chapter 1.4.1, the major aim of this research is to investigate whether the Data Envelopment Analysis is a suitable approach to evaluate employee performance in the service sector. Thus, the main research objectives are to investigate:

A: DEA´s technical suitability for evaluating employees´ performance in the service

sector

B: DEA´s organizational suitability for evaluating employees´ performance in the

service sector

From the research objectives, several subsidiary research questions are drawn (see chapter 1.4.). Addressing the research question whether the evaluation of employee performance in the service sector actually requires an advanced approach (A1) the literature review on service sector research reveals that there is no “unique” service but that there are different service types placing distinct requirements to performance evaluation (Grönroos and Voima, 2013). Thus, “mass services” are in many ways comparable to the production of goods. Therefore, traditional manufacturing based productivity models and evaluation methods may apply. On the contrary, “professional services” and “service shops” are service types that place different requirements to the evaluation of employee performance. Investigating research question A2 (“What are (…) the requirements for an advanced approach?”) the review shows that an evaluation approach for those particular service types requires taking several input and output factors into account. In addition, due to varying production processes, the evaluation approach should be able to discriminate between different production processes and to

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give detailed information about relative distance between employees (Vargo and Lusch, 2008). The analysis also indicates that for those service types, employees often are a source of unique skills and knowledge and therefore are a key driver for competitive advantage.

Considering the importance of skilled and motivated employees for service organizations, the review of HRM literature shows, that HRM activities are essential for the organization in order to employ and develop people (Armstrong, 2018). However, the concept of HRM has been facing criticism for neglecting its intended purpose to serve both sides, employees and managers or shareholders (Keeble-Ramsay and Armitage, 2015). To become mutual beneficial, the approach of sustainable HRM has emerged as an alternative to HPWS. With focus on long term and sustaining development, the concept holds an increased focus on employees as important stakeholders to the organization (Kramar, 2014). For developing employees, PM is a key function within the concept of HRM which also has evolved over time. Whilst the focus of PM was on accountability and on administrative purposes, a developmental orientation of PM became more popular during the last decade (Cappelli and Tavis, 2016). More recently, the trend of Business Analytics became popular in the field of PM by supplementing traditional approaches with sophisticated and analytical decision-making tools (Schläfke et al., 2012). Although the impact of PM on performance is still questioned by some researchers, there is a growing body of evidence that PM can be a valuable process if carried out properly (Chartered Institute of Personnel and Development, 2016a). Among the most cited general requirements for a proper performance evaluation (research question A2) is that a performance evaluation primarily needs to be considered fair by the employees. In addition, for managing career advancement, detailed feedback information for improvement needs to be provided by the evaluation method (Chartered Institute of Personnel and Development, 2016a; Kondrasuk, 2012; Sudin, 2011). By investigating the question what the pros and cons of traditional approaches for performance evaluation are (A3), it was found that, besides several strengths, traditional approaches show several shortcomings. Thus, traditional absolute approaches are often perceived as biased and are not able to provide useful improvement information. Comparative approaches fail to integrate and aggregate several input and output factors or to account. Also most approaches fail to discriminate between different production processes or to account for uncontrollable factors.

Considering that some service types demand advanced requirements for evaluating employee performance and that most traditional PM approaches fail to account for those requirements, DEA may be a promising approach to addresses some of the

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shortcomings of traditional approaches. As the review of literature reveals, DEA has been applied in various organizational context for evaluating performance since it was first proposed in 1978. However, until today there have been only very few applications on employee level. Moreover, DEA´s use in the context of HRM has not been investigated so far. Moreover, there is no information on how the method was perceived by employees.

In this thesis, DEA is applied for evaluating the performance of service employees in the banking industry according to the PM cycle (Armstrong and Taylor, 2014). To investigate whether DEA is able to meet the advanced requirements (research question A4) and provides accurate and reasonable results on employee level (research question A5) the method and results need to be analyzed and thereafter reviewed by all main stakeholders. The review should also examine how the method is perceived by all stakeholders (research question B1) and whether it accounts for both administrative and developmental purposes (B2). This is particularly important considering the lack of empirical data referring to employees´ perceptions of performance evaluation. Since DEA is applied in the banking industry, it should also be studied if the obtained results are a suitable basis for determining performance targets and bonus payments (B3). Thus, learning more about DEA´s suitability for evaluating employee performance and addressing some recurring issues considering performance evaluation in general may add some value to the scientific discussion.