ARMSTRONG'S
HANDBOOK
OF PERFORMANCE
MANAGEMENT
An evidence-based guide to
delivering high performance
4TH EDITION
Michael Armstrong
KOGAN PAGE
Contents
Introduction 1
Part I The Background to Performance Management 7 1. The Foundations of Performance Management 9
Performance management defined 9 A short history of performance management 10 Merit rating 11 Management by objectives 14 Developments in assessment techniques 18 Performance appraisal (1970s version) 18 Enter performance management 20 Why performance management? 25 Comparison of different approaches 27
2. The Conceptual Framework of Performance Management 28
Underpinning theories 28 Performance management values 29 The meaning of performance 30 Contextual factors 34 Performance management and motivation 38 Performance management and the psychological contract 40
3. Critiques of Performance Management 41
The critical arena 41 Views of commentators 42 Implications 51
vi Contents
Part II The Practice of Performance Management 53 4. Performance Management Systems 55
Performance management defined 55 Performance management as a system 58 Objectives of performance management 59 Principles of performance management 61 Characteristics of performance management 61 The performance management cycle 62 Performance and development planning 64 Performance measures 68 The performance and development agreement 70 Managing performance throughout the year 71 Formal performance reviews 72 Analysing and assessing performance 72 The ethical dimension 72 Issues in performance management 73 Effective performance management 74
5. Managing Performance Management 77
How should performance management be managed? 77 What needs to be managed? 78 The approach to managing performance management 78 Performance management documentation 79 Web-enabled performance management 82 The role of HR 87
6. Managing Under-performance 89
The problem of under-performance 89 Dealing with under-performers 90
Part III Performance Management Processes 95
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7. Goal Setting 97
Principles of goal setting 97 Goals and feedback 98 Types of goals 98 Smart objectives 100 Good objectives 100
Integrating goals 101 How to set goals 102
8. Feedback 105
Feedback defined 105 The nature of feedback 106 Use of feedback 106 How effective is feedback? 107 Guidelines on providing feedback 108 Feedback expert systems 109
9. 360-degree Feedback 112
360-degree feedback defined 112 The rationale for 360-degree feedback 113 Use of 360-degree feedback 114 360-degree feedback: methodology 114 360-degree feedback and appraisal 115 Effectiveness of 360-degree feedback 117 360-degree feedback: advantages and disadvantages 118 Introducing 360-degree feedback 119
10. Performance Reviews 122
The process of reviewing performance 122 The formal performance review meeting 124 ProblemsAvith formal performance reviews 125 Preparing for formal review meetings 135 Self-assessment 137 Conducting a formal performance review meeting 139
11. Analysing and Assessing Performance 142
Evidence-based performance management 143 Analysing performance 143 The process of rating 145 Rating scales 147 Forced distribution 151 Behaviourally anchored rating scales 154 Behavioural observation scales 155 Arguments for and against rating 156 Alternatives to rating 160 Conclusion 165
viii Contents
12. Coaching 166
Coaching defined 166 The process of coaching 167 Approach to coaching 168 Techniques of coaching 169 Coaching skills 171 Developing a coaching culture 171
Part IV Performance Management in Action 173 13. Performance Management Surveys 175
CIPD 175 E-reward 177 Houldsworth and Jirasinghe (2006) 178 Lawler and McDermott 179 The Institute of Employment Studies 180
The Work Foundation m 181
14. Performance Management Models 183
Astra-Zeneca company 184 CEMEX 184 Centrica 184 DHL 185 HalifaxBoS 186 Pfizer Inc , 186 Raytheon 186 Royal College of Nursing 187 Standard Chartered Bank 188 Victoria and Albert Museum 189 Yorkshire Water 189
15. Reactions to Performance Management 191
The focus groups 191 Focus groups: organization A (a financial services company) ' 193 Focus groups: organization B (a manufacturing company) 195 Focus groups: organization C (a call centre) 196 Focus groups: organization D (an oil exploration company) 200
Focus groups: organization E (a local authority) 203 Focus groups: organization F (a charity) 206 Overall comments on the focus group findings 208
16. The Impact of Performance Management 210
How performance management is expected to improve performance 210 Establishing the impact 211 Evidence from research 213 Conclusions 216
Part V The Application of Performance Management 217 17. Managing Organizational Performance 219
The process of managing organizational performance 219 The strategic approach to managing organizational performance 221 Business performance management systems 224 Organizational capability 226 Performance management and human capital management 227 Performance management and talent management 228 Developing a high-performance culture 228 Measuring performance 231
18. Managing Team Performance 239
Teams and performance 239 The performance of individual team members 240 Team competencies 240 Definition of a team 241 Performance measures for teams 241 Team performance management processes 243
19. Performance Management and Learning 246
Helping people to learn through performance management 246 Learning opportunities 247 Personal development planning < 248
20. Performance Management and Reward 250
Performance management and non-financial rewards 250 Performance management and pay 251
x Contents
Part VI Developing and Maintaining Performance Management 255 21. Developing Performance Management 257
The development framework 257 Stages of development 258 Contextual factors 259 Approach to development 260 Performance management development programme 262
22. The Performance Management Role of Line Managers 270
The performance management role of line managers 270 Issues with the performance management role of line managers 271 Addressing the issues 272 Gaining the commitment of line managers 273 Developing skills 275
23. Learning About Performance Management 277
The rationale for performance management 277 Contribution 278 Skills 278 Formal learning 278 Less formal learning 283
24. Evaluating Performance Management 284
Criteria 284 Method '•' 285 A typical approach 286
Appendix A Performance Management Toolkit 288 Appendix B Performance Management Case Studies 333 References 360 Subject Index 373 Author Index 379
