Performance management is one of the fundamental HR tools that has been part of organizational life for decades and has long been the backbone of other activities of the HR system (e.g., pay decisions, development plans). Despite the importance of performance management, it has historically been rated by employees, managers, and the HR function itself as one of the least effective and understood HR practices. Given the stagnation in academic research on the topic and discontent on the part of organizational stakeholders, we decided it was an opportune time to meet with leading companies to understand the state of the art in performance management. Specifically, we held two working group meetings with a total of 32 HR executives from 20 companies to discuss current challenges and best practices in the area of performance management. The discussions provided us with a deeper understanding of the dilemmas and challenges associated with performance management in large, multinational companies. We were also able to extract a handful of promising directions for enhancing the effectiveness of the performance management process

Bell, Bradford S

Collins, Christopher J

English

DigitalCommons@ILR

Cornell University ILR School 
DigitalCommons@ILR 
Articles and Chapters ILR Collection 
2012 
The State of the Art in Performance Management: Learnings from 
Discussions with Leading Organizations 
Bradford S. Bell 
Cornell University, bb92@cornell.edu 
Christopher J. Collins 
Cornell University, cjc53@cornell.edu 
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The State of the Art in Performance Management: Learnings from Discussions 
with Leading Organizations 
Abstract 
Performance management is one of the fundamental HR tools that has been part of organizational life for 
decades and has long been the backbone of other activities of the HR system (e.g., pay decisions, 
development plans). Despite the importance of performance management, it has historically been rated 
by employees, managers, and the HR function itself as one of the least effective and understood HR 
practices. Given the stagnation in academic research on the topic and discontent on the part of 
organizational stakeholders, we decided it was an opportune time to meet with leading companies to 
understand the state of the art in performance management. Specifically, we held two working group 
meetings with a total of 32 HR executives from 20 companies to discuss current challenges and best 
practices in the area of performance management. The discussions provided us with a deeper 
understanding of the dilemmas and challenges associated with performance management in large, 
multinational companies. We were also able to extract a handful of promising directions for enhancing 
the effectiveness of the performance management process. 
Keywords 
performance management, human resource management, organizations 
Disciplines 
Industrial and Organizational Psychology | Labor Relations | Performance Management 
Comments 
Required Publisher Statement 
© HR People + Strategy. Final version published as: Collins, C. J., & Bell, B. S. (2012). The state of the art 
in performance management: Learnings from discussions with leading organizations. People & Strategy, 
36(2), 50-52. Reprinted with permission. All rights reserved. 
Suggested Citation 
Collins, C. J., & Bell, B. S. (2012). The state of the art in performance management: Learnings from 
discussions with leading organizations [Electronic version]. Retrieved [insert date], from Cornell University, 
School of Industrial and Labor Relations site: http://digitalcommons.ilr.cornell.edu/articles/923 
This article is available at DigitalCommons@ILR: https://digitalcommons.ilr.cornell.edu/articles/923 
The State of the Art in Performance Management:  Learnings from Discussions with Leading 
Organizations 
 
Christopher Collins 
Bradford Bell 
Center for Advanced HR Studies 
ILR School, Cornell University 
 
Citation: 
Collins, C. J., & Bell, B. S. (2012).  The state of the art in performance management: Learnings from 
discussions with leading organizations. People & Strategy, 36 (2), 50-52. 
  
Performance management is one of the fundamental HR tools that has been part of organizational life 
for decades and has long been the backbone of other activities of the HR system (e.g., pay decisions, 
development plans).  Despite the importance of performance management, it has historically been 
rated by employees, managers, and the HR function itself as one of the least effective and understood 
HR practices.  Given the stagnation in academic research on the topic and discontent on the part of 
organizational stakeholders, we decided it was an opportune time to meet with leading companies to 
understand the state of the art in performance management.  Specifically, we held two working group 
meetings with a total of 32 HR executives from 20 companies to discuss current challenges and best 
practices in the area of performance management.  The discussions provided us with a deeper 
understanding of the dilemmas and challenges associated with performance management in large, 
multinational companies.  We were also able to extract a handful of promising directions for enhancing 
the effectiveness of the performance management process.   
Dilemmas and Challenges of Performance Management 
Across the companies that participated, there are several dilemmas and challenges that make it difficult 
to design the perfect performance management tool or system.  Although participants identified many 
issues, we highlight those that raise the greatest concern for organizations. 
First, performance management tools and outputs feed into multiple HR activities, including 
compensation and promotion decisions, employee development planning, and feedback and coaching, 
that use the information somewhat differently.  Not only does this make it difficult to design the ideal 
performance management tool, but expectations about how the tool will be used can also shape the 
attitudes and behaviors of managers and employees.  For example, managers are less inclined to give 
lower ratings or provide difficult feedback to their employees when performance data is used as inputs 
to determine bonuses, merit pay, or promotions.   In addition, employees are less likely to listen to and 
internalize developmental performance feedback when they are concerned that their rating will 
negatively affect their pay or promotion opportunities.  Often, because compensation decisions are a 
key part of the outcome of the process, managers tend to focus less on using the tool to drive effective 
feedback and developmental coaching conversations.  Research shows that coaching and feedback from 
leaders is a key driver of employee engagement, suggesting that focusing on compensation at the 
expense of feedback could be detrimental to driving higher employee engagement and potentially 
higher organizational performance. 
Second, the size, scope, and complexity of multinational firms can introduce inaccuracies or biases into 
the performance management process.  In global organizations, for example, performance is often 
defined differently depending on the maturity of the market, cultural differences can impact the ability 
or willingness of managers to have performance discussions with employees, and it can be difficult to 
calibrate performance ratings across the global enterprise.  In addition, the growing prevalence of 
matrix organizational structures, team-based work structures, and fluid employee role assignments, 
often necessitates that feedback be collected from a wider range of managers, employees, and internal 
or external customers.  However, this can place a significant time burden on managers or other raters 
and individuals who are more loosely connected to an employee might be reluctant to provide negative 
or highly detailed feedback.   
Third, the design of the tools, not to mention human nature, creates a high potential for inaccuracy and 
bias.  For example, rating scales often get in the way of effective discussions as neither employees nor 
managers feel comfortable using the lower end of the scale distribution.  In addition, the timing and the 
frequency of performance dialogues often creates challenges. For instance, the performance 
management process is often conducted close to year-end to facilitate using the results in compensation 
decisions, but this creates a time crunch as managers are focused on finishing other end-of-the-year 
activities.  The result is often an increase in errors or missing information.  Linking performance 
management to pay decisions also means that most companies conduct performance management 
reviews annually, which increases the tendency of managers to emphasize more recent outcomes and 
limits the likelihood of coupling feedback and performance discussions to goals or activities that occur 
throughout the year. 
 
Promising Directions for Improving Performance Management 
While there were rich discussions regarding a variety of interesting practices and new directions, we 
chose to focus on those activities and practices that we think hold the greater promise in addressing the 
dilemmas identified above.   
Leaders.  Managers are seen as key to improving the performance management process, and the 
greatest gains in effectiveness and accuracy will come from focusing more on leaders’ capabilities and 
motivation to effectively use the tools to provide feedback and coaching to the members of their teams.  
To help managers be more effective, organizations need to start with standard setting to increase 
understanding of the ratings, how to match them to observed behavior, and how to clearly link goals 
and objectives to outcomes.  If the standards are clear with clear behavioral anchors, it is easier for 
managers to rate performance and to have constructive conversations with their employees.  Accuracy 
and effectiveness of the tools also increase when managers are able to capture behavioral examples to 
support their ratings and facilitate performance conversations. 
Training can also help equip managers to conduct performance dialogues and answer difficult questions.  
Although formal training programs designed to teach managers how to have coaching, feedback, and 
development conversations are common, some companies have had success with workshops that allow 
managers to counsel each other on how to hold these dialogues.  It is also important to regularly 
reinforce the training, for example by including brief discussions about key principles of feedback during 
staff meetings.  The effectiveness of the training can be demonstrated by showing managers how their 
feedback and coaching capabilities tie to employee engagement scores.     
Additional Sources of Data.  Companies have been experimenting with obtaining data from additional 
sources besides managers to enhance the accuracy of data, reduce the burden on managers, and 
increase employee acceptance.  While employees are often asked to provide self-ratings, companies 
have found that this is only effective when employees have been sufficiently trained.  For example, 
training employees on how to write an effective, objective self-assessment can both save time and 
provide valuable input into the performance management process. 
In an effort to respond to the increasing complexity of work as well as improve the accuracy of 
performance data, companies are increasingly seeking additional information from peers and internal 
customers.   However, there are a number of factors that can influence the effectiveness of data 
gathered from these sources.  Input from other managers or peers will be more accurate and useful to 
the extent that it is part of the company culture – that is, everyone is expected to both participate in the 
process and provide honest and detailed feedback.  Employees are also more willing to give detailed 
feedback to others as they become more familiar with a tool and gain experience with the process.  
Further, the accuracy and depth of the feedback increase when performance questions are 
standardized, linked to goals, and framed from a positive developmental perspective (e.g., what could 
this employee do to improve their performance on a particular goal, behavior, or value).  Finally, the 
detail and accuracy of ratings can be influenced by the amount of time that employees have to input 
data and feedback.   As an extreme case, one company noted that they keep the tool open for four 
months, which enables managers and employees more time to provide feedback on a larger number of 
colleagues. 
Timing, Employees desire regular feedback and are hungry for information on what they are doing well 
and where they can improve. Companies that do a better job of providing their employees with this 
information, and do so more frequently, should see gains in employee motivation.  Accordingly, 
companies have created formal performance discussion sessions that managers and employees must 
conduct throughout the year that are separate from the formal evaluation that inform the 
compensation system.  These check-in performance dialogues enable managers and employees to 
revisit and refine goals, separate feedback from compensation decisions, and grow comfortable with 
having performance conversations. 
The Application of Technology.  Companies are increasingly looking to technology as potential means of 
increasing the accuracy and effectiveness of the performance management process.  For example, social 
media and mobile devices may serve as valuable tools for providing employees, particularly millenials, 
with real-time recognition and feedback.  At the same time, mobile applications present unique 
challenges, including potential legal and privacy issues as well as a risk that publicly available feedback 
can become positively skewed and artificial.     
One promising application of mobile technology is to use online systems to capture more frequent 
evaluations of employees and to create behavioral records. To streamline the process the entries could 
be limited to short descriptions that have a ceiling on the number of characters.  A less sophisticated 
alternative is to encourage managers to send themselves emails with employee observations and file 
them away for later use.  Both are good examples of event capturing – a means of capturing the essence 
of behaviors, outcomes, or performance throughout the year to increase the amount and accuracy of 
data and limit the bias associated with focusing performance reviews on only more recent events.  
Enhancing Employee Motivation 
In the end, it was clear from the data that we collected from our working groups that the process and 
systems for performance management will never be perfect.  If companies are looking to enhance the 
effectiveness of any performance management tool that they have in place, they should first remember 
that this is a tool to enhance employee motivation. So, below we share some insights gleaned into key 
drivers of employee motivation across the participating companies, and would encourage HR 
practitioners and leaders to keep these in mind as they think about their own performance management 
process. 
Meaningfulness: Employees’ decisions to join and remain with an organization are strongly influenced 
by the nature of the work and their belief in its value.  The meaning one’s work has on others within and 
outside the organization is sometimes quite evident and other times more obscured, but in any context 
it is important to acknowledge that meaningfulness is one of the foundations of employee motivation.  
Feedback: Employees desire regular feedback and are hungry for the information on what they are 
doing well and where they can improve. Companies that do a better job of providing their employees 
with this information, and do so more frequently, should see gains in employee motivation. 
Lifecycle: Participants noted that the motivational drivers for employees will change over the course of a 
person’s life, career, etc…  Some aspects of work can be customized to the individual (e.g., nature of the 
work, feedback) whereas others (e.g., compensation) need to be done at a higher level (e.g., group or 
unit). 
Manager accountability: Leaders have a tremendous impact on employee motivation and hence need 
to understand their reports and how to motivate different people. They need to be able to provide 
coaching in a non-threatening fashion so that employees internalize and act upon the feedback. 
Unfortunately, many managers were great individual contributors, but don’t have the capabilities 
needed to motivate others. Although training can help develop these capabilities, it is also important to 
ensure that those chosen for management have the capacity to motivate their followers. 


The State of the Art in Performance Management: Learnings from Discussions with Leading Organizations

Performance management is one of the fundamental HR tools that has been part of organizational life for decades and has long been the backbone of other activities of the HR system (e.g., pay decisions, development plans). Despite the importance of performance management, it has historically been rated by employees, managers, and the HR function itself as one of the least effective and understood HR practices. Given the stagnation in academic research on the topic and discontent on the part of organizational stakeholders, we decided it was an opportune time to meet with leading companies to understand the state of the art in performance management. Specifically, we held two working group meetings with a total of 32 HR executives from 20 companies to discuss current challenges and best practices in the area of performance management. The discussions provided us with a deeper understanding of the dilemmas and challenges associated with performance management in large, multinational companies. We were also able to extract a handful of promising directions for enhancing the effectiveness of the performance management process.Bell101_The_state_of_the_art.pdf: 1037 downloads, before Oct. 1, 2020

Bell, Bradford S.

Collins, Christopher J.

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