Performance Management, 5e

by Aguinis

ISBN: 978-1-948426-48-0 | Copyright 2023

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First, this edition includes important updates and additional information. In preparation for revising and updating this book, I gathered about 1,500 potentially relevant articles and books. About 100 of those sources are now included in this fifth edition. These sources have been published since the fourth edition of the book went into production and demonstrate an increased interest in performance management on the part of both academics and practitioners.

Second, there is an emphasis on the role of the context within which performance management takes place. Performance management does not operate in a vacuum. Rather, it takes place within a particular organizational context and organizations have a particular history, unwritten norms about what is valued and what is not (i.e., an organization’s culture), and unwritten norms about communication, trust, interpersonal relations, and many other factors that influence daily activities. Thus, for example, implementing an upward feedback system may be effective in some organizations but not in others (Chapter 8). As a second illustration, some organizations may have a culture that emphasizes results more than behaviors which, in turn, would dictate that the performance management system also emphasize results; instead, other organizations may emphasize long-term goals, which would dictate that performance be measured by emphasizing employee behaviors rather than results (Chapter 4). Also, we need to understand the contextual reasons why sometimes performance ratings may not be accurate—particularly if there is no accountability for raters to provide valid assessments (Chapter 6). As yet another example, cultural factors affect what sources are used for performance information: In a country like Jordan, whose culture determines more hierarchical organizational structures, the almost exclusive source of performance information is supervisors, whereas employees and their peers almost have no input. This situation is different in countries with less hierarchical cultures in which not only performance information is collected from peers but also supervisors are rated by their direct reports (Chapter 6). To emphasize the role of national culture, this edition describes research conducted in organizations in the United States and Canada, but also in Jordan, Japan, China, Turkey, Eritrea, Germany, Spain, South Korea, Mexico, Australia, the United Kingdom, Brazil, India, and others.

Third, this edition describes two key roles played by the HR function: strategic partner and internal consultant. Regarding the first role, the HR function is unfortunately often vilified as being merely operational and not able to think or act strategically. Well, over the past two decades or so, an entire new field of research has emerged and it is called strategic human resource management. Strategic human resource management is about planning and implementing HR policies and activities with the goal of enabling an organization to achieve its strategic goals.9 Performance management is an ideal vehicle to demonstrate the strategic role of the HR function because it allows for explicit and clear linkages between an organization’s mission, vision, and objectives and individual and team performance. By helping implement a successful performance management system, the HR function can get a “seat at the table” of the top management team. In fact, the few current or former CEOs with HR background, including Lisa M. Weber at MetLife, Nigel Travis at Dunkin’ Brands Group, Samuel R. Allen at John Deere, James C. Smith at Thomson Reuters, Steven L. Newman at Transocean, and Mary Barra at General Motors, have been able to serve as strategic partners, which is in large part what propelled their trajectory from an HR role to the very top of their organizations. Second, the HR function serves as an internal consultant for all organizational members participating in the performance management system. For example, it offers advice on how to measure performance, resources in the form of training opportunities, and can also lead the strategic planning process. So, although the HR function is certainly not the “owner” of the performance management system, it adds value by playing a key role in its design and implementation.

Fourth, this edition highlights important changes in the nature of work and organizations and how these changes have a direct impact on the design and implementation of performance management systems. These changes involve globalization, technology, and demographics. Regarding globalization, consider the example of a firm that is based in the United States, does its software programming in Sri Lanka, its engineering in Germany, its manufacturing in China, and has a call center in Brazil. How do we design a successful performance management system that takes into account the fact that employees work together across time zones on a daily basis without having ever met in person—although they have regular interactions using Zoom? Regarding technology, companies are now able to gather employee data that was simply unimaginable just a few years ago—what is usually called “Big Data.” For example, the use of GPS allows companies to track the location of its salesforce real-time 24/7. Also, Web and mobile access allow employees to provide and receive feedback on an ongoing basis from anywhere and at any time. The availability of data as well as AI offers almost unlimited opportunities to measure different facets of performance but also creates challenges and the need to understand the difference between “Big Data” and “Smart Data.” Third, regarding team work, there is hardly any job that is done without working with others. These changes highlight the importance and pervasiveness of teams and the need for a performance management system to include a formal team management component—as well as consider different types of teams such as virtual teams. Fourth, regarding demographic changes, because baby boomers are retiring in large numbers, members of Generation X, Generation Y or Millennials, and Generation Z or Post-Millennials are now entering the workforce in large numbers. Gen X and Gen Y employees are “digital natives” and are used to immediate feedback—just like when receiving a grade immediately after completing a Web-based exam in high school and college. A performance management system must consider generational differences to be successful. 

Fifth, this edition emphasizes that knowledge generated regarding performance management is essentially multidisciplinary. Accordingly, the sources used to support best-practice recommendations offered in this book come from a very diverse set of fields of study ranging from micro-level fields focusing on the study of individuals and teams (e.g., organizational behavior, human resource management) to macro-level fields focusing on the study of organizations as a whole (e.g., strategic management, accounting, information systems, engineering). This is consistent with a general movement toward multidisciplinary and integrative research in the field of management.10 For example, best-practice recommendations regarding performance management analytics originate primarily from industrial and organizational psychology (Chapter 5). On the other hand, best-practice recommendations regarding the relationship between performance management and strategic planning were derived primarily from theories and research from strategic management studies (Chapter 3). In addition, much of the best-practice recommendations regarding team performance management originated from the field of organizational behavior (Chapter 11).

Sixth, this edition emphasizes the important interplay between science and practice. Unfortunately, there is a great divide in management and related fields between scholars and practitioners. From the perspective of scholars, much of the work conducted by practitioners is seen as relevant but not rigorous. Conversely, from the perspective of practitioners, the work done by scholars is seen as rigorous but mostly not relevant. This “science-practice divide” has been documented by a content analysis of highly prestigious scholarly journals, which regularly publish research results that do not seem directly relevant to the needs of managers and organizations.11 This edition attempts to bridge this divide by discussing best-practice recommendations based on sound theory and research and, at the same time, discussing the realities of organizations and how some of these practices have been implemented in actual organizations.

Seventh, this edition, like its predecessor, describes the technical aspects of implementing a performance management system in detail. In addition, this edition emphasizes the key role that interpersonal dynamics play in the process. Traditionally, much of the performance appraisal literature has focused almost exclusively on ratings and the measurement of performance—for example, whether it is better to use five-point versus seven-point scales. However, more recent research suggests that issues such as trust, politics, leadership, negotiation, mentorship, communication, and other topics related to interpersonal dynamics are just as important in determining the success of a performance management system. Accordingly, this edition discusses the need to establish a helping and trusting relationship between supervisors and employees (Chapter 9), the role of an organization’s top management in determining the success of a system (Chapter 3), and the motivation of supervisors to provide accurate performance ratings (Chapter 6), among many other related issues throughout the book.

Eighth, this edition includes “company spotlight” boxes in every chapter. These application boxes are important because they serve the purpose of illustrating the concepts described in each chapter using contemporary examples. Also, these boxes will allow you to see how performance management is “done in real organizations” as well as allow you to think about some thorny and, in some cases, unresolved issues. Some of the organizations featured in this fifth edition include The Gap, Sears, Nike, Adobe, U.S. Department of Defense, Accenture, Goldman Sachs, Google, Airbnb, Facebook, Netflix, Microsoft, Salesforce, Dollar General, Intermex, BT Global Services, Accenture, Deloitte, GE, Nokia, and many others—including several less-known SMEs.

Ninth, this fifth edition includes new hands-on “Exercises” at the end of each chapter. These hands-on exercises will make learning the material more fun and also enhance the pedagogical experience of your course. In total, this edition includes 22 exercises (i.e., two per chapter).

Finally, this new edition includes two case studies in each chapter, also for a total of 22. One case in every other chapter has been updated. In addition, the instructor’s manual includes several more cases per chapter, for a total of about 40 additional ones. Thus, depending on an instructor’s preference, a course based on this new edition could be taught entirely following a case format, experiential format, lecture format, or a combination of the three.

  • Each of the chapters includes updated content and material and new sources.
  • This edition includes new “Company Spotlights” boxes in every other chapter, featuring leading companies such as Nike, Accenture, Goldman Sachs, Google, Facebook, Netflix, Microsoft, Salesforce, Nokia, and many others.
  • This new edition also includes a new case study in every other chapter.
  • Expanding upon improvements in the previous edition, this fifth edition describes the key “strategic partner” and “internal consultant” role played by the HR function in the design and implementation of the performance management system.
  • There is an emphasis on the changing nature of work and organizations, including globalization, technology and Big Data, teamwork, AI, and demographics (e.g., generational differences), and how these changes affect the design and implementation of performance management systems.
  • Similar to its predecessor, this fifth edition emphasizes that knowledge generated regarding performance management is essentially multidisciplinary.

Chapter Specific Changes

Chapter 4: New section on competency architectures. A competency architecture offers a set of rules to guide the selection of competencies and proficiency levels required for every job profile in a firm. This new section describes four types of competencies: (1) core, (2) job family, (3) technical or professional, and (4) leadership. The new material describes the benefits of designing and implementing a competency architecture such as alignment, fairness, and continuity.

• Chapter 5: New material on how AI is increasingly being used to measure performance and identify talent. While the use of AI is still nascent, this new material describes this increasing trend that is here to stay and how firms are already delegating several responsibilities to AI. This section describes that the performance management activities that can be enhanced by AI include identifying high and low performers, recognizing workers’ strengths, hiring, measuring employee engagement, and retention.

• Chapter 9: New section on why and how to stay connected with ex-employees. This new material describes that whenever managers need to make the tough call, they should ensure they manage the exit of employees properly so the relationship is not broken and they can stay connected with ex-employees. Some of the long-lasting benefits of keeping these ties include (1) potential clients, (2) future business partners, (3) brand ambassadors, and (4) rehires.

• Chapter 9: New section on the need for leaders to also receive coaching. This new section explains that with an increase in managers’ workloads, leaders tend to not find the time to develop their own skills. Leaders need training on hiring the right team members, motivating and developing them, evaluating both individual and team dynamics, resolving conflicts, and developing partnerships. They must also develop self-awareness and avoid becoming one of the four types of bad leaders: (1) micromanagers, (2) neglectful managers, (3) bully bosses, and (4) divisive bosses.

• Chapter 10: New section on what to do when employees reach the top of their salary bands. This new material discusses the need for leaders to control salary growth by ensuring that their salary structure is not so rigid that top performers are forced to leave the firm if they are offered better compensation elsewhere. To avoid the departure of critical employees, the new material describes the need for leaders to engage in proactive career discussions. To make sure these conversations are effective, they should involve good planning, looking for potential solutions, being aware of unique circumstances, analyzing the frequency of cases, and crafting a policy for the future.

Dr. Herman Aguinis is the Avram Tucker Distinguished Scholar, Professor of Management, and Chairperson of the Department of Management at the George Washington University School of Business. He has been elected for the presidency track of the Academy of Management (AOM), served as program chair for the AOM 2020 Virtual Conference and as AOM president in 2021–2022. The Web of Science Highly Cited Researchers Reports has ranked him among the world’s 100 most impactful researchers in economics and business every year since 2018. He has been a visiting scholar at universities in the People’s Republic of China (Beijing and Hong Kong), Malaysia, Singapore, Argentina, France, Spain, Puerto Rico, Australia, and South Africa. His research, teaching, and consulting activities focus on the acquisition and deployment of talent in organizations.

Dr. Aguinis has published ten books, including Applied Psychology in Human Resource Management (with Wayne F. Cascio, 8th ed., 2019, Sage), Performance Management for Dummies (2019, Wiley), and Regression Analysis for Categorical Moderators (2004, Guilford). In addition, he has written about 200 refereed journal articles. Dr. Aguinis is a Fellow of the Academy of Management, American Psychological Association, the Society for Industrial and Organizational Psychology, and the Association for Psychological Science. He has served as president of the Iberoamerican Academy of Management, division chair for the Research Methods Division of the Academy of Management, and editor-in-chief for the journal Organizational Research Methods. He has delivered about 300 presentations and keynote addresses at professional conferences, delivered more than 160 invited presentations in all seven continents except for Antarctica, raised about $5 million for his research and teaching endeavors from private foundations and federal sources (e.g., National Science Foundation), and consulted with numerous organizations in the United States, Europe, and Latin America. He has received several career contributions awards, including the Losey Award by the Society for Human Resource Management Foundation for lifetime achievement in human resource research, Academy of Management Research Methods Division Distinguished Career Award for lifetime contributions, Society for Industrial and Organizational Psychology Scientific Contributions Award for lifetime contributions, Academy of Management Practice Theme Committee Scholar Practice Impact Award recognizing outstanding impact on policy making and managerial and organizational practices, Academy of Management Entrepreneurship Division IDEA Thought Leader Award, and International Council for Small Business Global Leadership Excellence Award in Support of MSMEs. His research has been featured by The Economist, Forbes, BusinessWeek, National Public Radio, USA Today, Univision, and other media. For more information, please visit

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Table of Contents (pg. vii)
Preface (pg. xiv)
Chapter 1 Performance in Context (pg. 2)
Chapter 2 Performance Management Process (pg. 35)
Chapter 3 Performance Management and Strategic Planning (pg. 59)
Chapter 4 Defining Performance and Choosing a Measurement Approach (pg. 90)
Chapter 5 Measuring Results and Behaviors (pg. 114)
Chapter 6 Performance Analytics (pg. 145)
Chapter 7 Rolling Out the Performance Management System (pg. 185)
Chapter 8 Performance Management and Employee Development (pg. 210)
Chapter 9 Performance Management Leadership (pg. 239)
Chapter 10 Perfromance Management, Rewards, and the Law (pg. 282)
Chapter 11 Team Performance Management (pg. 320)
End Notes (pg. 346)
Name Index (pg. 364)
Subject Index (pg. 367)