Rediscovering performance management:

systems, learning and integration

Aurel Brudan

Aurel Brudan is a PhD

Candidate at The University
of Melbourne, Melbourne,
Australia.

Summary
Purpose This paper sets out to explore performance management as a discipline and propose an
integrated performance management model.
Design/methodology/approach This conceptual paper aims to clarify what performance
management is and how it emerged as a discipline by tracking its evolution at strategic, operational
and individual levels. Structured as a review, it enables the rediscovery of performance management
and the identification of several key dichotomies, brought together under an integrated performance
management model.
Findings Three emerging approaches to performance management are presented as potential
catalysts to accelerate the evolution of this discipline: systems thinking, learning and integration. An
integrated performance management model is also proposed.
Research limitations/implications The paper draws on the consultancy and research experience of
the author. The generated model is conceptual in essence and needs to be tested. Further research on
the history of performance management as a discipline and the integration approach between
organisational levels is needed.
Practical implications The paper makes suggestions for improving performance management
governance the introduction of the Performance Management Office. It also suggests a higher
emphasis on learning and integration during the implementation and usage of performance
management systems.
Social implications By outlining the importance of systems thinking in managing organisational
performance, this paper highlights the need for encouraging its applicability and implementation
through systemic thinking. A higher emphasis on including elements of systems thinking in educational
curricula may be a possible step forward.
Originality/value The paper is relevant to both practitioners and academics, as it clarifies the existing
body of knowledge and provides a platform for future research
Keywords Performance management, Learning, Integration
Paper type Conceptual paper

Introduction
Compared to the natural sciences, such as physics and chemistry, human organisation or
administration is more loosely defined, some considering it a science and others an art.
However, both proponents of management as a science and as an art agree on its ultimate
role getting things done, or accomplishing desired goals. Hence performance
management has emerged over time as a discipline that assists in establishing,
monitoring and achieving individual and organisational goals.
The premise of this paper is formed by empirical observations of todays performance
management practice that outline several areas of imbalance and tension. Exploring these is
important especially since performance management is a relatively young, emergent
discipline.

DOI 10.1108/13683041011027490

VOL. 14 NO. 1 2010, pp. 109-123, Q Emerald Group Publishing Limited, ISSN 1368-3047

MEASURING BUSINESS EXCELLENCE

PAGE 109

One of these areas is the fragmented body of knowledge of performance management as a

discipline. The lack of standards regarding the definition, classification and usage of
specific tools make both research and application of performance management principles
difficult. Tension between the command and control style of thinking and systems thinking in
organisational managerial practice is another possible area of imbalance. The suitability of
using twentieth century command and control thinking in the interconnected world of the
twenty-first century is debated by many. A third area of tension in performance management
practice is the dominance of the measurement and rewards ethos as opposed to learning
and improvement. The focus on target achievement and rewards gave performance
management a negative halo effect, to the detriment of its knowledge and improvement role.
Clarifying and addressing such areas of imbalance and tension is necessary in order to
enable the establishment of more solid foundations for performance management as a
discipline.

1. Rediscovering performance management

Reviewing the emergence, definition and evolution of performance management at
strategic, operational and individual level is necessary as it would not be prudent to make
recommendations for the future of this discipline without analysing the past.
1.1 Definition of performance
A key expectation from management, at both organisational and individual level, is
measuring and managing performance. From idea to action and achieving desired results
there is a journey to take. Perhaps the most used term in everyday life to reflect the progress
of this journey and its results is performance. This is in line with the systems thinking view
that each system needs to fulfil a purpose. A system that achieves its purpose is considered
a system that performs as planned. However, performance is a difficult word to define,
due to the various interpretations of its meaning. As in the case of management, the term
performance can be used at various levels (personal performance, individual performance,
team performance, organisational performance), to express general achievement (such as
performance in sport), or to reflect a benchmark against peers.
The current meaning of the word performance as abridged from the Merriam-Websters
English Dictionary (n.d.) reflects its polyvalent nature:
1a: the execution of an action; b: something accomplished: deed, feat
2: the fulfilment of a claim, promise, or request: implementation
3a: the action of representing a character in a play; b: a public presentation or exhibition , a
benefit performance .
4a: the ability to perform: efficiency; b: the manner in which a mechanism performs , engine
performance .
5: the manner of reacting to stimuli: behaviour
6: the linguistic behaviour of an individual: parole; also: the ability to speak a certain language
compare competence.

The first entry in this list provides the most common use of the term in todays management
research and is closely related to the second entry. An interesting parallel can be drawn
between the third entry a public presentation that is commonly associated with
performance arts (i.e. a concert or a play) and a similar performance in a business,
political or social environment. In a way, corporate senior executives are actors performing
a play (managing), based on a script (corporate strategy) and using tools/instruments
such as the Balanced Scorecard (BSC), under the direction of the CEO.
1.2 Performance in management research literature
Management research literature contains at least three in-depth articles that analyse the
term performance and its use. Lebas (Lebas, 1995) characterizes performance as future
oriented, customized to reflect particularities of each organisation/individual and based on a

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causal model linking inputs and outputs. A performing business is one that will achieve the
objectives set by the managing coalition, not necessarily one that has achieved the
objective. Thus, performance is about both capability and the future (Lebas, 1995). For
Wholey (Wholey, 1996), measurement is necessary as performance is not an objective
reality, out there somewhere, waiting to be measured and evaluated, but a socially
constructed reality that exists in peoples minds, if it exists anywhere at all. It has diverse
interpretations and it may include: inputs, outputs, outcomes, impacts and relate to
economy, efficiency, effectiveness, cost-effectiveness, or equity. Both these articles
consider performance as being subjective and interpretative and ultimately linked to cost
related headings (Lebas, 1995; Wholey, 1996).
The meaning and content of the term performance in business performance research is
comprehensively discussed more recently in an article that outlines three priorities or
governance objectives of performance (Folan et al., 2007). First, performance needs to be
analysed by each entity in the boundaries of the environment in which it decided to operate.
For example a companys performance needs to be analysed in the markets the company
operates and not in the ones that are not relevant to its operations. Second, performance is
always linked to one or more objectives established by the entity whose performance is
analysed. Thus, a company is evaluating its performance based on the objectives and
targets set and accepted internally and not by the ones used by external bodies. Third,
performance is reduced to characteristics that are relevant and recognisable. For example,
characteristics such as the ability to use office stationary are irrelevant and
unrecognisable. To create optimal conditions for the achievement of desired
performance, these priorities need to be interrelated and well aligned.
1.3 Performance management and measurement
In scientific management, performance is associated with two key processes: performance
management and performance measurement. These two key processes cannot be
separated from one another and performance management both proceeds and follows
performance measurement.
Performance management is the overarching process that deals with performance. It
reflects the approach one entity has towards performance and it includes sub processes
such as: strategy definition (planning/goal setting), strategy execution, training and
performance measurement. Thus, performance measurement is a sub process of
performance management that focuses on the identification, tracking and communication
of performance results by the use of performance indicators. Performance measurement
deals with the evaluation of results, while performance management deals with taking action
based on the results of the evaluation and ensuring the target results are achieved
In management research the lines between performance management and measurement
are not clear, as various authors use their own criteria to define these terms and even use
them interchangeably.
After reviewing over 300 documents, a team of researchers from the Cranfield University
found only 17 definitions of the business performance measurement (BPM) concept, this
suggesting that authors do not generally define what they are referring to, when they use the
phrase BPM system (Franco-Santos et al., 2007). The authors go on to analyse these
definitions, the elements of BPM systems, characteristics, features and roles, outlining the
importance of having a clear understanding of performance management as a discipline for
the generalisability and comparability of research in this field.

2. A comprehensive picture of performance management

2.1 Evolution of performance management
Performance management as a discipline contains elements that closely link it to a multitude
of other disciplines and organisational capabilities: Strategy Management, Project
Management, Human Resources Management, Accounting and Psychology, to name a

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few. It is used in almost all scientific disciplines, as it is a subset of almost all human activities.
To explore these associations and to get a better understanding of the polyvalent nature of
performance management it is necessary to analyse its various facets in practice by
identifying the organisational levels of its use.
Traditionally, performance management in an organisational context has been divided into
three levels: strategic, operational and individual performance management. For a better
understanding of the differences between these various levels of performance management
an analysis of their evolution in time is necessary. The aim of such an analysis is to illustrate
their background, their common evolution milestones and put into context the current status
of performance management in management research.
Administrative science is a fundamentally subjective enterprise (Astley, 1985). Hence the
evolution of management in time was not linear, but constructivist, the key drive being
conceptualisation based on practice. Further, traditionally management research uses
nominalist ontology, supported by a social constructivist epistemology approach. As
performance management is considered to be a subset of administrative science, Astleys
notes on the evolution of the body of knowledge in this discipline are perfectly applicable to
the evolution of performance management at all levels. The corollary is that management in
general and performance management in particular evolved in time under the umbrella of
constructivism.

2.2 Individual performance management evolution

The traditional level at which performance management is used in organisations is the
individual level. Individual performance management is perhaps the level with the longest
evolution in history, as it mirrors the level of organisational maturity. The precise origin of
performance appraisals is not known but the practice dates back to the third century when
the emperors of the Wei Dynasty (221-265 AD ) rated the performance of the official family
members (Banner and Cooke, 1984; Coens and Jenkins, 2000).
In early times, organisations were loosely defined and their performance management focus
was based on individuals performing tasks as part of a group. Performance appraisals in
industry were most likely initiated by Robert Owen in the early 1800s (George, 1972). Owen
monitored performance at his cotton mills in Scotland through the use of silent monitors.
The monitors were cubes of wood with different colours painted on each visible side. They
were displayed above the workstation of each employee (Banner and Cooke, 1984; Wiese
and Buckley, 1998).
In time, more complex approaches emerged, mainly driven by the military, public
administration and industrial companies. They all needed a system of monitoring the
performance of numerous individuals to ensure a streamlined progression in the
organisational hierarchy. The main drivers in the evolution of individual performance
management were industrial psychologists, human resources managers, organisational
development and organisational behaviour consultants.
Development of performance appraisals in US industry began with early work in salesman
selection by industrial psychologists at Carnegie-Mellon University, who used trait
psychology to develop a man-to-man rating system. The army used this system during
the First World War to assess the officer performance. After the war, business leaders,
impressed by the achievements of the army researchers, hired many of the men who had
been associated with the work in man-to-man appraisals (Scott et al., 1941; Wiese and
Buckley, 1998).
In the 1970s in the USA and the 1980s to 1990s in Britain it was government legislation
concerning such things as equal opportunity, civil rights, etc. which compelled
organisations to adopt some sort of system. Performance management systems (PMS)
were used in the 1980s and 1990s as powerful tools for change to try to bring about change
in public sector culture and ethos (Furnham, 2004).

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In the 1990s individual performance management was reshaped by two key trends. The first
was the increase in popularity of self-assessment of performance, sometimes followed by
feedback sessions with line managers. The increase in performance self-assessment was
natural as economies were dominated by knowledge workers, more independent in regards
to decision making and management of work processes (Drucker, 1999a). The second key
trend in recent years was the integration between strategic performance management and
individual performance management facilitated by the introduction of tools such as the BSC.
Organisational goals became reflected in individual goals and individual measures became
aligned with organisational performance measures, in an effort to increase the accountability
of all employees to the execution of the organisational strategy.
2.3 Operational performance management evolution
Performance management at operational level is linked to operational management, as its
focus is the achievement of departmental or group objectives. Although it is aligned with
corporate strategy, its focus is more functional. Scorecards and Dashboards are some of the
key tools used. For example Human Resources (HR) Dashboards are used to collect and
analyse a variety of HR management indicators that guide the management decisions of HR
departments. Only a handful are generally represented in the strategic performance
management system, at organisational level. Similar tools in other functional areas are
Marketing Scorecards, Portfolio Dashboards and Supplier Scorecards. A wide variety of
operational performance management tools are also used by Finance departments, where
management accountants generate a financial reports used to guide performance
management decisions at operational level.
The evolution of operational performance management is linked to the evolution of
accounting and management. This is due to the fact that operational performance is
traditionally evaluated in terms of efficiency and effectiveness. And the easiest way to do this
is by using financial indicators, provided by the accounting function in organisations. For
example in the thirteenth century, the performance of a Venetian sailing expedition used to
be defined as the difference between the amount of money invested by the ship owner(s)
and the amount of money obtained from selling all the goods brought back by the ships
captain (Lebas, 1995). However it was only in the early nineteenth century when the
distinction between the function of owners and managers arose, setting the stage for
management processes as an identifiable and separate activity (Dainty and Anderson,
2008; Johnson, 1972, 1975, 1978, 1981).
Thus in the first decade of the twentieth century, Frederick Taylor developed the concept of
scientific management (Drenth et al., 2001). This was based on the analysis of existing work
methods through observation and measurement. Taylors ideas were advanced by many
others including Frank and Lillian Gilbreth, who developed the concept of time and motion
studies, which required the measurement of every single movement undertaken by a worker
in the course of their work (Radnor and Barnes, 2007). The tableau de bord has been quite
popular in France ever since its introduction in 1930s, as a dashboard used by managers
to monitor the operational performance of their organisations (Bessire and Baker, 2005).
Although the majority of the large companies in France were using it, due to the limited
availability of translated literature it had a minimal overseas diffusion (Bontis et al., 1999).
Over time, as internal and external operating environments became more complex,
organisations started to look at non-financial indicators of performance. This made the
connection with operations management and other aspects of the general management
discipline. The Japanese quality management philosophy emerged in early 1950s to form
the roots of todays performance management theories and rules (Busi and Bititci, 2006).
Statistical techniques were based on the work of a number of Americans most notably
Deming (Deming, 1982), Juran (Juran and Gryna, 1980) and Shewhart (Shewhart, 1980)
who had been largely ignored by their compatriots, but whose ideas had been
enthusiastically taken up in post war Japan. The advent of total quality management
(TQM) increased operations managements concern to improve effectiveness and
responsiveness. This, in turn, lead to the introduction of customer-based measures. Such

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an example is the General Motors system of performance measures, the development of

which culminated in the 1970s (Johnson and Kaplan, 1987). It included several non-financial
indicators and can be seen as the forerunner of the BSC approach.
In the late 1980s and early 1990s, this dissatisfaction (with traditional backward looking
accounting based performance measurement systems) led to the development of
balanced or multi-dimensional performance measurement frameworks (Bourne et al.,
2000).
The rise of business intelligence software products over the last ten years had a profound
impact on how companies manage their operational performance. Enterprise resource
planning software (SAP, Oracle, etc.), combined with business intelligence software
(Business Objects, Hyperion, Cognos, etc.) enabled companies to reach new levels of data
integration, by making the data gathering and reporting process more streamlined.
Availability of performance reports widened to employees across the organisation and not
just to a limited number of employees, as it was before. Reporting becomes more complex,
with data streams enabling live reporting via dashboards and scorecards of performance
indicators. Users of such performance reports are able to customise them by slicing and
dicing the reported data.
2.4 Strategic performance management evolution
At strategic level, performance management deals with the achievement of organisational
objectives. Practitioners refer to it as corporate, business or enterprise performance
management, this being the highest and most complete level of usage of performance
management principles in organisations. Corporate performance management as a term
was born to differentiate between the individual and organisational levels of performance
management (Bourne et al., 2003).
The key processes related to strategic performance management systems are strategy
formulation and execution, both subsets of strategic management. The most popular tools
are the BSC and the Performance Prism (Neely et al., 2002). There are, however, numerous
other frameworks and quality awards, such as the Baldrige Award and the European
Foundation for Quality Management (EFQM) Excellence Model, used to guide the
achievement of organisational goals.
At strategic level, performance management as a discipline has a short history becoming
established only in the twentieth century. It was driven mainly by strategic management and
organisational behaviour practitioners. A turning point in the evolution of strategic
management and strategic performance management was Druckers publication of
Concept of the Corporation (Drucker, 1946). Interest in strategy as an area of management
study followed the diffusion of strategic planning (long-range planning) among large
companies during the 1950s and 1960s. Articles on long-range planning began appearing
in the Harvard Business Review during 1956-1961 (Ewing, 1956; Wrap, 1957; Payne, 1957;
Platt and Maines, 1959; Quinn, 1961). By 1965 the first systematic, analytically based
frameworks for strategy formulation appeared (Ansoff, 1965; Learned et al., 1965). In 1951,
Ralph Cordiner, the CEO of General Electric, commissioned a high-level task force to identify
key corporate performance measures. The effort had only a modest effect because the
measures believed to determine the companys stock price, to which incentives were tied,
were all financial: earnings per share, return on equity, return on investment, return on sales,
and earnings growth rate (Eccles, 1991).
As strategic management developed as an area of academic study, interest in companies
strategic planning practices waned. By the 1980s empirical research in strategic planning
systems focused upon just two areas: the impact of strategic planning on firm performance
and the role of strategic planning in strategic decision making (Grant, 2003). The first area
spawned many studies but no robust findings:
The results of this body of research are fragmented and contradictory (Ramanujam et al., 1986).

A survey-based research concluded:

The overall effect of planning on performance is very weak (Boyd, 1991).

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The mid-1990s witnessed a performance management revolution (Eccles, 1991; Neely,

1998, 1999), lead by the introduction and metamorphosis of the BSC. Kaplan and Norton
popularised the BSC, presenting the concept as a performance measurement tool, used by
organisations at to capture besides the financial measures, the value-creating activities from
an organisations intangible assets (Kaplan and Norton, 1992). A year later, in a new article,
they made the first references about the connection between performance metrics and
strategy (Kaplan and Norton, 1993). By 1996, the BSC was labeled as a strategic
performance management system, which formed the basis of a rallying framework for
strategic processes, resource allocation, budgeting and planning, goal setting and
employee learning (Kaplan and Norton, 1996). The shift towards a more strategic use of the
BSC was confirmed in a new article published in 2000 (Kaplan and Norton, 2000). The
following year, their second book (Kaplan and Norton, 2001) shined more light on the move
to use the BSC as an all encompassing strategic management and control system. By 2008,
the BSC is clearly positioned as a tool used as part of a wider management system used to
drive strategic planning, operational execution, feedback and learning (Kaplan and Norton,
2008). Thus, over a span of 16 years, the BSC evolved from a measurement tool, to a
management tool, to a system and then to a tool within a system, thus completing a full circle.
This demonstrates that the separation between performance measurement and
management in a research context must be carefully considered for each research article
on these topics and filtered through the most recent changes in this field as some literature is
outdated. Some authors use performance measurement to refer to what by todays
standards is considered performance management and vice versa. Overall, the BSC, as the
most popular system used for strategy execution is today the icon of strategic performance
management.
An emerging systems-based approach to strategic performance management is
represented by strategy dynamics. Strategic management dynamics is concerned with
understanding and managing performance through time, focusing on the factors that
explain why performance is as it is today, and how it might be managed into the future
(Warren, 2008). The vital tenet of this resource based performance management system is
the suggestion that the only way management can affect strategic performance is by actions
that affect resource flows (in or out). Thus informed actions require tracking of resource
levels, flows and performance over time. Such changes in the way in which performance
management systems are perceived and used require a shift in the mindset of performance
management practitioners from command and control thinking to Systems Thinking, from
measuring for rewards to measuring for learning and from dispersed organisational
performance management to an integrated approach.

3. Key directions for the future of performance management

3.1 Command and control and systems thinking
Analysing the history of performance management illustrates that its evolution for most of the
twentiethh century was driven by command and control and mechanistic thinking (Seddon,
2008). This type of thinking emerged as simple solutions to respond to the needs of the
social, technological and economical environment of those times. A mostly uneducated
workforce and ever-increasing demand from customers focused priorities on volume,
standards and control through product standardisation, work process specialisation and the
use of targets. This approach suited both the profile of the workforce, which contained a low
number of educated agents and the limited understanding of organisations as entities,
enabling considerable increases in productivity. Managers set targets for employees and
monitored their achievement using a command and control approach. Performance
management was mostly driven by financial indicators and production quotas, used for
checking if people were completing their tasks as assigned by managers.
Environmental conditions today are very much different. Customer needs are more diverse
and work is more complex. The workforce is more educated, more mobile and has different
aspirations. Also, the concept of organisation/corporation has matured beyond the initial
presentation of the concept in mid-1950s by Peter Drucker. The nature of work has changed

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from mechanical work in most of the production facilities to knowledge work in the services
industry. In this regard, at the beginning of the twentieth century the majority of industrial
workers were involved in the production of sub-components and their assembly in a finite
product (Ackoff, 1993). Automation of industrial work and the growth of the services sector
dramatically transformed the socio-economic landscape. Thus by the beginning of the
twenty-first century the vast majority of the workforce is active in technology intensive,
services industries, which involve human interactions, stakeholder management and
regular, fast decision making made by each employee (Drucker, 1999b). Performance
management frameworks have been slow to adapt, most of them still emphasizing financial
measures and a command and control approach, based on monitoring the achievement of
targets. There are numerous instances in organisations of conflicting priorities and targets
within the same organisation and ineffective performance management due to too much
emphasis on managerial control.
Command and control thinking sees organisations as top-down hierarchies, where
managers make decisions using budgets, standards and targets. Work is specialised in
functions that complement each other, however are not completely integrated. Workers are
controlled with an ever increasing array of management tools and practices rules,
specifications, procedures, inspections, performance management reviews, etc.
An alternative to command and control/mechanistic thinking is systems thinking which
became popularised by The Fifth Discipline (Senge, 1990). Systems Thinking promotes a
holistic approach to managing organisations. Organisations managed as systems and not
as functional hierarchies put people at the heart of the enterprise, in control, enabling them to
contribute, rather than being controlled (Seddon, 2008). If staff members control the work,
they need managers to be working on the things beyond the control of the workers which
affect the system conditions the way the work works.
A systems thinking approach to performance management focuses on the definition of the
system, its purpose and the measuring of how its purpose is achieved. Instead of an isolated
approach, the focus is on integrating all components of the system and mapping the
relationship between them in addressing and satisfying demand. Systems thinking places
more focus on the learning and human relationships in organisations, in line with Theory Y of
Douglas McGregor (Eccles et al., 2003). Such an approach requires new personal and
professional skills from a workforce already entrenched in a command and control mentality.
This is one of the reasons why a direct shift from command and control to systems thinking
will be difficult for organisations. Depending on organisational capabilities and the
internal/external conditions, command-and control might be more appropriate for some
organisations (such as the army and the public service, as they are slower to change), while
systems thinking for others (such as the ones operating in manufacturing and ecommerce).
Alternatively, an approach that balances both might be a suitable first step towards
improved organisational performance management systems.

3.2 From performance management for control to performance management for learning
Traditionally, organisational performance management has been concerned with control, by
setting and monitoring achievement of targets at strategic, operational and individual levels.
Measurement has its benefits, as it provides valuable information and measuring in itself
stimulates higher performance. The Hawthorn effect and the Westinghouse effect or
Observers paradox (Cukor-Avila, 2000) demonstrate the delicate nature of the measuring
process and the impact that measurement itself has on the results.
However, measurement for rewards leaves room for interpretation in the process of setting
targets and measuring results and quite often leads to abuse. Using targets for control and
linking the achievement of these targets to individual performance has the risk of staff
members manipulating the system to their benefit and the expense of other teams and even
the entire organisation. Further, proponents of the knowledge management/intellectual
capital school of thought argue that:

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the main problem with all measurement systems is that it is not possible to measure social
phenomena with anything close to scientific accuracy (Sveiby and Armstong, 2004).

They invoke Heisenbergs uncertainty principle to illustrate the inherent imprecision in

measurement that exists even in exact sciences such as physics. The principle states that
uncertainties, or imprecision, always turn up if one tries to measure the position and the
momentum of a particle at the same time (Cassidy, 1993, 1998). Neils Bohr famously stated
that:Accuracy and clarity of statement are mutually exclusive (for further details see Pais,
1994).The alternative proposed to measurement for control is measurement for learning, as
illustrated in Table I.
Empirical evidence shows that the focus on measurement for control in the context of
performance management has started to diminish in the 1990s, driven by the increase in
popularity of the BSC, knowledge management and systems thinking (Neely, 1999). As
illustrated above, even the BSC was first presented in 1992 as a measurement tool,
promoted by the management accounting school and having roots in the quality movement.
The first Balanced Scorecard was developed in 1987-1988 at Analogue Devices, by their
Quality and Productivity team (Schneiderman, 1999). However it gradually evolved to
become a complete management system supporting strategy execution as a core
competency. As a performance management tool, the BSC enables not only measurement
and control, but also communication and learning.
Thus the systems thinking approach to performance management, coupled with the
emphasis on learning, highlight the need for an integrated approach to performance
management. Effective performance management requires more than measuring and
reporting in isolation.
3.3 Integrated performance management
Practice shows that communication and integration between the three levels of
organisational performance is limited. Personal empirical observations illustrate that in
general, strategic performance management efforts are lead by the executive team,
operational performance management by group managers and individual performance
management by the HR department, mostly with limited interaction between them, if at all.
This can be attributed to various constraints, both general to the discipline itself and specific
to organisations. Management does not see performance management as an integrated
discipline used at various organisational levels, but as a subcomponent of strategic,
operational and HR management respectively. An integrated approach, linking together all
levels of performance management becomes a necessity for both research and practice to
facilitate the understanding and usage of performance management systems.
The typology analysis of performance management levels is outlined in the Table II.
Table I Measurement for control compared to measurement for learning
Characteristic

Measurement for control

Measurement for learning

Measurement drivers
Measures development
Measurement role

Management
Top-down commands
Measuring and managing work in functional
activities.
Productivity output, targets, standards: related to
budget
Restricted
Budget/political aspirations
Rewards, punishment and action to improve
results
Single loop
Link to individual rewards and recognition system

Employees
Process-oriented bottom-up approach
Measuring and managing the flow of work
thought the system
Capability, variation: related to purpose

Measurement focus
Results communication
Target driven by
Follow-up to results
Learning cycle
Link to rewards

Open
Understanding achievement versus purpose
Dialogue and improvement
Double loop learning
Group rewards, based on improvement

Source: Author (2009)

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Table II Grouping of performance management levels

Grouping by organisational responsibility

Grouping by measurement focus

Grouping by direct visibility and impact

Organisational
mandate

Organisation

Indirect personal
impact
Direct personal impact

Strategic
operational
individual

Strategic
operational
Individual

Individual

Strategic
Operational
individual

Source: Author (2009)

Integration between the three organisational performance management levels thus needs to
extend to the theory that supports them. Their analysis is important for clarifying the
relationships between each performance management level.
Performance management research is multidisciplinary, being informed by a varied group of
complementary disciplines and corresponding theories. Strategic Management, Operations
Management, Human Resources Management, Organisational Behaviour, Information
Systems, Marketing, Management Accounting and Control are all contributing to the field of
performance measurement. Table III groups levels and theories in two different views,
supported by corresponding themes:
First, there is a macro view, whose corresponding theme outlines a systemic approach to
organisational management. This is supported by organisational theory (Jones, 1995),
contingency theory (Fiedler, 1964; Donaldson, 2001) and systems theory (von Bertalanffy,
1973) as interrelated theories covering the structural aspects. Systems theory, includes a
series of variations such as General Systems Theory (Von Bertalanffy, 1956), Dialectical
Systems Theory (Mulej, 1976), Critical Systems Thinking (Flood and Jackson, 1995), or
Viable Systems Theory (Beer, 1984 and 1985). Goal setting theory (Locke, 2004), also
supports the organisational performance aspect.
Second, there is a micro view, whose corresponding theme is behavioural and
methodologically individualistic. One theory informing this micro view is principal-agent
theory or agency theory (Eisenhardt, 1989; Laffont and Martimort, 2002). Underlining the
learning aspects of performance management is social learning theory (Bandura, 1977,
Ormrod, 1999). The main theory informing individual performance management is
goal-setting theory (Locke and Latham, 2002), one of the most effective motivational
theories. While goal setting theory is generally analysed at individual level, its principles are
considered relevant at organisational level, being effective for any task where people have
control over their performance (Locke, 2004). Research in this field currently explores goal
setting theory at both individual and organisational level.
In organisational context, personal empirical observations highlight that the goals of
individuals, teams and the entity as a whole can be in conflict. Goal conflict can motivate
incompatible actions and this has the potential to impact performance. Thus, alignment
between individual goals and group goals is important for maximising performance. By
Table III Performance management levels, corresponding theories and themes
Level

View

Theory

Theme

Strategic performance management

Macro

Organisational theory
Contingency theory
Systems theory
Goal setting theory
Goal setting theory
Agency theory
Social learning theory

Systemic approach to organisational

management

Operational performance management

Individual performance management

Micro

Source: Author (2009)

PAGE 118 MEASURING BUSINESS EXCELLENCE VOL. 14 NO. 1 2010

Behavioural and methodologically

individualistic

linking the three levels of performance management and the theories informing them, an
integrated view of performance management emerges as a model for both research and
practice (see Figure 1).
This proposed integrated view to performance management has the potential to assist
individuals and organisations to better understand and align these levels and create a
complete, holistic picture of performance that outlines the relationship between
organisational and individual performance.
Grouping organisational performance management levels in an integrated model has
implication not only for the theory, but also in practice. The Office of Strategy Management
is promoted in the BSC literature as a central point of coordination of the strategic control
processes in organisations (Kaplan and Norton, 2001). However, if operational and
individual performance processes are not brought under the control of such an entity, an
integrated approach is difficult to realise. A Performance Management Office, similar to the
Project Management Office may be a more robust approach to integrating and aligning
performance in organisations.

Conclusions
Performance management is a ubiquitous term in todays business environment. It is
embedded in the body of knowledge of various disciplines and it is used at all organisational
levels. However, due to the constructivist evolution of performance management theory and
practice and its multidisciplinary nature, there is a high degree of fragmentation in this field.
While performance management continues to evolve as a discipline, it is important that in
parallel with proposing new ideas to the academic and practitioners community,
researchers reanalyse past assumptions and the soundness of the existing body of
knowledge. This paper has illustrated that clarity around definitions, taxonomy, scope and
historical evolution are important pillars for performance management research and
practice.
Reviewing performance management from its origins enables the rediscovery of this
discipline and the identification of several key dichotomies, brought together under an
emerging integrated approach, as illustrated in Table IV.
As a conceptual research paper, the focus of enquiry is on identifying patterns in a vast set of
data and proposing new ways to look the discipline of performance management. Further
research is required to identify if and how this improved understanding of performance
Figure 1 Integrated performance management model

Relevant theories

Organisational theory
Contingency theory
Systems theory
Goal setting theory

Organisational theory
Contingency theory
Systems theory
Goal setting theory

Agency Theory
Social learning theory
Goal setting theory

Organisational levels

Strategic/Organisational
Performance Management

Bridging the gap

New approach to Performance Management:
Integrated
Systems thinking focus
Intervention at organisational level
Learning as a key driver
Integrated Performance Management Approach
1. Performance Management for learning
and goal achievement
2. Performance education
3. Use of the Performance Management
Office for integration and alignment
4. Combination of systems and command
and control approach to performance

Operational/Functional/Team
Performance Management

Individual
Performance Management

Source: Author (2009)

VOL. 14 NO. 1 2010 MEASURING BUSINESS EXCELLENCE PAGE 119

Table IV Current and emerging approach to performance management

Element of analysis

Traditional dominant practice in performance

management

Emerging approach to performance

management

School of thought

Dominance of command and control thinking

Main focus
Definition/levels integration

Focus on measurement, motivation and rewards

Unstructured approach to definition and levels of
performance management

Organisational governance

Fragmented organisational approach to

performance management

Discipline of study

Performance management studies dispersed in

a multitude of disciplines

A balanced approach, combining systems

thinking with command and control
Focus on learning and improvement
Integrated approach to performance
management, with clear definition and alignment
of strategic, operational and individual levels
Unified approach to organisational performance
management by using the Performance
Management Office as a centre of organisational
expertise
Aggregation of the performance management
body of knowledge in a coherent, independent
discipline

Source: Author (2009)

management and emerging integrated approach can be translated into better outcomes for
organisations. It needs to address questions such as:
B

How is performance management defined in todays business environment?

What are the patterns in the evolution of performance management as a discipline at

strategic, operational and individual level?

What is the value and what are the implications of integrating the governance for
strategic, organisational and individual performance in organisations?

What are the results of using a command and control framed performance management
system compared to a systems thinking based one?

What are the key value drivers of implementing and using a performance management
system in an organisation?

What are the main obstacles in implementing sustainable performance management

systems in organisations? How can they be overpassed?

The internal and external integration of performance management and the holistic view of its
interrelations with other disciplines and entities are key drivers of future research, on the path
consolidating its status as a standalone discipline.

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About the author

Aurel Brudan is a PhD Candidate at The University of Melbourne (Faculty of Economics and
Commerce, Department of Management and Marketing). His research topic is: Integrated
performance management: linking strategic, operational and individual performance.
Among his other research interests are areas such as: systems thinking, project
management and information management. An experienced Performance Architect, Aurel
has assisted organisations with their performance management initiatives for over eight
years, developing customised solutions in a variety of industries and functional areas.
Currently, he is the Managing Director of eab group, a management consulting company
specialising in organisational performance management. Under his leadership, eab group
has launched www.smartKPIs.com, an online database of performance measures and KPIs,
supported by a knowledge base and a global community of practitioners. Aurel Brudan can
be contacted at: a.brudan@pgrad.unimelb.edu.au

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