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Dissatisfaction with performance management (PM) has had a long history. Managers and employees alike have frustrations with the system, and numerous calls for the elimination of performance appraisal have been made over the years (e.g., Scholtes, Reference Scholtes1999). The dissatisfaction and calls for elimination have created pressure for change in the practice of PM, and I applaud the focus on feedback and coaching that Pulakos, Mueller Hanson, Arad, and Moye (Reference Pulakos, Mueller Hanson, Arad and Moye2015) have proposed. Providing feedback and being actively involved in the PM process would seem to be a key part of the job of managers, yet many managers are uncomfortable addressing this central task. Focusing efforts in our field on improving the skills of managers and helping managers become effective coaches can play a key role in improving PM. The need for improvement in the informal process, however, does not mean that the formal process is not needed. Pulakos et al. have suggested streamlining the formal PM system as much as possible, with particular emphasis on the possibility of eliminating performance ratings. It is argued here that the formal PM system still serves important purposes. It is also argued that a balance between the informal and formal aspects of the PM system needs to be maintained. These two issues are addressed below.
The Need for Formal Performance Management
The formal PM system serves a number of purposes and has some positive effects. The intent here is to focus on only some of the major uses and effects.
Effectiveness of Feedback
Developmental feedback can be a rich source of input, but employees need to be motivated to act on that input. Unfortunately, splitting the judge and coach roles can have negative effects on employee motivation. As demonstrated by Prince and Lawler (Reference Prince and Lawler1986), the inclusion of salary in the discussion can have a positive impact on the PM process, particularly for poor performers. Similarly, researchers have found separating developmental and evaluative aspects of performance appraisal to be associated with lower employee intentions to use developmental feedback (Boswell & Boudreau, Reference Boswell and Boudreau2002). Without the outcomes associated with the formal system, the developmental feedback can lack meaningfulness. With feedback that is not linked to outcomes, the lack of instrumentality can reduce the importance and any potential effectiveness that the feedback might have. The formal system can help assure that feedback is seen as more than rhetoric.
Instrumentality
The formal PM system often has limited differentiation among performance levels and a lenient distribution of ratings. However, high performance work practices, including accurate performance appraisal and pay tied to performance, are positively related to the organizational commitment of top performers (Kwon, Bae, & Lawler, Reference Kwon, Bae and Lawler2010). Eliminating these evaluations and their relationship to outcomes, such as merit pay, may result in negative consequences for the organization. The best performers in an organization would have the most to lose and would likely be least satisfied with the removal of performance measurement and its linkage to tangible outcomes.
Basis for Personnel Actions
The formal system is also the typical trigger for personnel actions, such as placing an employee on a performance improvement plan (PIP). Although the PIP is a separate process, it is triggered by poor performance as identified by the standards and evaluations in the formal system. Further, there is an intimate relationship between the PIP and the formal system in that the PIP performance dimensions should be directly related to the dimensions identified in the formal system. The PIP augments the regular PM system with a focus on what the individual tasks are and how they need to be carried out, but these tasks make up the formal performance dimensions. It would be difficult to place someone on a PIP without the standards contained in the formal PM system. It would also be difficult for the PIP to be effective without the structure and standards provided by the formal system.
In addition to triggering personnel actions from pay raises to PIPs, the formal system provides documentation for both managers and employees. Documentation provided by the formal system can be helpful to managers if an action is challenged, and the documentation can be useful for employees if an action is inappropriate or if a manager does not follow through with an earned outcome.
Overall, there are some important purposes served by the formal PM system. It may not win popularity contests, and the majority may like for it to be eliminated, but having the formal system still in place can have positive effects for an organization. Rather than reduce or eliminate the formal system, organizations need to balance the formal and informal aspects of the PM system.
The Work Situation as a Balance Factor
The approach that Pulakos et al. (Reference Pulakos, Mueller Hanson, Arad and Moye2015) have described in the focal article includes emphasizing values and strategic mission, setting expectations on an ongoing basis, and using role descriptions rather than job descriptions. This description suggests a dynamic work situation in which goals can change and in which there is a more fluid and emergent approach to work rather than a set of routine and repetitive tasks. In dynamic work situations, organizations would expect managers to focus on improving worker capabilities. Managers who engage in informal feedback and coaching in these situations would be expected to be especially effective since those techniques would help the managers and their workers to engage in greater communication, allowing them to keep on top of changes in plans, priorities, and targets. Companies that emphasize informal aspects can enhance the relevance and vitality of PM in dynamic work situations.
In other work situations, jobs might be more clearly defined, and such jobs might consist of repetitive tasks. In these situations, performance and performance standards can be unambiguously defined, and there is less need for ongoing adjustments in expectations. In structured work situations, the focus would typically be on maintaining and improving task performance and removing deficiencies. Contingent rewards, such as pay tied to performance, would likely be used to improve and maintain the motivation of workers in structured work situations.
The nature of the work situation can be a factor in determining the balance point between informal and formal aspects of the PM system. Although the formal system can be an important component to maintain across both types of work situations, it may be most effective to have less emphasis on the formal system in an unstructured environment and relatively greater emphasis on that system in a structured work environment.
The emphasis on feedback and coaching that Pulakos et al. (Reference Pulakos, Mueller Hanson, Arad and Moye2015) have proposed in the focal article can be a key means for improving PM in organizations. Diagnosing performance problems and providing effective coaching are critical skills for effective PM. However, the standards and measurements emphasized in the formal system are also needed. “If you can't measure it you can't manage it” is a management adage that is still applicable. For our field to remain an operational and strategic partner with line management, questions regarding issues such as the validity of selections procedures, the effectiveness of training, and the gaps involved in reaching strategic targets need to be addressed. Responses to these types of questions usually rely on the formal PM system. Both formal and informal parts of the system are needed.