Performance management practices in New Zealand: Investigating the gap between theory and practice

Abstract

Performance management (PM) practices in New Zealand organisations that employ at least 50 staff were examined to investigate the current features and components of their PM, and how consistent the implementation of PM is with theoretical guiding principles of PM as recommended by researchers. Human Resource (HR) directors, line managers and appraised employees from the sampled organisations participated in a web-based survey. The main findings emerging from this study are as follows. First, the most commonly implemented PM practices in the country include supervisor-subordinate appraisal, self-appraisal, objective-setting, regular performance reviews, performance-related pay and PM training mainly targeted at line managers. Second, PM in most New Zealand organisations is operated as a strategic and integrative HR process in order to ensure horizontal and vertical alignment between PM, other HR practices and organisational strategies. However, the small percentage of organisations utilising PM to achieve organisational flexibility and innovative capacity indicates that PM is not applied innovatively in New Zealand. Third, there is not only a discrepancy between what HR directors and line managers believe can be achieved by PM and what employees observe actually happens, but also between the self-reported level of competency of line managers in PM and what employees consider the competency level of line managers to be. Fourth, the gaps between PM theory and practice revealed in the present study comprise the following: lack of congruence between PM and organisational context, lack of inclusiveness of PM coverage, patchy application of supervisory coaching, limited evaluation of PM effectiveness, non-user friendly processes, appraisal of functions not under employee control, infrequency of feedback, and limited capacity of PM to contribute to organisational flexibility and innovativeness. In contrast, the congruence between PM theory and practice revealed in the present study are as follows: alignment between individual performance objectives and organisational strategies, top management support of PM, specificity of individual performance goals, the perceived fairness of PM, the extent of employee participation in PM processes, the frequency of performance review meetings and the accountability of line managers for effective PM implementation. It was concluded that the overall state of PM practices in New Zealand appears to be relatively advanced. This is particularly the case in regard to the bulk of functional areas. Although some aspects of PM in New Zealand can be improved, it is likely that these aspects are subject to the influence of firm-specific variables, such as resource availability, employees’ personal commitment, organisational priorities, and the inherent conflict of interest in PM among different occupational categories which makes it difficult for everyone to appreciate the value of PM. Mitigation rather than elimination of these problematic aspects is, therefore, all that can reasonably be expected.