Industrial and Organizational Psychology, 4 (2011), 165–168.Copyright © 2011 Society for Industrial and Organizational Psychology. 1754-9426/11

COMMENTARIES

A Macro Perspective to Micro Issues

DEVASHEESH P. BHAVE AND STEPHANE BRUTUSConcordia University

Every decade or so, industrial–organiza-tional (I–O) psychologists interested inperformance management question fun-damental issues in this domain (Banks &Murphy, 1985; Feldman, 1981; Ilgen,Barnes-Farrell, & McKellin, 1993; Landy &Farr, 1980). Pulakos and O’Leary (2011)are continuing this interesting tradition byarguing that bringing the focus on the rela-tionship between the manager and theemployee will mend performance man-agement. We concur with the broadassessment that an excessive focus ontechnical improvements in performancemanagement systems is misplaced andthat implementation issues plague per-formance management. But we believethat poor implementation is an opera-tional challenge not because of the practiceitself but rather on account of misalign-ment—misalignment with (a) the overallorganizational strategy and (b) other humanresource (HR) practices.

Discussions of strategy are oftenneglected in the adoption and implemen-tation of various HR practices, and perfor-mance management is a particular culprit.In highlighting that the adoption of per-formance management practices fails toconsider their fit with organizational cul-ture, Pulakos and O’Leary also allude to

Correspondence concerning this article should beaddressed to Devasheesh P. Bhave or Stephane Brutus.E-mail: dbhave@jmsb.concordia.ca; sbrutus@jmsb.concordia.ca

Address: Department of Management, John MolsonSchool of Business, Concordia University, Montreal,QC H3G 1M8

a consideration of alignment. But they donot go far enough in clearly outlining therole of alignment in the recommendationsthey offer. Therefore, in this commentary wefirst highlight the relevance of both external(with organizational strategy) and internal(across other HR practice) alignment, usingthe issue of ‘‘rating competencies’’ as anexample to support our point. Second, weexplicitly discuss the issue of internal align-ment across HR practices, using the issue of‘‘multisource assessment’’ as an example.Finally, we outline the implications of sucha macro perspective for performance man-agement research and practice.

Performance Management:Considerations of External andInternal Alignment

Over the past 3 decades, practitioners andacademics have highlighted the impor-tance of aligning HR strategy with thefirm’s competitive strategy (external align-ment) and also aligning an individual HRpractice (e.g., performance management)with other HR practices (internal align-ment). Consider, for instance, a seminalstudy that compared manufacturing orga-nizations that adopted distinct competitivestrategies: cost leadership versus qualityand flexibility (also referred to as a dif-ferentiation strategy; Youndt, Snell, Dean,& Lepak, 1996). Results indicated that man-ufacturers who focused primarily on costreduction (i.e., cost leadership strategy)emphasized administrative HR systems thataimed to increase employee productivity.

165

166 D.P. Bhave and S. Brutus

Performance management processes insuch organizations focused on errorreduction and process standardization. Per-formance appraisals were results based—there was little emphasis on employeedevelopment and enhancing employees’skills because employees in such manufac-turing organizations were unlikely to havemuch autonomy in performing their jobs. Incontrast, manufacturers who adopted qual-ity or flexibility (differentiation) strategiesemphasized human-capital enhancing HRsystems that aimed to enhance employeeskill acquisition and development. Perfor-mance appraisal methods were behaviorbased, and there was a greater emphasison processes where employees receivedcontinuous feedback and developmentalopportunities. The results of this study pro-vided evidence that organizational perfor-mance was maximized when the HR system(administrative or human-capital enhanc-ing) was aligned with the correspondingcompetitive business strategy (cost leader-ship or differentiation).

How would a strategic HR approachhelp address the concerns outlined byPulakos and O’Leary? Consider the orga-nizational application of one performancemanagement practice embedded in theirconcern about rating competencies: the useof forced distribution rating systems (FDRS).General Electric (GE) is often cited as anexemplar of an organization implement-ing FDRS. Of note, it consistently appearsin annual rankings as of one of the mostadmired companies (e.g., Fortune maga-zine annual rankings). From a strategic HRperspective, the use of FDRS is an appro-priate performance management practiceat GE on two counts. First, it is consis-tent with GE’s organizational strategy ofdifferentiation in many businesses whereinit endeavors to offer innovative productsand services to its customers (Jones &Butler, 1988; Porter, 1985). Such a busi-ness strategy necessitates an HR strategywherein GE needs to make appropriate dis-tinctions between high- and low-performingemployees through FDRS. Second, GEhas implemented compensation, training,

and development processes that com-plement this performance managementapproach.

But the use of FDRS has failed atother large organizations (e.g., Ford MotorCompany), generated much criticism, andresulted in lawsuits (Scullen, Bergey, &Aiman-Smith, 2005). Certainly, issues suchas the time frame of application of FDRS(Scullen et al., 2005), rater and ratee reportsof difficulty and fairness (Schleicher, Bull, &Green, 2009), and severity of consequencesfor low performers (Blume, Baldwin, &Rubin, 2009), among other issues, wouldinfluence the effectiveness of FDRS. Beyondthese elements, strategic HR research high-lights that implementation of FDRS at aparticular organization should be guidedby its overall organizational strategy as wellas the fit of FDRS with other HR prac-tices—failing to do so may explain the pooradoption of FDRS.

Now contrast GE’s performance man-agement practice with Walmart, one of theworld’s largest and most successful businessorganizations. Walmart follows a businessstrategy that emphasizes cost leadershipwhere its goal is to be the industry leaderin reducing costs and to offer the benefits ofthis cost reduction to its consumers (Jones &Butler, 1988; Porter, 1985). Consistent withthis organizational strategy, its HR strategydoes not focus on making relative distinc-tions between employees. Consequently, itsperformance management system focuseson comparing its employees with respectto an absolute standard or benchmark.Does the use of such an absolute ratingsystem indicate that performance manage-ment practices at Walmart are less effectivethan those at GE? Insights from strategicHR research indicate otherwise. Perfor-mance management practices at Walmartare aligned with its HR and business strate-gies—making relative distinctions betweenemployees will be time consuming andcostly for Walmart and incongruent withits primary focus on cost reduction. Thus,Walmart’s and GE’s approach parallels thatof the manufacturing organizations in theYoundt et al. (1996) study. Consistent with

A macro perspective 167

its cost leadership strategy, Walmart empha-sizes an administrative HR system, whereasGE’s human-capital enhancing HR sys-tem reflects its differentiation strategy—itis this external alignment that maximizesperformance.

Taking a Closer Look atInternal Alignment

Pulakos and O’Leary’s article also glossesover the issue of internal alignment orthe fact that the effectiveness of individualperformance management practices arecontingent upon their alignment with otherHR practices. For the sake of parsimony,we chose to highlight this point by focusingon one of the processes targeted by Pulakosand O’Leary: multisource assessment.

Pulakos and O’Leary express uncer-tainty ‘‘whether or not their [multisourcefeedback processes] cost and complex-ity provide a sufficient return to justifytheir use.’’ This is an empirical questionthat certainly deserves to be investigated.Clearly, feedback processes can potentiallylead to detrimental effects of performance(Kluger & DeNisi, 1996), and multisourcefeedback can be quite costly in terms ofdevelopment, implementation, and raterinvolvement (e.g., London & Beatty, 1993).However, evidence gathered so far doespoint to a positive impact on employeeperformance when these feedback pro-cesses are structured and supported appro-priately. Research on the topic, which isbased on realistic field experiments androbust longitudinal designs, outlines theboundary conditions under which feedbacksystems work. These conditions includethe complementarity of other developmentprocesses such as coaching (Luthans &Peterson, 2003) and the use of training(Seifert, Yukl, & McDonald, 2003). Further-more, research highlights the importanceof enhancing accountability mechanisms—a sense of accountability (toward ratersor the organizations) was one of the bestpredictors of development as a result ofmultisource feedback (Atwater & Brett,2005; London, Smither, & Adsit, 1997). In

summary, feedback processes have to bepackaged with appropriate training, devel-opment, and compensation components inorder to be effective. The recipe is clear, andthe crux of the matter remains in ensuringthat this packaging (or internal alignment)occurs.

Incorporating StrategicPerspectives inPerformance Management

Note that we have considered the imple-mentation challenges of FDRS and mul-tisource feedback only as examples. Ourlarger point of focusing on alignmentequally applies for the implementationissues plaguing other performance man-agement practices highlighted by Pulakosand O’Leary (i.e., cascading organiza-tional goals to employees, setting SMARTgoals). Incorporating a strategic perspec-tive in performance management wouldspur researchers to shift their focus fromtechnical improvements in performancemanagement practices to identifying strate-gic performance management configura-tions. That is, it will direct research attentiontoward determining unique bundles of per-formance management practices that rein-force other HR practices and are alignedwith the organization’s strategy.

For practitioners, a strategic view of per-formance management will help in craft-ing customized performance managementsolutions that enable their organizationsto maximize performance. Practitionerscould frame nuanced performance man-agement systems that are appropriate basedon the organization’s context and strat-egy. Some organizations could have highlycomplex systems, whereas others mayimplement the ‘‘straightforward and sim-ple formal appraisal systems’’ that Pulakosand O’Leary recommend.

In conclusion, Pulakos and O’Leary’scautions of moving beyond formal sys-tems in performance management andfocusing on informal ones such as themanager–employee relationship are well-intentioned. But merely focusing on

168 D.P. Bhave and S. Brutus

informal processes would continue the tra-dition of pursuing technical enhancementsin performance management without valu-ing the role of context (Johns, 1993). Rather,I–O psychologists would benefit fromincorporating strategic HR perspectives,which will enable them to design robustperformance management architecture.

ReferencesAtwater, L. E., & Brett, J. F. (2005). Antecedents and

consequences of reactions to developmental 360degree feedback. Journal of Vocational Behavior,66, 532–548.

Banks, C. G., & Murphy, K. R. (1985). Toward nar-rowing the research-practice gap in performanceappraisal. Personnel Psychology, 38, 335–345.

Blume, B. D., Baldwin, T. T., & Rubin, R. S. (2009).Reactions to different types of forced distributionperformance evaluations systems. Journal of Busi-ness and Psychology, 24, 77–91.

Feldman, J. M. (1981). Beyond attribution theory:Cognitive processes in performance appraisal.Journal of Applied Psychology, 66, 127–148.

Ilgen, D. R., Barnes-Farrell, J. L., & McKellin, D. B.(1993). Performance appraisal process research inthe 1980s: What has it contributed to appraisals inuse? Organizational Behavior and Human DecisionProcesses, 54, 321–368.

Johns, G. (1993). Constraints on the adoption ofpsychology-based personnel practices: Lessonsfrom organizational innovation. Personnel Psychol-ogy, 46, 569–592.

Jones, G. R., & Butler, J. E. (1988). Costs, revenue, andbusiness-level strategy. Academy of ManagementReview, 13, 202–213.

Kluger, A. N., & DeNisi, A. (1996). Effects of feedbackintervention on performance: A historical review,a meta-analysis, and a preliminary feedbackintervention theory. Psychological Bulletin, 119,254–284.

Landy, F. J., & Farr, J. (1980). Performance rating.Psychological Bulletin, 87, 72–107.

London, M., & Beatty, R. W. (1993). 360-degreefeedback as a competitive advantage. HumanResource Management, 32, 352–373.

London, M., Smither, J. W., & Adsit, D. J. (1997).Accountability: The Achilles’ heel of multisourcefeedback. Group and Organization Management,22, 162–184.

Luthans, F., & Peterson, S. J. (2003). 360-degree feed-back with systematic coaching: Empirical analysissuggests a winning combination. Human ResourceManagement, 42, 243–256.

Porter, M. E. (1985). Competitive advantage: Creatingand sustaining superior performance. New York,NY: The Free Press.

Pulakos, E. D., & O’Leary, R. S. (2011). Why is perfor-mance management broken? Industrial and Organi-zational Psychology: Perspectives on Science andPractice, 4, 146–164.

Schleicher, D. J., Bull, R. A., & Green, S. G. (2009).Rater reactions to forced distribution rating systems.Journal of Management, 35, 899–927.

Scullen, S. E., Bergey, P. K., Aiman-Smith, L. (2005).Forced distribution rating systems and the improve-ment of workforce potential: A baseline simulation.Personnel Psychology, 58, 1–32.

Seifert, C. F., Yukl, G., & McDonald, R. A. (2003).Effects of multisource feedback and a feedbackfacilitator on the influence behavior of managerstowards subordinates. Journal of Applied Psychol-ogy, 88, 561–569.

Youndt, M. A., Snell, S. A., Dean, J. W., & Lepak, D. P.(1996). Human resource management, manufac-turing strategy, and firm performance. Academy ofManagement Journal, 39, 836–866.